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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997 OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from _____________to______________
Commission file number 0-11618
HPSC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2560004
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
60 STATE STREET, BOSTON, MASSACHUSETTS 02109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (617) 720-3600
--------------
NONE
(FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR IF CHANGED SINCE LAST
REPORT)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES /X/ NO / /
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
COMMON STOCK, PAR VALUE $.01 PER SHARE. SHARES OUTSTANDING AT NOVEMBER 1, 1997,
4,549,630
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HPSC, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
PART 1 -- FINANCIAL INFORMATION
<S> <C>
Condensed Consolidated Balance Sheets as of September 30, 1997 and
December 31,1996 ......................................................... 3
Condensed Consolidated Statements of Income for Each of the
Three and Nine Months Ended September 30, 1997 and September 30, 1996 .... 4
Condensed Consolidated Statements Of Cash Flows for Each Of
The Nine Months Ended September 30, 1997 and September 30,1996 ........... 5
Notes to Condensed Consolidated Financial Statements ....................... 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................................... 7
PART II -- OTHER INFORMATION
Signatures ................................................................ 13
Exhibit Index ............................................................. 14
</TABLE>
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ITEM 1. FINANCIAL STATEMENTS.
HPSC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
ASSETS
------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 6,645 $ 2,176
RESTRICTED CASH 4,773 6,769
INVESTMENT IN LEASES AND NOTES:
Lease contracts and notes receivable due in installments 206,712 160,049
Notes receivable 24,615 18,688
Estimated residual value of equipment at end of lease term 10,461 9,259
Less unearned income (47,505) (34,482)
Less allowance for losses (4,174) (4,082)
Less security deposits (5,501) (4,522)
Deferred origination costs 4,660 4,312
--------- ---------
Net investment in leases and notes 189,268 149,222
--------- ---------
OTHER ASSETS:
Other assets 4,918 3,847
Refundable income taxes 703 1,203
--------- ---------
TOTAL ASSETS $ 206,307 $ 163,217
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
REVOLVING CREDIT BORROWINGS $ 35,000 $ 40,000
SENIOR NOTES 105,729 76,737
SENIOR SUBORDINATED NOTES 20,000 --
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 2,486 5,916
ACCRUED INTEREST 1,693 450
ESTIMATED RECOURSE LIABILITIES 895 480
INCOME TAXES:
Currently payable 420 300
Deferred 5330 5,002
--------- ---------
TOTAL LIABILITIES 171,553 128,885
--------- ---------
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, $1.00 par value;
authorized 5,000,000 shares; issued - None -- --
COMMON STOCK, $.01 par value; 15,000,000
shares authorized; issued and outstanding
4,786,530 shares in 1997 and 1996 48 48
TREASURY STOCK (at cost) 236,900 shares in
1997 and 128,600 in 1996 (1,210) (587)
Additional paid-in capital 13,062 12,305
Retained earnings 26,115 25,351
--------- ---------
38,015 37,117
Less: Deferred compensation (3,092) (2,590)
Notes receivable from officers
and employees (169) (195)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 34,754 34,332
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 206,307 $ 163,217
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
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HPSC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
SEPTEMBER 30, 1996
(in thousands, except per share and share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Earned income on leases and notes $ 6,115 $ 4,434 $ 16,531 $ 12,562
Gain on sales of leases and notes 759 610 1,927 885
Provisions for losses (381) (424) (821) (1,224)
----------- ----------- ----------- -----------
Net Revenues 6,493 4,620 17,637 12,223
----------- ----------- ----------- -----------
EXPENSES:
Selling, general and administrative 3,289 1,867 9,072 5,580
Interest expense 2,772 2,403 7,470 5,826
Interest income (79) (58) (264) (177)
----------- ----------- ----------- -----------
Net operating expenses 5,982 4,212 16,278 11,229
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES: 511 408 1,359 994
----------- ----------- ----------- -----------
PROVISION FOR INCOME TAXES:
Federal, Foreign and State:
Current 97 650 268 1,950
Deferred 120 (490) 327 (1,560)
----------- ----------- ----------- -----------
TOTAL INCOME TAXES 217 160 595 390
----------- ----------- ----------- -----------
NET INCOME $ 294 $ 248 $ 764 $ 604
----------- ----------- ----------- -----------
NET INCOME PER SHARE $ .07 $ .06 $ .19 $ .15
----------- ----------- ----------- -----------
SHARES USED TO COMPUTE
INCOME PER SHARE 4,019,148 4,145,270 4,073,752 4,107,313
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
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HPSC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
SEPT 30, SEPT 30,
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 764 $ 604
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,847 2,818
Deferred income taxes 328 (1,560)
Restricted stock compensation 149 --
Gain on sale of receivables (1,927) (885)
Provision for losses on lease contracts and notes
receivable 821 1,224
Increase in accrued interest 1,243 415
Decrease in accounts payable and accrued liabilities (3,430) (2,229)
Increase in accrued income taxes 120 415
Decrease in refundable income taxes 500 1,088
Decrease in other assets 228 142
-------- --------
Cash provided by operating activities 1,643 2,032
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Origination of lease contracts and notes receivable
due in installments (94,965) (62,750)
Portfolio receipts, net of amounts included in income 42,594 30,478
Proceeds from sales of lease contracts and notes
receivable due in installments 20,616 12,629
Net increase in notes receivable (5,883) (6,507)
Net increase in security deposits 979 721
Net (increase) in other assets (38) (593)
Net decrease (increase) in loans to employees 26 (13)
-------- --------
Cash used in investing activities (36,671) (26,035)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of senior notes (29,837) (16,438)
Proceeds from issuance of senior notes, net of debt
issue costs 58,550 24,381
Proceeds from issuance of senior subordinated notes,
net of debt issuance costs 18,306 --
Net repayment of revolving credit borrowings (28,500) (8,000)
Proceeds from revolving credit borrowings, net of debt
issuance costs 23,492 24,950
Purchase of treasury stock (623) --
Net decrease in restricted cash (1,996) (1,141)
Repayment of employee stock ownership plan promissory note 105 105
-------- --------
Cash provided by financing activities 39,497 23,857
-------- --------
Net increase (decrease) in cash and cash equivalents 4,469 (146)
Cash and cash equivalents at beginning of period 2,176 861
-------- --------
Cash and cash equivalents at end of period $ 6,645 $ 715
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 6,218 $ 5,127
Income taxes paid 111 675
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
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HPSC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The information presented for the interim periods is unaudited, but includes
all adjustments (consisting only of normal recurring adjustments) which, in the
opinion of HPSC, Inc. (the "Company"), are necessary for a fair presentation of
the financial position, results of operations and cash flows for the periods
presented. The results for interim periods are not necessarily indicative of
results to be expected for the full fiscal year. Certain 1996 account balances
have been reclassified to conform with 1997 presentation.
2. The earnings per share computations assume the exercise of stock options
under the modified treasury stock method and include those shares allocated to
participant accounts in the Company's Employee Stock Ownership Plan and those
shares subject to time vesting under the Restricted Stock Award Plan.
3. On September 30, 1997, the Company had $4,773,000 in restricted cash, all of
which was reserved for debt service. On June 20, 1997, the Company terminated
its agreement with HPSC Funding Corp I with respect to the $70,000,000
securitization transaction on December 27, 1993.
4. In connection with the HPSC Bravo Funding Corp. ("Bravo") revolving credit
facility, the Company had $67,919,000 of its Senior Notes subject to interest
rate swap agreements. Under this facility, Bravo incurs interest at various
rates in the commercial paper market and enters into interest rate swap
agreements to assure fixed rate funding. At September 30, 1997, Bravo had
twenty-two separate swap contracts with BankBoston with a total notional value
of $71,838,000. These interest rate swaps are matched swaps, and as such, are
accounted for using settlement accounting. Monthly cash settlements on the swap
agreements are recognized in income as they accrue. In the case where the
notional value of the interest rate swap agreements significantly exceeds the
outstanding underlying debt, the excess swap agreements would be
marked-to-market through income until new borrowings are incurred which would be
subject to such swap agreements. All interest rate swap agreements entered into
by the Company are for other than trading purposes.
5. In March 1997, the Company completed the issuance of $20,000,000 of unsecured
senior subordinated notes (the "Notes") due in 2007, which bear interest at a
fixed rate of 11%. The Notes pay interest semi-annually on April 1 and October
1, beginning on October 1, 1997. The Notes are redeemable at the option of the
Company, in whole or in part, other than through the operation of a sinking
fund, after April 1, 2002 at established redemption prices, plus accrued but
unpaid interest to the date of repurchase. Beginning July 1, 2002, the Company
is required to redeem through sinking fund payments, on January 1, April 1, July
1, and October 1 of each year, a portion of the aggregate principal amount of
the Notes at a redemption price equal to 100% of such principal amount redeemed
plus accrued but unpaid interest to the redemption date.
6. In June 1997, the Company entered into a three-year $100,000,000 Lease
Receivable Purchase Agreement with EagleFunding Capital Corporation ("Eagle")
under which the Company may transfer assets from time to time to HPSC Capital
Funding, Inc. ("Capital"), a wholly-owned, bankruptcy remote, special purpose
corporation. Capital may then pledge or sell assets to Eagle. Under this
Agreement, the Company had Senior Notes outstanding of $32,532,000 at September
30, 1997, and in connection with this agreement had three separate swap
contracts with a national value of $30,456,000.
7. Statement of Financial Accounting Standards No. 128, "Earnings per Share",
effective for the Company for reporting periods ending after December 15, 1997,
provides new standards for computing and presenting earnings per share (EPS). It
replaces primary EPS with basic EPS and requires dual presentation of basic and
diluted EPS. For the three and nine months ended September 30, 1997, the pro
forma basic EPS for the Company would be $0.08 and $0.20 per share,
respectively, while pro forma diluted EPS would be $0.07 and $0.19 per share,
respectively.
8. Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," establishes standards for reporting and presentation of comprehensive
income and its components. This standard will be effective for the Company for
its reporting periods beginning after December 15, 1997.
9. Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information," establishes standards for
public enterprises in reporting information about its operating segments and in
disclosing information related to their operations. This statement will be
effective for the Company for its reporting periods beginning after December 15,
1997.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Earned income from leases and notes for the three months ended September 30,
1997 was $6,115,000 (including approximately $1,007,000 from the Company's
commercial lending subsidiary ("ACFC")) as compared to $4,434,000 (including
approximately $729,000 from ACFC) for the three months ended September 30, 1996.
Earned income for the nine months ended September 30, 1997 was $16,531,000
(including approximately $2,842,000 from ACFC) compared to $12,562,000
(including approximately $1,843,000 from ACFC) for the comparable period of
1996. The increases of 38% for the three months and 32% for the nine months were
due principally to increases in net investment in leases and notes for both
periods in 1997 over 1996. The increases in net investment for both periods
resulted in part from a higher level of originations in the 1997 third quarter
of $36,121,000 compared to $22,389,000 for the third quarter of 1996 and
$97,492,000 for the nine months ended September 30, 1997 compared to $66,026,000
in the comparable 1996 period. Gains on sales of leases and notes were $759,000
in the three months ended September 30, 1997 compared to $610,000 for the 1996
quarter. Gains on sales of leases and notes for the nine months ended September
30, 1997 were $1,927,000 compared to $885,000 in the comparable 1996 period. The
increases were caused by a higher level of asset sales activity in the current
year.
Interest expense (net of interest income) for the third quarter of 1997 was
$2,693,000 (44% of earned income) compared to $2,345,000 (53% of earned income)
in the comparable 1996 period. For the nine months ended September 30,1997, net
interest expense was $7,206,000 (44% of earned income) compared to $5,649,000
(45% of earned income) in the nine months ended September 30,1996. The increase
in net interest expense was due primarily to an increase in debt levels of 24%
from September 30, 1996 to September 30, 1997. These higher debt levels resulted
primarily from borrowings to finance a higher level of financing contract
originations.
Net financing margin (earned income less net interest expense) for the third
quarter of 1997 was $3,422,000 (56% of earned income) compared to $2,089,000
(47% of earned income) for the third quarter of 1996. For the nine months, net
interest margin in 1997 was $9,325,000 (56% of earned income) compared to
$6,913,000 (55% of earned income). The increases in margins in both periods were
due to higher earnings on higher balances of earning assets. The decline in
percentage in third quarter was due to higher debt levels in the 1997 period as
compared to the 1996 period.
The provision for losses for the third quarter of 1997 was $381,000 (6% of
earned income) compared to $424,000 (10% of earned income) in the third quarter
of 1996. For the nine months ended September 30,1997, the provision for losses
was $821,000 (5% of earned income) compared to $1,224,000 (10% of earned income)
for the comparable 1996 period. The decline in both periods is due to the
Company's continuing evaluation of its portfolio quality, loss history and
allowance for losses.
The allowance for losses at September 30, 1997 was $4,174,000 (2.2% of net
investment) compared to $4,082,000 (2.7% of net investment) at September 30,
1996. Net charge offs for the nine months ended September 30, 1997 were $767,000
compared to $ 781,000 in 1996.
Selling, general and administrative expenses for the three months ended
September 30, 1997 were $3,289,000 (54% of earned income) compared to $1,867,000
(42% of earned income) in the comparable 1996 period. For the nine months ended
September 30, 1997, selling, general and administrative expenses were $9,072,000
(55% of earned income) compared to $5,580,000 (44% of earned income) in the same
1996 period. The increases in both periods were caused by increased staffing and
increased personnel and sales and marketing costs required by higher levels of
owned and managed assets and the acceleration of the recognition of unamortized
deferred costs associated with the termination in June 1997 of HPSC Funding Corp
I ($350,000 for the nine months ended September 30, 1997).
The Company's income before income taxes for the quarter ended September 30,
1997 was $511,000 compared to $408,000 in the 1996 period. For the nine months
ended September 30, 1997, income before income taxes was $1,359,000
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compared to $994,000 in the 1996 period. For the quarter ended September 30,
1997 the provision for income taxes was $217,000 (42% of income before income
taxes) compared to $160,000 (39% of income before income taxes) in the third
quarter of 1996. For the nine months ended September 30,1997, the provision for
income taxes was $595,000 (44% of income before income taxes) compared to
$390,000 ( 39% of income before income taxes) in the 1996 period. The increase
in the nine month provision was caused by expenses related to the continuing
wind-down of the Company's Canadian operation in the first quarter that are not
deductible in computing the tax provision.
The Company's net income for the three months ended September 30, 1997 was
$294,000 ($.07 per share) compared to $248,000 ($.06 per share) for the three
months ended September 30, 1996. For the nine months ended September 30, 1997,
the Company's net income was $764,000 ($.19 per share) compared to $604,000
($.15 per share) for the nine months ended September 30, 1996. The increases in
both periods in 1997 as compared to 1996 were due to higher earned income on
leases and notes, higher gains on sales and a lower provision for losses
partially offset by higher selling, general and administrative costs, higher net
interest costs and a higher effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had $11,418,000 in cash, cash
equivalents and restricted cash as compared to $8,945,000 at December 31, 1996.
As described in Note 3 to the Company's condensed consolidated financial
statements included in this report on Form 10-Q, $4,773,000 was restricted
pursuant to financing agreements as of September 30, 1997, compared to
$6,769,000 at December 31, 1996.
Cash provided by operating activities was $1,643,000 for the nine months
ended September 30, 1997 compared to cash provided by operating activities of
$2,032,000 for the nine months ended September 30, 1996. The significant
components of cash used in operating activities for the nine months ended
September 30, 1997, as compared to the same period in 1996, were the decrease in
accounts payable and accrued liabilities of $3,430,000 as compared to $2,229,000
for the same period of 1996, an increase in the gain on sale of receivables
caused by a higher level of sales activity in the first nine months of 1997, and
a net increase in deferred income taxes.
Cash used in investing activities was $36,671,000 for the nine months ended
September 30, 1997 compared to $26,035,000 for the nine months ended September
30, 1996. The significant components of cash used in investing activities for
the first nine months of 1997 compared to the same period in 1996 were an
increase in originations of lease contracts and notes receivable to $94,965,000
from $62,750,000, offset by an increase in proceeds from sales of lease
contracts and notes receivable to $20,616,000 in the 1997 period from
$12,629,000 in the 1996 period and higher portfolio receipts of $42,594,000 in
the 1997 period as compared to $30,478,000 in the 1996 period.
Cash provided by financing activities for the nine months ended September
30, 1997 was $39,497,000 compared to $23,857,000 for the nine months ended
September 30, 1996. The significant components of cash provided by financing
activities for the first nine months of 1997 as compared to 1996 were an
increase in proceeds from issuance of senior notes, net of debt issue costs, to
$58,550,000 from $24,381,000; an increase in proceeds from issuance of senior
subordinated notes in March 1997, net of debt issuance costs, of $18,306,000 in
the 1997 period; an increase in repayment of senior notes to $29,837,000 from
$16,438,000; net repayment of revolving credit borrowings of $28,500,000 in the
1997 period from $8,000,000 in the 1996 period; and lower proceeds from
revolving credit borrowings net of debt issuance costs to $23,492,000 in the
1997 period from $24,950,000.
On December 27, 1993, the Company raised $70,000,000 through an asset
securitization transaction in which its wholly-owned subsidiary, HPSC Funding
Corp I ("Funding I"), issued senior secured notes (the "Funding I Notes") at a
rate of 5.01%. Under the terms of the Funding I securitization, when the
principal balance of the Funding I Notes equals the balance of the restricted
cash in the facility, the Funding I Notes are paid off from the restricted cash
and Funding I terminates. This occurred during the second quarter of 1997, prior
to the scheduled termination of Funding I. Due to this early termination, the
Company incurred a $350,000 non-cash, non-operating charge against earnings
representing the early recognition of certain unamortized deferred transaction
origination costs. The Company recognized approximately $175,000 in each of the
first and second quarters of 1997.
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The Company's Second Amended and Restated Revolving Credit Agreement with
the First National Bank of Boston (now BankBoston) as Agent Bank, dated December
12, 1996 ("the Revolver Agreement") increased the Company's availability under
the Revolver Agreement to $95,000,000. Under the Revolver Agreement, the Company
may borrow at variable rates of prime and at LIBOR plus 1.25% to 1.75%,
dependent on certain performance covenants. At September 30, 1997, the Company
had $35,000,000 outstanding under this facility and $60,000,000 available for
borrowing, subject to borrowing base limitations. The Revolver Agreement
currently is not hedged and is, therefore, exposed to upward movements in
interest rates.
As of January 31, 1995, the Company, along with its wholly-owned,
special-purpose subsidiary HPSC Bravo Corp ("Bravo"), established a $50,000,000
revolvings credit facility structured and guaranteed by Capital Markets
Assurance Corporation ("CapMAC"). Under the terms of this facility (the "Bravo
Facility"), Bravo, to which the Company has sold and may continue to sell or
contribute certain of its portfolio assets, pledges its interests in these
assets to a commercial paper conduit entity. Bravo incurs interest at variable
rates in the commercial paper market and enters into interest rate swap
agreements to assure fixed rate funding. Monthly settlements of principal and
interest payments are made from the collection of payments on Bravo's portfolio.
HPSC may make additional sales to Bravo subject to certain covenants regarding
Bravo's portfolio performance and borrowing base calculations. The Company is
the servicer of the Bravo portfolio, subject to meeting certain covenants. The
required monthly payments of principal and interest to purchasers of the
commercial paper are guaranteed by CapMAC pursuant to the terms of the
agreement. Effective November 5, 1996, the Bravo facility was increased to
$100,000,000 and amended to provide that up to $30,000,000 of such facility may
be used for sale accounting treatment. The Company had $25,964,000 outstanding
at September 30, 1997 from sales of receivables under this portion of the Bravo
facility. The Company had $67,919,000 of indebtedness outstanding under the
Bravo loan facility at September 30, 1997, and in connection with this facility,
had 22 separate interest rate swap agreements with BankBoston with a total
notional value of $71,451,000.
In April, 1995, the Company entered into a fixed rate, fixed term loan
agreement with Springfield Institution for Savings ("SIS") under which the
Company borrowed approximately $3,500,000 at 9.5% subject to certain recourse
and performance covenants. In July 1997, the Company entered into another fixed
rate, fixed term loan agreement with SIS under which the Company borrowed an
additional $3,984,000 at 8% subject to the same conditions as the first loan.
The Company had $5,278,000 outstanding under these agreements at September 30,
1997.
In March 1997, the Company completed a $20,000,000 offering of unsecured
senior subordinated notes due 2007 ("Senior Subordinated Note") bearing interest
at a fixed rate of 11% (the "Note Offering"). The Note Offering was completed on
the terms and conditions described in Amendment No. 2 to the Company's
Registration Statement No. 333-20733 on Form S-1. The Company received
approximately $18,300,000 in net proceeds from the Note Offering and used such
proceeds to repay amounts outstanding under the Revolver Agreement.
In June 1997, the Company, along with its wholly-owned, special purpose
subsidiary, HPSC Capital Funding, Inc. ("Capital"), established a $100,000,000
Lease Receivable Purchase Agreement with EagleFunding Capital Corporation
("Eagle"). Under the terms of the facility (the "Capital Facility"), Capital, to
which the Company may sell certain of its portfolio assets from time to time,
pledges or sells its interests in these assets to Eagle, a commercial paper
conduit entity. Capital may borrow at variable rates in the commercial paper
market and may enter into interest rate swap agreements to assure fixed rate
funding. Monthly settlements of the borrowing base and any applicable principal
and interest payments will be made from collections of Capital's portfolio. The
Company will be the servicer of the Capital portfolio subject to certain
covenants. The agreement expires in September 2000. The Company had $32,532,000
of indebtedness outstanding under this facility at September 30, 1997, and in
connection with this facility had three separate swap agreements with a total
national value of $30,456,000.
Management believes that the Company's liquidity, resulting from the
availability of credit under the Revolver Agreement, the Bravo facility, the
Capital facility [and loans from savings banks], along with cash obtained from
the sales of its financing contracts and from internally generated revenues is
adequate to meet current obligations and future projected levels of financings
and to carry on normal operations. In order to finance adequately its
anticipated growth, the Company will continue to seek to raise additional
capital from bank and non-bank sources, make selective use of asset sale
transactions in 1997 and use its current credit facilities. The Company expects
that it will be able to obtain additional capital at competitive rates, but
there can be no assurance it will be able to do so.
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Inflation in the form of rising interest rates could have an adverse impact
on the interest rate margins of the Company and its ability to maintain adequate
earning spreads on its portfolio assets.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. If used in this
Form 10-Q, the words "believes," "anticipates," "expects," "plans," "intends,"
"estimates," "continue," "may," or "will" (or the negative of such words) and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to a number of risks and uncertainties, including but not
limited to the following:
a) Dependence on Funding Sources; Restrictive Covenants. The Company's
financing activities are capital intensive. The Company's revenues and
profitability are related directly to the volume of financing contracts it
originates. To generate new financing contracts, the Company requires
access to substantial short- and long-term credit. To date, the Company's
principal sources of funding for its financing transactions have been (i)
the Revolving Agreement, (ii) the Capital Facility, (iii) the Bravo
Facility, (iv) a fixed-rate, full recourse term loans, from savings banks,
(v) specific recourse sales of financing contracts to savings banks and
other purchasers, (vi) the Senior Subordinated Note, and (vii) the
Company's internally generated revenues. There can be no assurance that
the Company will be able to negotiate a new revolving credit facility at
the end of the current term of the Revolver Agreement in December 1997,
complete additional asset securitizations or obtain other additional
financing, when needed and on acceptable terms. The Company would be
adversely affected if it were unable to continue to secure sufficient and
timely funding on acceptable terms. The Revolver Agreement contains
numerous financial and operating covenants. There can be no assurance that
the Company will be able to maintain compliance with these covenants, and
failure to meet such covenants would result in a default under the
Revolver Agreement. Moreover, the Company's financing arrangements with
Bravo, Capital and savings banks described above incorporate the
covenants and default provisions of the Revolver Agreement. Thus, any
default under the Revolver Agreement will also trigger defaults under
these other financing arrangements.
b) Securitization Recourse; Payment Restriction and Default Risk. As part of
its overall funding strategy, the Company utilizes asset securitization
transactions with wholly-owned, bankruptcy-remote subsidiaries to get
fixed rate, matched-term financing. The Company sells financing contracts
to these subsidiaries which, in turn, either pledge or sell the contracts
to third parties. The third parties' recourse with regard to the pledge or
sale is limited to the contracts sold to the subsidiary. If the contract
portfolio of these subsidiaries does not perform within certain
guidelines, the subsidiaries must retain or "trap" any monthly cash
distribution to which the Company might otherwise be entitled. This
restriction on cash distributions could continue until the portfolio
performance returns to acceptable levels (as defined in the relevant
agreements), which restriction could have a negative impact on the cash
flow available to the Company. There can be no assurance that the
portfolio performance would return to acceptable levels or that the
payment restrictions would be removed.
c) Customer Credit Risks. The Company maintains an allowance for doubtful
accounts in connection with payments due under financing contracts
originated by the Company (whether or not such contracts have been
securitized, held as collateral for loans to the Company or, when sold, a
separate recourse reserve is maintained) at a level which the Company
deems sufficient to meet future estimated uncollectible receivables, based
on an analysis of the delinquencies, problem accounts, and overall risks
and probable losses associated with such contracts, together with a review
of the Company's historical credit loss experience. There can be no
assurance that this allowance or recourse reserve will prove to be
adequate. Failure of the Company's customers to make scheduled payments
under their financing contracts could require the Company to (i) make
payments in connection with its recourse loan and asset sale transactions,
(ii) lose its residual interest in any underlying equipment and (iii)
forfeit collateral pledged as security for the Company's limited recourse
asset securitizations. In addition, although the allowance for losses on
the contracts originated by the Company have been 2.2% of the Company's
net investment in leases and notes for 1997, any increase in such losses
or in the rate of payment defaults under the financing contracts
originated by the Company will be able to maintain or
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reduce its current level of credit losses.
d) Competition. The Company's financing activities are highly competitive.
The Company competes for customers with a number of national, regional and
local finance companies, including those which, like the Company,
specialize in financing for healthcare providers. In addition, the
Company's competitors include those equipment manufacturers which finance
the sale of lease of their products themselves, conventional leasing
companies and other types of financial services companies such as
commercial banks and savings and loan associations. Many of the Company's
competitors and potential competitors possess substantially greater
financial, marketing and operational resources than the Company. Moreover,
the Company's future profitability will be directly related to its ability
to obtain capital funding at favorable funding rates as compared to the
capital costs of its competitors. The Company's competitors and potential
competitors include many larger, more established companies that have a
lower cost of funds than the Company and access to capital markets and to
their funding sources that may be unavailable to the Company. There can be
no assurance that the Company will be able to continue to compete
successfully in its targeted markets.
e) Equipment Market Risk. The demand for the Company's equipment financing
services depends upon various factors not within its control. These
factors include general economic conditions, including the effects of
recession or inflation, and fluctuations in supply and demand related to,
among other things, (i) technological advances in and economic
obsolescence of the equipment and (ii) government regulation of equipment
and payment for healthcare services. The acquisition, use, maintenance and
ownership of most types of medical and dental equipment, including the
types of equipment financed by the Company, are affected by rapid
technological changes in the healthcare field and evolving federal, state
and local regulation of healthcare equipment, including regulation of the
ownership and resale of such equipment. Changes in the reimbursement
policies of the Medicare and Medicaid programs and other third-party
payers, such as insurance companies, as well as changes in the
reimbursement policies of managed care organizations, such as health
maintenance organizations, may also affect demand for medical and dental
equipment and, accordingly, may have a material adverse effect on the
Company's business, operating results and financial condition.
f) Changes in Healthcare Payment Policies. The increasing cost of medical
care has brought about federal and state regulatory changes designed to
limit governmental reimbursement of certain healthcare providers. These
changes include the enactment of fixed-price reimbursement systems in
which the rates of payment to hospitals, outpatient clinics and private
individual and group practices for specific categories of care are
determined in advance of treatment. Rising healthcare costs may also cause
non-governmental medical insurers, such as Blue Cross and Blue Shield
associations and the growing number of self-insured employers, to revise
their reimbursement systems and policies governing the purchasing and
leasing of medical and dental equipment. Alternative healthcare delivery
systems, such as health maintenance organizations, preferred provider
organizations and managed care programs, have adopted similar cost
containment measures. Other proposals to reform the United States
healthcare system are considered from time to time. These proposals could
lead to increased government involvement in healthcare and otherwise
change the operating environment for the Company's customers. Healthcare
providers may react to these proposals and the uncertainty surrounding
such proposals by curtailing or deferring investment in medical and dental
equipment. Future change sin the healthcare industry, including
governmental regulation thereof, and the effect of such changes on the
Company's business cannot be predicted. Changes in payment or
reimbursement programs could adversely affect the ability of the Company's
customers to satisfy their payment obligations to the Company and,
accordingly, may have a material adverse effect on the Company's business,
operating results and financial condition.
g) Interest Rate Risk. Except for approximately $25 million of the Company's
financing contracts at September 30, 1997, which are at variable interest
rates with no scheduled payments, the Company's financing contracts
require the Company's customers to make payments at fixed interest rates
for specified terms. However, approximately $35 million of the Company's
borrowings currently are subject to a variable interest rate.
Consequently, an increase in interest rates, before the Company is able to
secure fixed-rate, long-term financing for such contracts or to generate
higher-rate financing contracts to compensate for the increased borrowing
cost, could adversely affect the Company's business, operating results and
financial condition. The Company's ability to secure additional long-term
financing and to generate higher-rate financing contracts is limited by
many factors, including competition, market and general economic
conditions and the Company's financial conditions.
h) Residual Value Risk. At the inception of its equipment leasing
transactions, the Company estimates what it believes will
11
<PAGE> 12
be the fair market value of the financed equipment at the end of the
initial lease term and records that value (typically 10% of the initial
purchase price) on its balance sheet. The Company's results of operations
depend, to some degree, upon its ability to realize these residual values
(as of September 30, 1997, the estimated residual value of equipment at
the end of the lease term was approximately $10.5 million, representing
approximately 5.1% of the Company's total assets). Realization of residual
values depends on many factors, several of which are not within the
Company's control, including, but not limited to, general market
conditions at the time of the lease expiration; any unusual wear and tear
on the equipment; the cost of comparable new equipment; the extent, if
any, to which the equipment has become technologically or economically
obsolete during the contract term; and the effects of any new government
regulations. If, upon the expiration of a lease contract, the Company
sells or refinances the underlying equipment and the amount realize is
less than the original recorded residual value for such equipment, a loss
reflecting the difference will be recorded on the Company's books. Failure
to realize aggregate recorded residual values could thus have an adverse
effect on the Company's business, operating results and financial
condition.
i) Sales of Receivables. As part of the Company's portfolio management
strategy and as a source of funding of its operations, the Company has
sold selected pools of its lease contracts and notes receivable due in
installments to a variety of savings banks and the Bravo facility. These
transactions are subject to certain covenants that require the Company to
(i) in the savings bank sales, repurchase financing contracts from the
bank and/or make payments under certain circumstances, including the
delinquency of the underlying debtor, (ii) under the Bravo Facility, a
limited recourse reserve is established and (iii) service the underlying
financing contracts. The Company carries a recourse reserve for each
transaction and recognizes a gain that is included for accounting purposes
in revenues for the year in which the transaction is completed. Each of
these transactions incorporates the covenants under the Revolver
Agreement as such covenants were in effect at the time the asset sale or
loan agreement was entered into. Any default under the Revolver Agreement
may trigger a default under the loan or asset sale agreements. The Company
may enter into additional asset sale agreements in the future in order to
manage its liquidity. The level of recourse reserves established by the
Company in relation to these sales may not prove to be adequate. Failure
of the Company to honor its repurchase and/or payment commitments under
these agreements could create an event of default under the loan or asset
sale agreements and under the Revolver Agreement. There can be no
assurance that a continuing market can be found to sell these types of
assets or that the purchase prices in the future would generate comparable
gain recognition.
j) Dependence on Sales Representatives. The Company is, and its growth and
future revenues are, dependent in large part upon (i) the ability of the
Company's sales representatives to establish new relationships, and
maintain existing relationships, with equipment vendors, distributors and
manufacturers and with healthcare providers and other customers and (ii)
the extent to which such relationships lead equipment vendors,
distributors and manufacturers to promote the Company's financing services
to potential purchasers of their equipment. As of September 30, 1997, the
Company had 15 field sales representatives and eight in-house sales
personnel. Although the Company is not materially dependent upon any one
sales representative, the loss of a group of sales representatives could,
until appropriate replacements were obtained, have a material adverse
effect on the Company's business, operating results and financial
condition.
k) Dependence on Current Management. The operations and future success of the
Company are dependent upon the continued efforts of the Company's
executive officers, two of whom are also directors of the Company. The
loss of the services of any of these key executives could have a material
adverse effect on the Company's business, operating results and financial
condition.
l) Fluctuations in Quarterly Operating Results. Historically, the Company has
generally experienced fluctuation in quarterly revenues and earnings
caused by varying portfolio performance and operating and interest costs.
Given the possibility of such fluctuations, the Company believes that
quarterly comparisons of the results of its operations during any fiscal
year are not necessarily meaningful and that results for any one fiscal
quarter should not be relied upon as an indication of future performance.
HPSC cautions the reader, however, that such list of risk factors may not be
exhaustive. HPSC undertakes no obligation to release publicly the result of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
12
<PAGE> 13
HPSC, INC.
PART II. OTHER INFORMATION
ITEMS 1 THROUGH 5 ARE OMITTED BECAUSE THEY ARE INAPPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.1 Lease Receivables Purchase Agreement dated as of June 27,
1997 among HPSC Capital Funding, Inc., as Seller, HPSC,
Inc. as Servicer and Custodian, EagleFunding Capital
Corporation as Purchaser and BancBoston Securities, Inc.
as Deal Agent.
10.2 Appendix A to EagleFunding Purchase Agreement (Definitions
List Attached).
10.3 Purchase and Contribution Agreement Dated as of June 27,
1997 Between HPSC Capital Funding, Inc. as the Buyer, and
HPSC, Inc. as the Originator and the Servicer.
10.4 Undertaking to Furnish Certain Copies of Omitted Exhibits
to Exhibit 10.1 and 10.3 hereof.
27 Financial Data Schedule
b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the three months
ended September 30, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, HPSC, Inc. has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: November 14, 1997 HPSC, INC.
-------------------------
(Registrant)
By: /s/ John W. Everets
-------------------------
John W. Everets
Chief Executive Officer
Chairman of the Board
By: /s/ Rene Lefebvre
-------------------------
Rene Lefebvre
Vice President
Chief Financial Officer
13
<PAGE> 1
[Execution Version]
LEASE RECEIVABLES PURCHASE AGREEMENT
Dated as of June 27, 1997
among
HPSC CAPITAL FUNDING, INC.,
as Seller
HPSC, INC.,
as Servicer and Custodian
EAGLEFUNDING CAPITAL CORPORATION
as Purchaser
and
BANCBOSTON SECURITIES INC.,
as Deal Agent
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Definitions....................................1
SECTION 1.02. Accounting Terms.......................................2
SECTION 1.03. Other Terms............................................2
SECTION 1.04. Computation of Time Periods............................2
ARTICLE II
AMOUNT AND TERMS OF THE PURCHASES
SECTION 2.01. Receivables Purchase Facility..........................2
SECTION 2.02. Making Purchases from the Seller.......................3
SECTION 2.03. Reduction of Purchase Limit............................6
SECTION 2.04. Settlement Procedures..................................6
SECTION 2.05. Payments and Computations, Etc.........................8
SECTION 2.06. Compensation...........................................8
SECTION 2.07. Dividing or Combining of Capital and Purchase
Periods....................................9
SECTION 2.08. Increased Costs, Capital Adequacy......................9
SECTION 2.09. Taxes.................................................11
SECTION 2.10. Fees..................................................12
SECTION 2.11. Grant of Security Interest in Equipment
Collateral............................................12
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Receivables
Purchase..............................................13
SECTION 3.02. Conditions Precedent to Each Receivables
Purchase..............................................15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Seller..........16
<PAGE> 3
ARTICLE V
GENERAL COVENANTS
SECTION 5.01. Affirmative Covenants of the Seller...................23
SECTION 5.02. Reporting Requirements of the Seller and the
Servicer..............................................29
SECTION 5.03. Negative Covenants of the Seller......................30
ARTICLE VI
SERVICING, ADMINISTRATION, COLLECTION AND CUSTODY
SECTION 6.01. Designation of Servicer...............................34
SECTION 6.02. Duties of the Servicer................................35
SECTION 6.03. Rights of the Deal Agent..............................37
SECTION 6.04. Further Action Evidencing Transfers...................38
SECTION 6.05. Responsibilities of the Seller........................39
SECTION 6.06. Administration of Collections by Servicer.............40
SECTION 6.07. Application of Collections............................40
SECTION 6.08. Servicing Fee.........................................40
SECTION 6.09. Resignation; Successor Servicer.......................41
SECTION 6.10. Lock-Box Accounts; Collection Account.................42
SECTION 6.11. Collection Account....................................42
ARTICLE VII
WIND-DOWN EVENTS; REMEDIES
SECTION 7.01. Wind-Down Events......................................47
SECTION 7.02. Remedies..............................................49
ARTICLE VIII
INDEMNIFICATION; REPURCHASES
SECTION 8.01. Indemnities by the Seller.............................50
ARTICLE IX
THE DEAL AGENT
SECTION 9.01. Authorization and Action..............................54
SECTION 9.02. Deal Agent's Reliance, Etc............................54
SECTION 9.03. Deal Agent and Affiliates.............................55
SECTION 9.04. [Reserved]............................................55
SECTION 9.05. Resignation of the Deal Agent.........................55
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ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc......................................56
SECTION 10.02. Notices, Etc.........................................56
SECTION 10.03. No Waiver; Remedies..................................57
SECTION 10.04. Binding Effect; Assignability........................57
SECTION 10.05. GOVERNING LAW; WAIVER OF JURY TRIAL..................57
SECTION 10.06. Costs, Expenses and Taxes............................58
SECTION 10.07. Execution in Counterparts; Severability..............59
SECTION 10.08. No Bankruptcy Petition Against EagleFunding..........59
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<PAGE> 5
APPENDICES
Appendix A Definitions List
LIST OF EXHIBITS
EXHIBIT A Form of Notice of Sale
EXHIBIT B Form of Opinion of Counsel for Seller
EXHIBIT C Form of Officer's Certificate
EXHIBIT D List of Offices of Seller and Where Records
are Kept
EXHIBIT E Form of Interest Rate Hedge Assignment
EXHIBIT F Form of Lock-Box Agreement
EXHIBIT G List of Lock-Box Accounts, Lock-Box Banks
and their Post Office Boxes
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<PAGE> 6
LEASE RECEIVABLES PURCHASE AGREEMENT
LEASE RECEIVABLES PURCHASE AGREEMENT, dated as of June 27,
1997 (the "EagleFunding Purchase Agreement"), among HPSC CAPITAL FUNDING, INC.,
a Delaware corporation ("Funding"), as Seller (the "Seller"), EAGLEFUNDING
CAPITAL CORPORATION, a Delaware corporation ("EagleFunding"), as Purchaser (the
"Purchaser"), HPSC, INC., a Delaware corporation ("HPSC"), as Servicer (the
"Servicer") and as Custodian (the "Custodian"), and BANCBOSTON SECURITIES INC.,
a Massachusetts corporation ("BSI"), as Deal Agent (the "Deal Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Originator Purchase Agreement, the
Seller has agreed to purchase and otherwise acquire certain Transferred Assets
from time to time from HPSC (in such capacity, the "Originator") and the
Originator has agreed to act as Servicer of such Transferred Assets; and
WHEREAS, the Seller has requested that EagleFunding make
Receivables Purchases from the Seller, the proceeds of which shall be used by
the Seller to purchase new Transferred Assets from the Originator in accordance
with the terms of the Originator Purchase Agreement; and
WHEREAS, EagleFunding will fund such Receivables Purchases by
(i) the issuance of Commercial Paper or (ii) if EagleFunding fails for any
reason to issue Commercial Paper, by borrowing under the Liquidity Agreement,
dated as of the date hereof, among EagleFunding, the Liquidity Providers and the
Liquidity Agent; and
WHEREAS, subject to the terms and conditions set forth herein,
EagleFunding is willing to make the Receivables Purchases from the Seller.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Definitions. As used in this EagleFunding
Purchase Agreement or any certificate or other document made or delivered
pursuant hereto, the capitalized terms used herein and therein shall, unless
otherwise defined herein or therein, have the meanings assigned to them in the
Definitions List attached hereto as Appendix A, the terms of which are
incorporated herein by reference (the "Definitions List").
<PAGE> 7
SECTION 1.02. Accounting Terms. As used herein and in any
certificate or other document made or delivered pursuant hereto and thereto,
accounting terms not defined in the Definitions List and accounting terms partly
defined in the Definitions List to the extent not defined, shall have the
respective meanings given to them under GAAP.
SECTION 1.03. Other Terms. (a) All other undefined
terms contained in this EagleFunding Purchase Agreement shall, unless the
context indicates otherwise, have the meanings provided for by the UCC to the
extent the same are used or defined therein.
(b) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this EagleFunding Purchase Agreement shall refer to
this EagleFunding Purchase Agreement as a whole and not to any particular
provision of this EagleFunding Purchase Agreement, and Section, subsection,
Schedule and Exhibit references are to this EagleFunding Purchase Agreement
unless otherwise specified.
(c) Capitalized terms used herein shall be equally applicable
to both the singular and plural forms of such terms.
SECTION 1.04. Computation of Time Periods. In this
EagleFunding Purchase Agreement, in the computation of periods of time from a
specified date to a later specified date, the word "from" shall mean "from and
including" and the words "to" and "until" shall each mean "to but excluding."
ARTICLE II
AMOUNT AND TERMS OF THE PURCHASES
SECTION 2.01. Receivables Purchase Facility. EagleFunding
shall subject to the terms and conditions herein after set forth, make purchases
of Receivables ("Receivables Purchases") from time to time on any Settlement
Date (except that the initial Receivables Purchase may be on a date other than a
Settlement Date) during the period from the date the conditions precedent in
Section 3.01 are satisfied to the Termination Date. Each Receivables Purchase
shall constitute an assignment and sale by the Seller, and a purchase and
acquisition by EagleFunding of Purchased Interests, including, without
limitation, designated Receivables identified as Eligible Receivables by the
Seller, and Related Security and Collections with respect thereto. Under no
circumstances shall EagleFunding make any Receivables Purchase if, after giving
effect to such Receivables Purchase, the
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<PAGE> 8
aggregate outstanding Capital hereunder would exceed the least of (i) the
Purchase Limit, (ii) the Capital Limit, or (iii) the sum, on such Receivables
Purchase Date, of (a) the net proceeds from the sale of Commercial Paper plus
(b) the proceeds of Advances. The Capital Limit in effect on any date shall be
determined by reference to the most recent Settlement Report delivered by the
Seller to EagleFunding in accordance with Section 5.02(f) hereof (x) as adjusted
on the most recent Settlement Date to reflect additional Eligible Receivables
sold on such Settlement Date since the delivery of such Settlement Report and
(y) as adjusted on any other date of determination to eliminate from the
Discounted Eligible Receivables Balance any Receivables which were Eligible
Receivables as of the dates reflected in the Settlement Report but which no
longer satisfy the criteria for Eligible Receivables. The Capital of the initial
Receivables Purchase hereunder shall be in a minimum amount of $10,000,000, the
incremental Capital of each other Receivables Purchase hereunder shall be in a
minimum amount of $2,500,000. It is the intention of the parties hereto that
each Receivables Purchase to be made hereunder shall constitute either (A) a
"sale of accounts or chattel paper", as such term is used in Article 9 of the
UCC, or (B) a sale of "instruments", as such term is used in Article 9 of the
UCC. If at any time a court characterizes the transactions hereunder as loans by
EagleFunding to the Seller, then the Seller hereby pledges, grants a security
interest in and assigns to the Deal Agent, for the benefit of EagleFunding, all
of its right and title to and interest in the Purchased Interests, including the
Purchased Receivables and the Related Security, Collections and Equipment
related thereto, as security for such loans and for the payment and performance
of all obligations of the Seller hereunder.
SECTION 2.02. Making Purchases from the Seller.
(a) Sale Notice. Whenever the Seller wishes to sell
Receivables hereunder, it shall deliver to EagleFunding a notice ("Sale Notice")
in substantially the form of Exhibit A hereto no later than 10:00 A.M. (Boston,
Massachusetts time) at least three (3) Business Days prior to the proposed
Receivables Purchase Date. Each Sale Notice shall be by telephone, telex,
telecopy, cable or other facsimile transmission (in the case of any such Sale
Notice by telephone, confirmed immediately in writing) and shall specify therein
(1) the aggregate initial Capital to be funded in connection with such
Receivables Purchase, (2) the relevant Receivables Purchase Date, and (3) the
requested duration of the initial Purchase Period(s) for such Capital. In
addition, the Seller shall attach to each such Sale Notice a list of the
Receivables intended to be sold pursuant thereto, identifying each such
Receivable by its Obligor and Outstanding Balance, and a notation evidencing the
classification of each
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<PAGE> 9
such Receivable as (I) an Eligible Receivable, and (II) a Designated Receivable
or a Non-Designated Receivable. The delivery of such Sale Notice by the Seller
to EagleFunding, together with the accompanying list of Receivables intended to
be sold pursuant thereto, shall be deemed to constitute the identification by
the Seller of each such Receivable to EagleFunding and the Deal Agent as an
Eligible Receivable.
(b) Consideration for Receivables Purchases. The consideration
for each Receivables Purchase shall consist of the Capital funded under this
EagleFunding Purchase Agreement and the obligation of the Purchaser to remit to
the Seller all Collections of the Receivables so purchased and actually received
by the Purchaser following the Collection Date, and to direct the Servicer and
the Deal Agent to remit all Collections received by each such Person directly to
the Seller, pursuant to the terms and conditions of Section 6.11(b) or Section
6.11(d), as applicable. Until the occurrence of the Collection Date, on each
Business Day, the outstanding amounts of accrued Yield, Carrying Costs, or other
amounts owed by (or to be paid on behalf of) the Seller under this EagleFunding
Purchase Agreement shall be automatically recomputed to reflect any changes
therein. The Purchased Interests shall become zero at such time, after the
Termination Date, as EagleFunding shall have recovered the aggregate outstanding
Capital and each of EagleFunding and the Deal Agent shall have received all
other amounts payable to EagleFunding and the Deal Agent, respectively, pursuant
to this EagleFunding Purchase Agreement and the Seller has received payment of
the amount of all Collections received by the Purchaser or the Deal Agent
following the Collection Date. EagleFunding shall remit, and shall direct each
of the Servicer and the Deal Agent to remit, in consideration of the sale of the
Purchased Interests, from and after the Collection Date, to the Seller, all
proceeds of Collections in respect of the Purchased Interests; provided that,
from and after the date following the Collection Date that the Outstanding
Balance of the Purchased Receivables is less than or equal to 10% of the
Outstanding Balance of the Purchased Receivables as of the Termination Date, the
Deal Agent may, in lieu of continuing to make such remittances on behalf of the
Purchaser, by at least three (3) Business Days' prior written notice to the
Seller, reassign to the Seller all of EagleFunding's right, title and interest
in and to the Purchased Assets in full satisfaction of the obligation of the
Purchaser to remit and direct each of the Deal Agent and the Servicer to remit
all Collections received following the Collection Date. It is expressly
understood and agreed that the Purchaser's and the Deal Agent's obligations to
remit all Collections received by each such Person, respectively, following the
Collection Date shall be limited solely to Collections and other proceeds of the
Purchased Interests actually received by
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<PAGE> 10
each such Person, respectively, and that none of EagleFunding, the Deal Agent
nor any Liquidity Provider shall have any personal liability for the payment of
the amount of any such Collections.
(c) Selection of Purchase Periods. Promptly upon receiving
each Sale Notice, the Deal Agent shall, following its review of the Seller's
request set forth therein with respect to the initial Purchase Period(s) for
Capital to be funded in connection with such Sale Notice, select Purchase
Periods for all increases in outstanding Capital so that all outstanding Capital
is at all times allocated to a Purchase Period (it being understood that if the
Seller does not propose a specific Purchase Period, the Deal Agent shall select
such Purchase Period in its discretion). The Purchase Period for any Capital
shall be specified in the Sale Notice described in subsection (a) hereof. At
least one Business Day prior to the last day of each Purchase Period for any
Capital allocated to such Purchase Period, the Seller shall request new Purchase
Periods for such Capital; provided that, in the case of any Purchase Period for
Capital for which Yield is to be determined by reference to the Eurodollar Rate,
such request shall be given not later than 10:00 A.M. (Boston, Massachusetts
time) at least three (3) Business Days prior to the last day of the relevant
preceding Purchase Period. The Deal Agent shall, on the date of any Receivables
Purchase hereunder and, so long as any Capital related to such Receivables
Purchase is outstanding, on the first day of each successive Purchase Period for
such Capital, notify the Seller of the duration of the relevant Purchase Period
and the Yield which will be applicable to the Capital during such Purchase
Period. Any Purchase Period that commences before the Termination Date and would
otherwise end on a date occurring after the Termination Date shall end on the
Termination Date and the duration of any Purchase Period that commences on or
after the Termination Date shall be of such duration as shall be selected by the
Deal Agent in its discretion. In addition, if a CP Disruption shall have
occurred and be continuing, EagleFunding, or the Deal Agent on its behalf, may,
upon notice to the Originator and the Seller, terminate any Purchase Period then
in effect if EagleFunding has funded the Capital allocated to such Purchase
Period by issuing Commercial Paper. All outstanding Capital shall be assigned a
Purchase Period at all times, which Purchase Periods will be limited as set
forth in the definition thereof.
(d) Funding. EagleFunding shall, before 3:00 P.M. (Boston,
Massachusetts time) on the proposed Receivables Purchase Date of each
Receivables Purchase, subject to the applicable conditions set forth in Article
IV, make available to the Seller a wire transfer of such funds to the Seller in
accordance with the Seller's written wire transfer instructions.
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SECTION 2.03. Reduction of Purchase Limit. The Seller shall
have the right, at any time upon at least three (3) Business Days' notice to
EagleFunding, to terminate in whole or reduce in part the unused portion of the
Purchase Limit in a minimum amount of $5,000,000 and increments of $5,000,000 in
excess thereof; provided, that in no event shall the Purchase Limit be reduced
to less than the amount of Capital then outstanding. Any such termination shall
be without premium or penalty of any kind, except for any indemnification which
may be owed in connection with such termination pursuant to Section 2.06 and
Section 8.01.
SECTION 2.04. Settlement Procedures.
(a) Any Collections of Purchased Receivables received (or
deemed to have been received) by the Seller shall be remitted directly to
EagleFunding by depositing such Collections in the Lock-Box Account within one
Business Day of Seller's receipt (or deemed receipt) thereof. On each Payment
Date, the Seller shall pay to EagleFunding Yield on all outstanding Capital the
Purchase Period for which ends on such date.
(b) On each Settlement Date to occur prior to the Designated
Termination Date, the Seller shall either:
(i) at any time prior to the occurrence of the Termination
Date (other than the Designated Termination Date), sell additional
Receivables hereunder in accordance with the procedures and subject to
the conditions set forth in Section 2.01 such that, immediately
following such Receivables Purchase, the Capital Limit equals or
exceeds outstanding Capital, in which event the Deal Agent shall,
subject to the order of priority set forth in Section 6.11(b), remit
the Collections so set aside pursuant to Section 6.11 to the Seller in
consideration of the purchase price for such Receivables Purchase; or
(ii) out of the Collections set aside pursuant to Section
6.11, direct the Deal Agent to remit, subject to the order of priority
set forth in Section 6.11, an amount of such Collections to be applied
toward the reduction of outstanding Capital such that, following the
application of such Collections to outstanding Capital, the Capital
Limit equals or exceeds the outstanding Capital.
(c) On each Payment Date from and after the Designated
Termination Date, the Seller shall direct the Deal Agent, for the benefit of
EagleFunding, to distribute for application toward the
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reduction of outstanding Capital, all Collections so set aside but not to exceed
the sum of (i) the Capital allocated to such Purchase Period, (ii) all accrued
and unpaid Yield thereon, and (iii) the aggregate of all other amounts owed
hereunder by the Seller to EagleFunding and/or the Deal Agent, all as more fully
set forth in Section 6.11.
(d) If on any day the Outstanding Balance of any Purchased
Receivable is either (i) reduced or adjusted as a result of any defective,
rejected, returned, repossessed or foreclosed merchandise, any defective or
rejected services, any cash discount or any other adjustment made or performed
by the Seller or any other Person (including, without limitation, those
described in the definition of "Dilution Factors"), or (ii) reduced or canceled
as a result of a setoff in respect of any claim by the Obligor thereof against
the Seller or any other Person (whether such claim arises out of the same or a
related transaction or an unrelated transaction), the Seller shall be deemed to
have received on such day a Collection of such Purchased Receivable in the
amount of such reduction, cancellation or adjustment. If on any day any of the
representations or warranties in Section 4.01(g) is no longer true with respect
to a Purchased Receivable or if the Seller has breached its obligations under
Section 5.01(j), then the Seller shall be deemed to have received on such day a
Collection of such Purchased Receivable: (x) if such representation, warranty or
covenant relates to the non-existence of any Adverse Claims, the Seller shall be
deemed to have received a Collection of such Purchased Receivable in the dollar
amount of the Adverse Claims attaching thereto and (y) if such representation or
warranty relates to the validity or perfection of the transfer of such Purchased
Receivable under this EagleFunding Purchase Agreement or the perfection of
EagleFunding's security interest in any Equipment as against the Obligor
thereunder, then the Seller be deemed to have received a Collection of such
Purchased Receivable in an amount equal to the Outstanding Balance thereof. To
the extent that any such deemed Collection reduces the Outstanding Balance of
such Purchased Receivable to zero, then, upon the Seller's payment to the Deal
Agent of such deemed Collection, the Deal Agent shall re-assign to the Seller
all of its right, title and interest in and to the relevant Purchased
Receivable, the Contract under which such Purchased Receivable arose and the
Related Security relating thereto.
(e) Although the Originator, the Seller and EagleFunding agree
that the Originator shall have no right to so terminate, reject or not assume a
Contract, if the Originator in its capacity as Servicer (or its successor in
interest, including a trustee appointed under the Bankruptcy Code) terminates,
rejects or does not assume a Contract, in whole or in part, prior
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to the expiration of the original term of such Contract, whether such rejection,
termination or non-assumption is made pursuant to an equitable cause, statute,
regulation, judicial proceeding or other applicable law (including, without
limitation, Section 365 of the Bankruptcy Code), then (i) the Seller shall be
deemed to have received Collections with respect to Purchased Receivables
arising under such Contract in an amount equal to (A) in the event of a
prepayment or termination of a Contract consented to by the Originator at the
Obligor's request, the excess, if any, of the Termination Amount over all
amounts paid by the Obligor on account of such termination or (B) in the event
of any other rejection, termination or non-assumption, the amount of the
Outstanding Balance thereof that has not been, or may not be paid as a result of
such rejection, termination or non-assumption. Upon the Seller's payment of any
such deemed Collections described in this Section 2.04(e), the Deal Agent shall
re-assign to the Seller all of its right, title and interest in and to the
relevant Purchased Receivable or Purchased Receivables, the Contracts under
which such Purchased Receivable(s) arose and the Related Security relating
thereto.
SECTION 2.05. Payments and Computations, Etc. All amounts to
be paid or deposited by the Seller hereunder shall be paid or deposited by the
Seller in immediately available funds to EagleFunding not later than 1:00 P.M.
(Boston, Massachusetts time) on the date on which payable. Payments received by
EagleFunding after such time shall be deemed to have been received on the next
Business Day. All payments by the Seller under this EagleFunding Purchase
Agreement shall be made without setoff, deduction or counterclaim and the Seller
agrees to pay on demand any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this EagleFunding Purchase Agreement. Whenever any
payment to be made hereunder shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next applicable
Business Day and interest shall be payable at the applicable rate during such
extension; provided, that if such extension would be inconsistent with one of
the provisions set forth in the definition of "Purchase Period", then such
provision shall control.
SECTION 2.06. Compensation. The Seller shall compensate
EagleFunding, upon its written request, for all losses, expenses and
liabilities, including, without limitation, any indemnification payments owed by
EagleFunding pursuant to the Liquidity Agreement, on account of any liquidation
or reemployment of deposits or other funds acquired by such party to make, fund
or maintain Capital hereunder, (i) if for any reason a
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Receivables Purchase does not occur on a date specified therefor in the Sale
Notice; (ii) if for any reason any payment, prepayment or conversion of any
Capital occurs on a date which is not the last day of the Purchase Period for
such Capital or (iii) as a consequence of any required conversion of any
Eurodollar Rate Advance prior to the last day of the Purchase Period for the
relevant Capital. Any request for compensation under this Section 2.06 shall be
accompanied by a copy of a statement from EagleFunding setting forth in
reasonable detail the basis for requesting compensation and the determination of
the amount thereof in such statement shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 2.07. Dividing or Combining of Capital and Purchase
Periods. The Seller may, on notice to and with the consent of the Deal Agent
received at least one Business Day prior to the last day of any Purchase Period,
either (a) divide such Capital so as to allocate such Capital to two or more
Purchase Periods, or (b) combine such Capital with other Capital originating on
such last day or having Purchase Periods ending on such last day so as to
allocate all such Capital to a single Purchase Period. On and after the
Termination Date, the Deal Agent shall have the right to divide and/or combine
Capital for purposes of allocation to Purchase Periods in any manner which it
may select in its sole discretion.
SECTION 2.08. Increased Costs, Capital Adequacy.
(a) If, after the date hereof due to either (i) the
introduction of or any change in or to the interpretation of any law or
regulation by the governmental authority that promulgated or administers
compliance with such law or regulation (other than laws or regulations with
respect to income taxes or any change by way of imposition or increase of
reserve requirements included in the Eurodollar Reserve Percentage) or (ii) the
compliance with any guideline or request from any central bank or other
governmental authority or similar agency (whether or not having the force of
law), and taking into account the obligations of the Liquidity Providers under
the Liquidity Agreement and otherwise in connection with EagleFunding's
asset-supported financing business, any reserve or deposit or similar
requirement shall be imposed, modified or deemed applicable or, any basis of
taxation shall be changed or any other condition shall be imposed, and there
shall be any increase in the cost to EagleFunding (either directly or indirectly
through any increase in the costs to the Liquidity Providers) of making,
funding, or maintaining Receivables Purchases or in the cost to EagleFunding of
agreeing to make, fund, or maintain Receivables Purchases (including the
reduction of any sum received or Receivable hereunder), then the Seller shall
from time to time, upon demand by EagleFunding by
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the submission of the certificate described below, pay to EagleFunding
additional amounts sufficient to compensate EagleFunding for such increased
cost. A certificate setting forth in reasonable detail the amount of such
increased cost submitted to the Seller by EagleFunding shall be conclusive and
binding for all purposes, absent manifest error.
(b) If EagleFunding or any Liquidity Provider determines that
compliance with any law or regulation or any guideline or request or any written
interpretation from any central bank or other governmental authority or similar
agency (whether or not having the force of law) which is introduced, implemented
or received by EagleFunding or such Liquidity Provider after the date hereof,
affects or would affect capital adequacy or the amount of capital required or
expected to be maintained by EagleFunding or such Liquidity Provider or any
corporation controlling EagleFunding or such Liquidity Provider and that the
amount of such capital is increased by or based upon the existence of this
EagleFunding Purchase Agreement or upon the Advances or such Liquidity
Provider's commitment to lend under the Liquidity Agreement and other
commitments of that type, or has or would have the effect of reducing the rate
of return on capital, then, upon demand by EagleFunding by the submission of the
certificate described below, the Seller shall pay to EagleFunding, from time to
time as specified by EagleFunding, additional amounts sufficient to compensate
EagleFunding or such corporation in the light of such circumstances, to the
extent that EagleFunding reasonably determines such increase in capital to be
allocable to the Receivables Purchases or the existence of this EagleFunding
Purchase Agreement or to the extent that EagleFunding owes compensation to a
Liquidity Provider in respect of or on account of such events. A certificate
setting forth in reasonable detail such amounts submitted to the Seller by
EagleFunding shall be conclusive and binding for all purposes, absent manifest
error.
(c) In the event that EagleFunding requests compensation for
increased costs on behalf of any Liquidity Provider under this Section 2.08 and
such increased costs are not being requested by the other Liquidity Providers
generally or, if only one Liquidity Provider exists, by EagleFunding's liquidity
providers for similar transactions, then EagleFunding shall, promptly following
identification by the Seller of an "Eligible Assignee" (as defined in the
Liquidity Agreement) willing to accept such commitment, cause the Liquidity
Provider requesting such increased costs to assign its outstanding Advances and
commitments under the Liquidity Agreement to such Eligible Assignee, all as more
particularly described in Section 8.06(g) of the Liquidity Agreement.
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SECTION 2.09. Taxes. (a) All payments made by the Seller under
this EagleFunding Purchase Agreement shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
governmental authority having taxing authority, excluding net income taxes and
franchise taxes (imposed in lieu of income taxes) imposed on EagleFunding, as a
result of any present or former connection between the jurisdiction of the
government or taxing authority imposing such tax or any political subdivision or
taxing authority thereof or therein and EagleFunding (excluding a connection
arising solely from EagleFunding having executed, delivered or performed its
obligations or received a payment under, or enforced, this EagleFunding Purchase
Agreement) (all such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions and withholdings being hereinafter called "Taxes"). If any Taxes are
required to be withheld from any amounts payable by the Seller, (i) the sum
payable shall be increased as may be necessary so that, after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.09), EagleFunding receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Seller shall make
such deductions, and (iii) the Seller shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
(b) In addition, the Seller agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges, or similar levies that arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with respect to, this
EagleFunding Purchase Agreement (hereinafter "Other Taxes").
(c) The Seller will indemnify EagleFunding for the full amount
of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.09) paid by
EagleFunding and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. Whenever any Taxes are payable by the
Seller, as promptly as possible thereafter the Seller shall send to
EagleFunding, a certified copy of an original official receipt received by the
Seller showing payment thereof. If the Seller fails to pay any Taxes when due to
the appropriate taxing authority or fails to remit to EagleFunding the required
receipts or other required documentary evidence, the Seller shall indemnify
EagleFunding for any incremental Taxes, interest or penalties that EagleFunding
is legally required to pay as a result of any such failure. The agreements in
this
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subsection shall survive the termination of this EagleFunding
Purchase Agreement.
(d) If, under the terms of the Liquidity Agreement,
EagleFunding is required to compensate any Liquidity Providers in respect of
taxes under circumstances similar to those described in this Section 2.09, then
immediately upon demand by EagleFunding, the Seller shall pay to EagleFunding
such additional amount or amounts as may be necessary to pay such Liquidity
Providers the amounts so due or otherwise reimburse EagleFunding for any such
amounts paid by it.
SECTION 2.10. Fees. In further consideration of the
Receivables Purchases to be made hereunder, the Seller agrees to pay to the Deal
Agent and EagleFunding all fees specified in the Fee Letter of even date
herewith, which fees will be due and payable at the times and in the manner set
forth in such Fee Letter.
SECTION 2.11. Grant of Security Interest in Equipment
Collateral. (a) As security for the payment and performance of all the
obligations of the Seller hereunder and as additional enhancement to enable
EagleFunding and the Liquidity Providers to fully recover Capital and accrued
and unpaid Yield and fees, the Seller hereby grants to the Deal Agent, for the
benefit of EagleFunding and the Liquidity Providers, a security interest in all
of the Seller's right, title and interest in and to the following, whether now
owned or hereafter acquired and whether now existing or hereafter arising (the
"Equipment Collateral"): all Equipment which is the subject of a Contract for
any Purchased Receivable and substitutions therefor and products and proceeds
thereof, including, without limitation, all payments under insurance (whether or
not the Deal Agent is the loss payee thereof) or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
(b) The Seller shall, at its expense, promptly execute and
deliver all further instruments and documents, and take all further action
(including, without limitation, the execution and filing of such financing or
continuation statements, or amendments thereto and assignments thereof), that
may reasonably be necessary or desirable, or that the Deal Agent may request, in
order to perfect and protect any security interest granted or purported to be
granted to the Deal Agent hereunder or to enable the Deal Agent to exercise and
enforce its rights and remedies hereunder with respect to any Equipment
Collateral. The Seller hereby authorizes the Deal Agent to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any part of the Equipment Collateral
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now existing or hereafter arising without the signature of the Seller where
permitted by law. A carbon, photographic or other reproduction of the
EagleFunding Purchase Agreement of any financing statement covering the
Equipment Collateral or any part thereof shall be sufficient as a financing
statement.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Receivables
Purchase. The agreement of EagleFunding to make a Receivables Purchase on the
occasion of the initial Receivables Purchase Date hereunder is subject to
satisfaction of the following conditions precedent:
(a) EagleFunding shall have received, on or before the initial
Receivables Purchase Date, all of the following, each fully executed and in form
and substance satisfactory to EagleFunding:
(i) This EagleFunding Purchase Agreement;
(ii) each of the Lock-Box Agreements;
(iii) A copy of the resolutions of the Board of Directors of
the Seller approving the Originator Purchase Agreement, this
EagleFunding Purchase Agreement, the other Facility Documents to which
it is a party and all other documents and instruments to be delivered
hereunder or thereunder by the Seller, certified by its Secretary or
Assistant Secretary;
(iv) A certificate of the Secretary or an Assist ant Secretary
of the Seller certifying (A) the names and true signatures of the
officers of the Seller authorized to sign this EagleFunding Purchase
Agreement and the other documents and instruments to be delivered by
the Seller pursuant hereto or thereto (on which certificate
EagleFunding may conclusively rely until such time as EagleFunding
shall receive from the Seller a revised certificate meeting the
requirements of this subsection (iv)) and (B) a true and complete copy
of the By-laws of the Seller;
(v) A certificate executed by an officer of the Seller
certifying that as of the initial Receivables Purchase Date, all of the
representations and warranties contained in Article IV hereof are true
and
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accurate in all material respects with the same force and effect as
though such representations and warranties had been made as of such
time;
(vi) The Certificate of Incorporation of the
Seller, certified by the Secretary of State of
Delaware;
(vii) Good Standing Certificates for the Seller
issued by the Secretaries of State of the State of
Delaware and The Commonwealth of Massachusetts;
(viii) Certificates executed by an officer of the
Seller and the Originator relating to solvency;
(ix) An opinion of Hill & Barlow, counsel to the Seller and
the Originator, in substantially the form of Exhibit B and as to such
other matters as EagleFunding may reasonably request;
(x) An opinion of Hill & Barlow, counsel to the Seller and the
Originator, in form and substance reasonably satisfactory to the Deal
Agent, to the effect that, in the event of any Insolvency Proceeding
filed by or against the Originator, the Transferred Assets would not be
treated as property of the Originator's estate and that the Seller's
assets and liabilities would not be substantively consolidated with
those of the Originator;
(xi) Acknowledgment copies of proper UCC-1 Financing
Statements executed by the Originator and by the Seller, as may be
necessary or, in the opinion of the Deal Agent, desirable under the UCC
of all appropriate jurisdictions, or any comparable law to perfect the
Deal Agent's interests in all Purchased Receivables, Contracts and
Related Security in which an interest may be acquired hereunder;
(xii) Certified copies of Requests for Information or Copies
(Form UCC-11) (or a similar search report certified by a party
acceptable to the Purchaser), dated a date reasonably near to the date
hereof, listing all effective financing statements which name the
Originator or the Seller (under its present name and any previous
names) as debtor and which are filed in the jurisdictions in which
filings were made pursuant to subsection (xi) of this Section 3.01,
together with copies of such financing statements;
(xiii) An Officer's Certificate in the form of Exhibit
C, executed by the President or the Treasurer of the Seller;
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(xiv) Original copies of the Originator Purchase Agreement,
and all documents described in Section 3.01 of the Originator Purchase
Agreement and not otherwise described above;
(xv) The Fee Letter;
(xvi) The Liquidity Agreement; and
(xvii) The Liquidity Security Agreement;
(b) All fees and expenses due and owing as of the initial Receivables
Purchase Date under the Fee Letter (including, without limitation, the
Structuring Fee) shall have been paid;
(c) Any existing Adverse Claims on the Transferred Assets
shall have been released;
(d) A copy of the resolutions of BSI's credit committee approving this
EagleFunding Purchase Agreement, the other Facility Documents and the other
transactions contemplated hereby and thereby; and
(e) Each of the Deal Agent and EagleFunding shall have received such
other approvals or documents as it may reasonably request.
SECTION 3.02. Conditions Precedent to Each Receivables
Purchase. The agreement of EagleFunding to make a Receivables Purchase on the
occasion of each Receivables Purchase Date (including the initial Receivables
Purchase) shall be subject (i) to EagleFunding's receipt of (A) a Settlement
Statement for the most recent calendar month then ended, (B) a notice from the
Custodian in substantially the form of Exhibit A to the Custodial Agreement
confirming that the Custodian has received the Contract Files required to be
delivered to it pursuant to Section 6.04(b) hereof and (C) such other approvals
or documents as EagleFunding may reasonably request, (ii) to the satisfaction of
the obligations of the Seller under Section 5.01(n) of this EagleFunding
Purchase Agreement, and (iii) to the condition precedent that on the Receivables
Purchase Date of such Receivables Purchase, before and after giving effect to
such Receivables Purchase and to the application of the proceeds therefrom, the
following statements shall be true (and each of the giving of the applicable
Sale Notice and the acceptance by the Seller of the proceeds of such Receivables
Purchase shall constitute a representation and warranty by the Seller that on
the Receivables Purchase Date of such Receivables Purchase, before and after
giving effect thereto and to the application of the proceeds therefrom, such
statements are true):
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(a) the representations and warranties contained in Article IV
hereof and all representations and warranties of the Originator in the
Originator Purchase Agreement are true and accurate as of the
Receivables Purchase Date in all material respects with the same force
and effect as though such representations and warranties had been made
as of such time;
(b) no event has occurred and is continuing, or would result
from such Receivables Purchase, which constitutes an Event of
Termination or an Unmatured Event of Termination or a Wind-Down Event
or Unmatured Wind-Down Event;
(c) the outstanding amount of all Capital after giving effect
to such Receivables Purchase shall be equal to or less than the Capital
Limit; and
(d) the proceeds of such Receivables Purchase shall be used to
fund a Purchase of Transferred Assets under the Originator Purchase
Agreement to occur simultaneously with such Receivables Purchase and
all conditions to such Purchase under the Originator Purchase Agreement
on such date have been satisfied or waived.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Seller. The Seller represents and warrants to EagleFunding that:
(a) Due Incorporation and Good Standing. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. The Seller is duly qualified to do
business as a foreign corporation and is in good standing in every jurisdiction
in which the nature of its business requires it to be so qualified or where the
ownership of its properties or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
materially adversely affect (i) the collectibility of the Purchased Interests,
(ii) the collectibility of any Receivable, (iii) the business, properties,
operations, prospects, profits or condition (financial or otherwise) of the
Seller or (iv) the ability of the Seller to perform its obligations hereunder
and under the other Facility Documents to which it is a party.
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<PAGE> 22
(b) Due Authorization and No Conflict. The execution, delivery
and performance by the Seller of this EagleFunding Purchase Agreement and all
other Facility Documents and the transactions contemplated hereby and thereby,
including the acquisition of the Transferred Assets under the Originator
Purchase Agreement and the purchases contemplated hereunder, are within the
Seller's corporate powers, have been duly authorized by all necessary corporate
action, do not contravene (i) the Seller's charter or by-laws, (ii) any law,
rule or regulation applicable to the Seller, (iii) any contractual restriction
contained in any indenture, loan or credit agreement, lease, mortgage, security
agreement, bond, note, or other agreement or instrument binding on or affecting
the Seller or its property or (iv) any order, writ, judgment, award, injunction
or decree binding on or affecting the Seller or its property, and do not result
in or require the creation of any Adverse Claim upon or with respect to any of
its properties; and no transaction contemplated hereby requires compliance with
any bulk sales act or similar law. This EagleFunding Purchase Agreement and the
other Facility Documents to which the Seller is a party have been duly executed
and delivered on behalf of the Seller.
(c) Governmental and Other Consents. Except for the filing of
financing statements pursuant to the UCC required to perfect the security
interests granted hereunder or under the other Facility Documents and except for
consents under certain contractual agreements which have been obtained, no
authorization, consent, approval or other action by, and no registration,
qualification, designation, declaration, notice to or filing with, any
governmental authority or other Person is or will be necessary in connection
with the execution and delivery of this EagleFunding Purchase Agreement or any
other Facility Document to which the Seller is a party or any of the other
documents contemplated hereby or thereby, consummation of the transactions
herein or therein contemplated, or performance of or compliance with the terms
and conditions hereof or thereof, to ensure the legality, validity or
enforceability hereof or thereof.
(d) Enforceability of Facility Documents. This EagleFunding
Purchase Agreement and each of the other Facility Documents to which the Seller
is a party have been duly and validly executed and delivered by the Seller and
constitute the legal, valid and binding obligation of the Seller enforceable in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency or similar laws relating to or affecting creditors'
rights generally and by equitable principles.
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<PAGE> 23
(e) No Litigation. There are no actions, suits or proceedings
at law or in equity or by or before any governmental authority now pending or,
to the knowledge of the Seller, threatened against or affecting the Seller or
any property or rights of the Seller which purport to challenge the legality,
validity or enforceability of this EagleFunding Purchase Agreement or any other
Facility Document or which may materially impair the ability of the Seller to
carry on business substantially as now being conducted or which may materially
adversely affect the condition (financial or otherwise), operations or
properties of the Seller.
(f) Use of Proceeds. No proceeds of any Receivables Purchase
will be used by the Seller other than to fund a Purchase of Transferred Assets
from the Originator except that the Seller may net from the Purchase Price paid
to the Originator reasonable and necessary amounts for the funding of its
operating expenses.
(g) Valid Title and Perfected Interest. Each Receivable,
together with the Contract related thereto, is owned by the Seller free and
clear of any Adverse Claim except as provided herein and, upon the making of
each Receivables Purchase, EagleFunding shall acquire a valid and perfected
first priority undivided percentage ownership interest, to the extent of the
Purchased Interests, in each Purchased Receivable then existing or thereafter
arising and in the Related Security and Collections with respect thereto, in
each case free and clear of any Adverse Claim except as provided hereunder or
under the Liquidity Agreement or the Liquidity Security Agreement (except that
the Deal Agent will not have a perfected security interest in any Collateral
constituting Equipment which is owned by the Seller and located in a State other
than The Commonwealth of Massachusetts); and no effective financing statement or
other instrument similar in effect covering any Purchased Receivable or the
Related Security or Collections with respect thereto shall at any time be filed
except in favor of the Deal Agent in accordance with this EagleFunding Purchase
Agreement.
(h) Accuracy of Information. All certificates, reports,
financial statements and similar writings furnished by or on behalf of the
Seller to EagleFunding or the Deal Agent at any time pursuant to any requirement
of, or in response to any written request of any such party under, this
EagleFunding Purchase Agreement or any other Facility Document or any
transaction contemplated hereby or thereby, have been, and all such
certificates, reports, financial statements and similar writings hereafter
furnished by the Seller to such parties will be, true and accurate in every
respect material to the transactions contemplated hereby on the date as of which
any such certificate, report, financial statement or similar writing was or will
be
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delivered, and shall not omit to state any material facts or any facts necessary
to make the statements contained therein not materially misleading.
(i) Governmental Regulations. The Seller is not an "investment
company" or a company controlled by an "investment company" registered or
required to be registered under the Investment Company Act of 1940, as amended,
or otherwise subject to any other federal or state statute or regulation
limiting its ability to incur indebtedness.
(j) Margin Regulations. The Seller is not engaged, principally
or as one of its important activities, in the business of extending credit for
the purpose of "purchasing" or "carrying" any "margin stock" (as each of the
quoted terms is defined or used in Regulation G, T, U or X). No part of the
proceeds of any Receivables Purchase has been used for so purchasing or carrying
margin stock or for any purpose which violates, or which would be inconsistent
with, the provisions of Regulation G, T, U or X.
(k) Location of Chief Executive Office and Records. The chief
place of business and chief executive office of the Seller are located at the
address referred to in Exhibit D hereof and the locations of the offices where
the Seller keeps all the Records are listed on Exhibit D (or at such other
locations, notified to the Deal Agent in accordance with Section 5.01(f), in
jurisdictions where all action required by Section 6.04 has been taken and
completed).
(l) Lock-Box Accounts. Each Obligor under a Contract has,
within one month of the date of Purchase of such Contract, been instructed to
remit payment on the Purchased Receivables to a Post Office Box for remittance
to a Lock-Box Account or directly to a Lock-Box Account substantially in the
form of Exhibit G to the Originator Purchase Agreement. From and after the
initial Purchase Date, the Originator will have no right, title and/or interest
to any of the Lock-Box Accounts and will maintain no lock-box accounts in its
own name for the collection of such Receivables. The Seller has caused the
Originator to deliver to the Deal Agent a duplicate key to each Post Office Box
and has filed a standing delivery order with the United States Postal Service
authorizing the Deal Agent to receive mail delivered to each such Post Office
Box. The account numbers of all Lock-Box Accounts, together with the names and
addresses of all the Lock-Box Banks maintaining such Lock-Box Accounts and the
related Post Office Boxes, are specified in Exhibit H to the Originator Purchase
Agreement. The Seller has no other Lock-Box Accounts for the collection of the
Transferred Assets except for the Lock-Box Accounts.
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(m) No Trade Names. The Seller has no trade names,
fictitious names, assumed names or "doing business as" names.
(n) Separate Identity. The Seller is operated as an entity
separate from the Originator and each other Subsidiary of the Originator and (i)
has its own board of directors, (ii) has at least one director who is reasonably
acceptable to EagleFunding and who is not a direct, indirect or beneficial
stockholder, officer, director, employee, affiliate, associate, customer or
supplier of the Originator nor a relative of any thereof, nor a trustee in
bankruptcy for any Affiliate of the Originator, (iii) maintains its assets in a
manner which facilitates their identification and segregation from those of its
Affiliates, and has a separate telephone number from that of the Originator or
any Subsidiary of the Originator, (iv) has all office furniture, fixtures and
equipment necessary to operate its business and such furniture, fixtures and
equipment are either owned by the Seller or leased pursuant to written leases,
(v) conducts all intercompany transactions with the Originator and each other
Subsidiary of the Originator on terms which the Seller reasonably believes to be
on an arm's-length basis, (vi) has not guaranteed any obligation of the
Originator or any other Subsidiary of the Originator, nor has it had any of its
obligations guaranteed by any such entities and has not held itself out as
responsible for debts of any such entity or for the decisions or actions with
respect to the business and affairs of any such entity, (vii) has not, except as
otherwise expressly acknowledged under the Facility Documents, permitted the
commingling or pooling of its funds or other assets with the assets of the
Originator or any other Affiliate, (viii) has separate deposit and other bank
accounts to which neither the Originator nor any other Affiliate has any access
and does not at any time pool any of its funds with those of the Originator or
any such Affiliate, (ix) maintains financial records which are separate from
those of the Originator and each other Subsidiary of the Originator, (x)
compensates all employees, consultants and agents, or reimburses the Originator,
from the Seller's own funds, for services provided to the Seller by such
employees, consultants and agents, (xi) has agreed with the Originator to
allocate among themselves shared corporate operating services and expenses which
are not reflected in the Servicing Fee (including, without limitation, the
services of shared employees, consultants and agents and reasonable legal and
auditing expenses) on the basis of actual use or the value of services rendered,
and otherwise on a basis reasonably related to actual use or the value of
services rendered, (xii) pays directly for its own account for accounting and
payroll services, rent, lease and other expenses and does not have such
operating expenses paid by the Originator or any other Subsidiary of the
Originator, (xiii) conducts all of its business (whether in writing or orally)
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solely in its own name, (xiv) is not, directly or indirectly, named as a direct
or contingent beneficiary or loss payee on any insurance policy covering the
property of the Originator or any other Subsidiary of the Originator and has
entered into no agreement to be named as such a beneficiary or payee, (xv)
acknowledges that EagleFunding, the Deal Agent and the Liquidity Providers are
entering into the transactions contemplated by this EagleFunding Purchase
Agreement and the other Facility Documents in reliance on the Seller's identity
as a separate legal entity from the Originator and each other Subsidiary of the
Originator, and (xvi) practices and adheres to corporate formalities such as
complying with its By-laws and corporate resolutions and the holding of
regularly scheduled board of directors meetings.
(o) Subsidiaries. The Seller has no Subsidiaries and does not
own or hold, directly or indirectly, any capital stock or equity security of, or
any equity interest in, any Person.
(p) Facility Documents. The Originator Purchase Agreement is
the only agreement pursuant to which the Seller purchases Receivables or other
Transferred Assets. The Seller has furnished to EagleFunding true, correct and
complete copies of each Facility Document to which the Seller is a party, each
of which is in full force and effect. Neither the Seller nor any Affiliate
thereof is in default of any of its obligations thereunder in any material
respect. Upon the Purchase of each Receivable pursuant to the Originator
Purchase Agreement, the Seller shall be the lawful owner of, and have good title
to, such Receivable and all Transferred Assets relating thereto, free and clear
of any Adverse Claims. All such Transferred Assets are purchased without
recourse to the Originator except as described in the Originator Purchase
Agreement. The Purchases of the Transferred Assets by the Seller constitute
valid and true sales and transfers for consideration (and not merely a pledge of
such Transferred Assets for security purposes), enforceable against creditors of
the Originator and no Transferred Assets shall constitute property of the
Originator.
(q) Business. Since its incorporation, the Seller has
conducted no business other than the execution, delivery and performance of the
Facility Documents contemplated hereby, the purchase of Transferred Assets
thereunder, and such other activities as are incidental to the foregoing. The
Seller has incurred no Indebtedness except that expressly incurred hereunder and
under the other Facility Documents.
(r) Ownership of the Seller. One hundred percent (100%) of the
outstanding capital stock of the Seller is directly owned (both beneficially and
of record) by HPSC. Such stock is validly issued, fully paid and nonassessable
and there are no
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options, warrants or other rights to acquire capital stock from
the Seller.
(s) Taxes. The Seller has filed or caused to be filed all
Federal, state and local tax returns which are required to be filed by it, and
has paid or caused to be paid all taxes shown to be due and payable on such
returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which the Seller has set aside
adequate reserves on its books in accordance with GAAP and which proceedings
have not given rise to any Adverse Claim.
(t) Solvency. The Seller, both prior to and after giving
effect to the initial Purchase on the initial Purchase Date, and after giving
effect to each subsequent Purchase, (i) is not "insolvent" (as such term is
defined in Section 101(31)(A) of the Bankruptcy Code); (ii) is able to pay its
debts as they become due; and (iii) does not have unreasonably small capital for
the business in which it is engaged or for any business or transaction in which
it is about to engage.
(u) Diversification. After giving effect to the initial
Receivables Purchase on the initial Receivables Purchase Date, the number of
Contracts and the number of Obligors associated with the Purchased Receivables
shall equal or exceed 100, and, commencing no later than 120 days after the
initial Receivables Purchase, such number shall equal or exceed 300.
(v) Software. Each of (i) the Seller, (ii) the Servicer and
(iii) the Deal Agent has the right (whether by license, sublicense or
assignment) to use all of the computer software used by the Servicer and/or the
Originator to account for the Purchased Interests to the extent necessary to
administer the Purchased Interests, and, in the case of the Seller and the
Servicer, to assign (by way of sale or collateral pledge) or sublicense such
rights to use all of such software to the Deal Agent.
ARTICLE V
GENERAL COVENANTS
SECTION 5.01. Affirmative Covenants of the Seller. From the
initial Receivables Purchase Date until the later of the Termination Date or the
Collection Date, the Seller shall, unless the Deal Agent shall otherwise consent
in writing:
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(a) Compliance with Laws, Etc. Comply in all material respects
with all applicable laws, rules, regulations and orders with respect to it, its
business and properties and all Receivables and related Contracts.
(b) Preservation of Corporate Existence. Preserve and maintain
its corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction except where the failure to preserve
and maintain such existence, rights, franchises, privileges and qualifications
would not materially adversely affect (i) the collectibility of the Purchased
Interests, (ii) the collectibility of any Receivable, (iii) the business,
properties, operations, prospects, profits or condition (financial or otherwise)
condition of the Seller or (iv) the ability of the Seller to perform its
obligations hereunder and under the other Facility Documents to which it is a
party.
(c) Audits. At any time and from time to time upon prior
written notice to the Seller during regular business hours and on a quarterly
basis if requested, permit the Deal Agent, or its agents or representatives, (i)
to examine and make copies of and abstracts from all Records, and (ii) to visit
the offices and properties of the Seller for the purpose of examining such
Records, and to discuss matters relating to the Receivables or the Seller's
performance hereunder with any of the officers or employees of the Seller having
knowledge of such matters. Each such audit shall be at the sole expense of the
Seller (subject to the Seller's right under the Originator Purchase Agreement to
recover such expenses from the Originator).
(d) Keeping of Records and Books of Account. Maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing the Receivables in the
event of the destruction of the originals thereof) and keep and maintain, all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of all collections of and
adjustments to each Purchased Receivable).
(e) Performance and Compliance with Receivables and Contracts.
At its expense timely and fully perform and comply, and cause the Originator to
comply, in all material respects, with all material provisions, covenants and
other promises required to be observed by it or the Originator under the
Contracts.
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<PAGE> 29
(f) Location of Records. Keep its chief place of business and
chief executive office, and the offices where it keeps the Records, at the
address of the Seller referred to in Section 4.01(k), or, in any such case, upon
30 days' prior written notice to the Deal Agent, at such other locations within
the United States where all action required by Section 6.04 shall have been
taken and completed.
(g) Credit and Collection Policies. Comply in all material
respects with the Credit and Collection Policy in regard to each Purchased
Receivable and the related Contract.
(h) Collections. Instruct all Obligors to cause all
Collections to be deposited directly to a Post Office Box or Lock-Box Account,
and if the Seller shall receive any Collections, the Seller shall hold such
Collections in trust for the benefit of the Deal Agent and deposit such
Collections into a Lock-Box Account or the Collection Account within one
Business Day following Seller's receipt thereof.
(i) Compliance with ERISA. Comply in all material respects
with the provisions of ERISA, the IRC, and all other applicable laws, and the
regulations and interpretations thereunder.
(j) Perfected Security Interest under Contracts. Take such
action with respect to each Purchased Receivable as is necessary to ensure that
the Seller maintains, as against the Obligor thereunder, a perfected first
priority security interest in any Equipment relating thereto free and clear of
Adverse Claims or, in the case of any Lease, to ensure that the Seller would
maintain such a perfected first priority security interest in the event that a
court or other Person were to determine that such Lease purported to transfer to
the Obligor an ownership (rather than a leasehold) interest in the Equipment
subject thereto (in each such case, including, without limitation, the filing of
a continuation statement with respect to a financing statement originally filed
under the UCC of any appropriate jurisdiction prior to the date on which the
effectiveness of such financing statement would lapse under the UCC of such
jurisdiction); provided, that the Seller shall not be required to file financing
statements or to maintain the effectiveness of previously filed financing
statements with respect to any Eligible Receivables the Outstanding Balance of
which originally is or has thereafter been reduced below $5,000, respectively,
so long as the aggregate Outstanding Balance of Receivables hereunder for which
no such financing statements are in effect at any time remains less than 10.0%
of the Discounted Eligible Receivables Balance hereunder; provided that such ten
percent limitation shall not apply from and after the Termination Date
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<PAGE> 30
unless and to the extent that the Deal Agent specifically requests otherwise.
(k) Maintenance of Insurance. Maintain, or cause the Originator or
each Obligor to maintain, with respect to the Contracts and the Equipment
related thereto, casualty and general liability insurance which provide at least
the same coverage as a fire and extended coverage insurance policy as is
comparable for other companies in related businesses. Such insurance policies
(and self-insurance where permitted) shall be maintained in an amount which is
not less than the aggregate Discounted Value of the Purchased Receivables
hereunder arising under the relevant Contracts hereunder. Each such casualty and
liability policy if maintained by an Obligor, shall name the Originator or the
Seller as loss payee and additional insured, and the Originator shall have
assigned any such interest to the Seller. The Seller shall remit, or shall cause
to be remitted, the proceeds of any such insurance policy to a Lock-Box Account
or the Collection Account.
(l) Separate Identity. Take all actions required to maintain the
Seller's status as a separate legal entity. Without limiting the foregoing, the
Seller shall:
(i) conduct all of its business, and make all communications to
third parties (including all invoices (if any), letters, checks and
other instruments) solely in its own name (and not as a division of any
other Person), and require that its employees, if any, when conducting
its business identify themselves as such and not as employees of any
other Affiliate of the Seller (including, without limitation, by means
of providing appropriate employees with business or identification
cards identifying such employees as the Seller's employees);
(ii) compensate all employees, consultants and agents directly or
indirectly through reimbursement of the Originator each calendar
quarter, from the Seller's bank accounts, for services provided to the
Seller by such employees, consultants and agents and, to the extent any
employee, consultant or agent of the Seller is also an employee,
consultant or agent of any Affiliate of the Seller, allocate the
compensation of such employee, consultant or agent between the Seller
and such Affiliate on a basis which reflects the services rendered to
the Seller and such Affiliate;
(iii) pay its own operating expenses and liabilities from its own
funds, allocate all overhead expenses (including, without limitation,
telephone and other utility charges) for items shared between the
Seller and any
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<PAGE> 31
Affiliate on the basis of actual use to the extent practicable and, to
the extent such allocation is not practicable, on a basis reasonably
related to actual use and allocate taxes on the basis of their
respective incomes in accordance with applicable federal regulations;
(iv) at all times have at least one "Independent Director", as
defined in and as required under the Seller's Certificate of
Incorporation and have at least one officer responsible for managing
its day-to-day business and manage such business by or under the
direction of its board of directors;
(v) maintain its books and records separate from those of any
Affiliate;
(vi) prepare its financial statements separately from those of
its other Affiliates and insure that any consolidated financial
statements of the Originator have notes to the effect that the Seller
is a separate corporate entity whose creditors have a claim on its
assets prior to those assets becoming available to its equity holders
and therefore to any creditors of the Originator;
(vii) use its best efforts not to commingle its funds or other
assets with those of any other Affiliate, and not to hold its assets in
any manner that would create an appearance that such assets belong to
any other Affiliate, and not maintain bank accounts or other depository
accounts to which any Affiliate is an account party, into which any
Affiliate makes deposits or from which any Affiliate has the power to
make withdrawals;
(viii) not permit any Affiliate to pay its operating expenses
(except pursuant to allocation arrangements that comply with the
requirements of subsection (ii) or (iii) of this Section 5.01(l) or
pursuant to the terms of the Originator Purchase Agreement);
(ix) not guarantee any obligation of any Affiliate nor (to the
extent that the Seller has the legal power to prevent such) have any of
its obligations guaranteed by any such Affiliate, (either directly or
by seeking credit based on the assets of such Affiliate) or otherwise
hold itself out as responsible for the debts of any Affiliate;
(x) maintain at all times stationery and a telephone number
separate from that of any Affiliate and which telephone number will be
answered in its own name, and have
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all its officers and employees conduct all of its business solely in
its own name;
(xi) hold regular meetings of its board of directors (not less
frequently than quarterly) in accordance with the provisions of its
Certificate of Incorporation and otherwise take such actions as are
necessary on its part to ensure that all corporate procedures required
by its Certificate of Incorporation and by-laws are duly and validly
taken;
(xii) maintain a separate office from the offices of any of its
Affiliates and identify such office by a sign in its own name;
(xiii) pay dividends only if (A) no other dividend has been paid
during the calendar month in which such dividend is paid, (B) such
dividend has been duly authorized by its board of directors in
accordance with applicable law and (C) its net worth, determined
immediately after giving effect to such dividend is at least
$2,000,000; and
(xiv) take such other actions as are necessary on its part to
ensure that the facts and assumptions set forth in the opinion
described in Section 3.01(a)(x) remain true and correct at all times.
(m) Taxes. File or cause to be filed, and (to the extent it has
legal power to cause such) cause each of its Affiliates with whom it shares
consolidated tax liability to file, all federal, state and local tax returns
which are required to be filed by it, except where the failure to file such
returns could not reasonably be expected to have a material adverse effect on
the collectibility of the Transferred Assets or the ability of the Seller to
perform its obligations hereunder or under any other Facility Document to which
it is a party or which could otherwise be reasonably expected to expose the
Seller to a material liability. The Seller shall pay or cause to be paid all
taxes shown to be due and payable on such returns or on any assessments received
by it, other than any taxes or assessments, the validity of which are being
contested in good faith by appropriate proceedings and with respect to which the
Seller or the applicable subsidiary shall have set aside adequate reserves on
its books in accordance with GAAP and which proceedings could not reasonably be
expected to have a material adverse effect on the collectibility of the
Transferred Assets or the ability of the Seller to perform its obligations
hereunder or under any other Facility Document to which it is a party or which
could otherwise be reasonably expected to expose the Seller to a material
liability.
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(n) Interest Rate Hedges. Concurrently with each Receivables
Purchase, enter into an Interest Rate Hedge with the Swap Provider as
contemplated in the definition of "Discount Rate", and transfer, assign and
otherwise convey to the Deal Agent for the benefit of EagleFunding all of the
Seller's rights in, to and under such Interest Rate Hedge pursuant to an
Interest Rate Hedge Assignment in substantially in the form of Exhibit E hereto,
together with a certificate executed by the Swap Provider in substantially the
form of Exhibit A to such Interest Rate Hedge Assignment. The Seller shall
thereafter maintain each such Interest Rate Hedge in full force and effect at
all times until the Capital associated with such Receivables Purchase has been
recovered in full by EagleFunding, based on an amortization schedule to be
mutually agreed upon by the Seller and the Deal Agent which matches the expected
amortization of the aggregate Purchased Receivables then outstanding and
relating to such Receivables Purchase (giving effect to expected prepayments,
defaults and dilutions relating thereto) and the terms of which are otherwise
reasonably satisfactory to the Deal Agent. The aggregate notional amount of all
such Interest Rate Hedges shall at all times be an amount equal to no less than
94% and no more than 100% of the sum of the outstanding Capital at such time.
The Seller shall perform all of its obligations under the Interest Rate Hedges
to the same extent as if its rights under the Interest Rate Hedges has not been
assigned hereunder and shall indemnify EagleFunding against any payments by such
party on account of the Seller's failure to perform its obligations under the
Interest Rate Hedges. The exercise by the Deal Agent of any of its rights
hereunder or under the Interest Rate Hedge Assignment shall not relieve the
Seller from such obligations.
(o) Facility Documents. Comply in all material respects with the
terms of and employ the procedures outlined in and enforce the obligations of
the Originator under the Originator Purchase Agreement, and all of the other
Facility Documents to which it is a party, take all such action to such end as
may be from time to time reasonably requested by the Deal Agent, maintain all
such Facility Documents in full force and effect and make to the Originator such
reasonable demands and requests for information and reports or for action as the
Seller is entitled to make thereunder and as may be from time to time reasonably
requested by the Deal Agent.
(p) Segregation of Collections. Prevent the deposit into any of
the Lock-Box Accounts of any funds other than Collections in respect of the
Transferred Assets and, to the extent that any such funds are nevertheless
deposited into any of such Lock-Box Accounts, promptly identify any such funds
to the Servicer for segregation and remittance to the owner thereof.
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(q) Diversification. Sell sufficient Receivables under this
EagleFunding Purchase Agreement so that, no later than 120 days after the
initial Receivables Purchase Date, the number of Contracts and the number of
Obligors associated with the Purchased Receivables shall have exceeded 300.
SECTION 5.02. Reporting Requirements of the Seller and the
Servicer. From the initial Receivables Purchase Date until the later of the
Termination Date or the Collection Date, unless the Deal Agent shall otherwise
consent in writing,
(a) the Seller shall furnish to the Deal Agent and to the
Purchaser (and, in the case of each of clauses (i) and (ii) below, to each
director of the Seller):
(i) as soon as available and in any event within 20 days
after the end of each calendar month, a balance sheet of the Seller as
of the end of such month, certified by the chief financial officer,
chief accounting officer or treasurer of the Seller (which balance
sheet may be included in the Settlement Report for the related month);
(ii) as soon as available and in any event within 105 days
after the end of each fiscal year of the Seller, a copy of the balance
sheet of the Seller as of the end of such year, reported on by
nationally recognized independent public accountants acceptable to the
Deal Agent (the Deal Agent acknowledges that any of the "Big 6"
accounting firms will be acceptable to the Deal Agent);
(iii) promptly upon receipt thereof, copies of (A) all annual
and quarterly financial statements delivered to the Seller by the
Originator pursuant to the Originator Purchase Agreement and (B) all
other reports and other written information not specified above which
are required to be delivered by the Originator (individually, or as
Servicer) to the Seller pursuant to the terms of the Originator
Purchase Agreement;
(iv) as soon as possible and in any event within five
Business Days after the occurrence of each Event of Termination or
Wind-Down Event or each Unmatured Event of Termination or Unmatured
Wind-Down Event, the statement of the chief financial officer, chief
accounting officer or treasurer of the Seller setting forth details of
such Event of Termination, Wind-Down Event, Unmatured Event of
Termination, or Unmatured Wind-Down Event, and the action which the
Seller proposes to take with respect thereto;
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(v) promptly after the filing or receiving thereof, copies
of all reports and notices with respect to any Reportable Event defined
in Article IV of ERISA which the Seller or any Affiliate files under
ERISA with the IRS or the PBGC or the DOL or which the Seller receives
from the PBGC;
(vi) on or before the 15th day of each month (or if such day
is not a Business Day, the immediately succeeding Business Day), or at
such more frequent intervals as may be required in writing by the Deal
Agent to the Seller from time to time, a copy of the Settlement Report
for the most recently concluded calendar month (or the last day of such
shorter interval, as the case may be), which shall include a summary of
the portfolio of Interest Rate Hedges as of such day;
(vii) promptly, from time to time, such other information,
documents, records or reports respecting the Purchased Receivables or
the conditions or operations, financial or otherwise, of the Seller as
the Deal Agent may from time to time reasonably request in order to
protect the interests of the Deal Agent or of EagleFunding under or as
contemplated by this EagleFunding Purchase Agreement; and
(b) the Servicer shall furnish to the Deal Agent and to the
Purchaser, promptly upon the effectiveness thereof, any change in the Credit and
Collection Policy.
SECTION 5.03. Negative Covenants of the Seller. From the initial
Receivables Purchase Date until the later of the Termination Date or the
Collection Date, the Seller shall not, without the written consent of the Deal
Agent:
(a) Sales, Liens, Etc. Against Receivables and Related Security.
Except as otherwise provided herein, sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist, any Adverse
Claim upon or with respect to, any Purchased Receivable, Related Security,
Collections, or any related Contract, or upon or with respect to any Lock-Box
Account to which any Collections of any Purchased Receivable are sent, or assign
any right to receive income in respect thereof, or upon any other Transferred
Asset, except that the Seller shall have no responsibility for any Adverse Claim
created by an Obligor upon or with respect to any Equipment owned by such
Obligor so long as such Adverse Claim is subordinate to the security interest of
the Seller in such Equipment.
(b) Extension or Amendment of Receivables. Except for actions of
the Servicer otherwise permitted hereunder and in the
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Originator Purchase Agreement, extend, amend or otherwise modify, the terms of
any Receivable, or amend, modify or waive, any term or condition of any Contract
related thereto, whether for any reason relating to a negative change in the
related Obligor's creditworthiness or inability to make any payment under the
related Contract or otherwise.
(c) Change in Business or Credit and Collection Policy. Make any
change in the character of its business or in the Credit and Collection Policy,
which change would, in either case, impair the collectibility of any Transferred
Asset.
(d) Change in Payment Instructions to Obligors. Add or terminate
any bank as a Lock-Box Bank from those listed in Exhibit I to the Originator
Purchase Agreement or make any change in its instructions to Obligors regarding
payments to be made to the Seller or payments to be made to any Lock-Box Bank,
unless the Deal Agent shall have received (i) ten Business Days' prior notice of
such addition, termination or change, (ii) prior to the effective date of such
addition, termination or change, (x) executed copies of Lock-Box Agreements
executed by each new Lock-Box Bank and the Seller and (y) copies of all
agreements and documents signed by either the Seller or the respective Lock-Box
Bank with respect to any new Lock-Box Account, and (iii) the prior written
consent of the Purchaser to such addition, termination or change (which consent
shall not be unreasonably withheld).
(e) Stock, Merger, Consolidation, Etc. Sell any shares of any
class of its capital stock to any Person (other than the Originator) or
consolidate with or merge into or with any other corporation, or purchase or
otherwise acquire all or substantially all of the assets or capital stock, or
other ownership interest of, any Person or sell, transfer, lease or otherwise
dispose of all or substantially all of its assets to any Person, except for the
conveyances of a security interest in favor of the Deal Agent as expressly
permitted under the terms of this EagleFunding Purchase Agreement.
(f) Change in Corporate Name. Make any change to its corporate
name, or use any trade names, fictitious names, assumed names or "doing business
as" names.
(g) ERISA Matters. (i) Engage or permit any ERISA Affiliate to
engage in any prohibited transaction for which an exemption is not available or
has not previously been obtained from the DOL; (ii) permit to exist any
accumulated funding deficiency, as defined in Section 302(a) of ERISA and
Section 412(a) of the IRC, or funding deficiency with respect to any Benefit
Plan other than a Multiemployer Plan; (iii) fail to make
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any payments to any Multiemployer Plan that the Seller or any ERISA Affiliate
may be required to make under the agreement relating to such Multiemployer Plan
or any law pertaining thereto; (iv) terminate any Benefit Plan so as to result
in any liability; or (v) permit to exist any occurrence of any reportable event
described in Title IV of ERISA which represents a material risk of a liability
of the Seller or any ERISA Affiliate under ERISA or the IRC; provided, however,
the Seller's ERISA Affiliates may take or allow such prohibited transactions,
accumulated funding deficiencies, payments, terminations and reportable events
described in clauses (i) through (iv) above so long as such events occurring
within any fiscal year of the Seller, in the aggregate, involve a payment of
money by or an incurrence of liability of any such ERISA Affiliate in an amount
which does not exceed $500,000.
(h) Terminate or Reject Contracts. Without limiting Section
5.03(b), terminate or reject any Contract prior to the term of such Contract,
whether such rejection or early termination is made pursuant to an equitable
cause, statute, regulation, judicial proceeding or other applicable law
(including, without limitation, Section 365 of the Bankruptcy Code), unless, in
the case of a Practice Finance Loan, prior to such termination or rejection, the
Seller pays the Deal Agent, for the benefit of EagleFunding, an amount equal to
the Termination Amount owed with respect thereto.
(i) Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness except for (i) Indebtedness to EagleFunding, the Deal Agent or any
Liquidity Provider expressly contemplated hereunder, (ii) ordinary course
expenses (to the extent, if any, that such ordinary course expenses constitute
Indebtedness) in an aggregate amount outstanding at any time not to exceed
$10,000 (exclusive of taxes) and (iii) Indebtedness to the Originator pursuant
to the Originator Purchase Agreement.
(j) Guarantees. Guarantee, endorse or otherwise be or become
contingently liable (including by agreement to maintain balance sheet tests) in
connection with the obligations of any other Person, except endorsements of
negotiable instruments for collection in the ordinary course of business and
reimbursement or indemnification obligations in favor of EagleFunding, the Deal
Agent, or any Liquidity Provider as provided for under this EagleFunding
Purchase Agreement.
(k) Limitation on Transactions with Affiliates. Enter into, or be
a party to any transaction with any Affiliate, except for:
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(i) the transactions contemplated by the Originator Purchase
Agreement;
(ii) transactions related to the allocation of shared overhead
expenses or taxes as described in clause (iii) of Section 5.01(l); and
(iii) to the extent not otherwise prohibited under this
EagleFunding Purchase Agreement, other transactions in the nature of
employment contracts and directors' fees, upon fair and reasonable
terms materially no less favorable to the Seller than would be obtained
in a comparable arm's-length transaction with a Person not an
Affiliate.
(l) Facility Documents. Except as otherwise permitted under
Section 10.01, (a) terminate, amend or otherwise modify any Facility Document to
which it is a party, or grant any waiver or consent thereunder, (b) without the
prior consent of the Deal Agent, exercise any discretionary rights granted to
the Seller under the Originator Purchase Agreement pursuant to provisions
thereof providing for certain actions to be taken "with the consent of the
Buyer", "acceptable to the Buyer" as "specified by the Buyer", "in the
reasonable judgment of the Buyer" or similar provisions (it being understood
that inaction by the Seller shall not be considered to be an exercise of such
discretionary rights) or (c) without the prior written consent of the Deal
Agent, consent to any amendment or modification of the Credit and Collection
Policy.
(m) Charter and By-Laws. Amend or otherwise modify its Certificate
of Incorporation or By-laws in any manner which requires the consent of the
"Independent Director" (as defined in the Seller's Certificate of Incorporation)
without the prior written consent of the Deal Agent and delivery of an opinion
of counsel that such amendment shall not alter the conclusions set forth in the
legal opinion described in Section 3.01(a)(x).
(n) Lines of Business. Conduct any business other than that
described in Section 4.01(q), or enter into any transaction with any Person
which is not contemplated by or incidental to the performance of its obligations
under the Facility Documents.
(o) Accounting Treatment. Prepare any financial statements or
other statements (including any tax filings which are not consolidated with
those of the Originator) which shall account for the transactions contemplated
by the Originator Purchase Agreement in any manner other than as the sale of, or
a capital contribution of, the Transferred Assets by the Originator
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to the Seller (it being understood that non-recognition of such transaction due
to the application of consolidated financial reporting principles under GAAP or
the filing of tax returns on a consolidated basis shall not constitute a
violation of this covenant).
(p) Limitation on Investments. Make or suffer to exist any loans
or advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any Affiliate or any other Person except for (i) Permitted
Investments, (ii) the purchase of Receivables and other Transferred Assets
pursuant to the terms of the Originator Purchase Agreement and (iii) so long as
the aggregate outstanding Capital hereunder is less than the Capital Limit then
in effect, the acceptance of investments in exchange for Defaulted Receivables
in an effort to maximize the recoveries thereon.
(q) Fair Selection. In connection with (i) each designation of
Purchased Receivables under Section 2.02 as either Designated Receivables or
Non-Designated Receivables, and (ii) each repurchase of Designated Receivables
pursuant to Section 8.02, select Receivables on a basis which is adverse to
either of EagleFunding or the Deal Agent.
ARTICLE VI
SERVICING, ADMINISTRATION, COLLECTION AND CUSTODY
SECTION 6.01. Designation of Servicer. The servicing,
administering and collection of the Purchased Receivables and the other
Purchased Interests shall be conducted by the Person (the "Servicer") designated
by the Deal Agent from time to time in accordance with this Section 6.01. Until
the Deal Agent gives notice to the Originator of the designation of a new
Servicer, the Originator is hereby designated as, and hereby agrees to perform
the duties and obligations of, the Servicer pursuant to the terms hereof. The
Deal Agent may at any time from and after the occurrence of a Servicing
Termination Event, or earlier upon the written request of the Seller, designate
as Servicer any other Person to succeed the Originator or any Successor
Servicer, on the condition in each case that any such Person so designated shall
agree to perform, and shall have assumed, the duties and obligations of the
Servicer pursuant to the terms hereof (including, without limitation Section
6.09(c)). The Servicer may, with the prior written consent of EagleFunding and
the Deal
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Agent, subcontract with any other Person for servicing, administering or
collecting the Purchased Interests, provided that the Servicer shall remain
liable for the performance of the duties and obligations of the Servicer
pursuant to the terms hereof. The Servicer shall use reasonable care in
performing its duties as Servicer hereunder and, without limiting the foregoing,
shall service the Purchased Receivables in accordance with the Credit and
Collection Policy.
SECTION 6.02. Duties of the Servicer. (a) The Servicer shall take
or cause to be taken all such actions as may be necessary or advisable to
collect each Purchased Receivables from time to time, all in accordance with
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Policy. Each of the Seller,
EagleFunding and the Deal Agent hereby appoints as its agent the Servicer, from
time to time designated pursuant to Section 6.01, to enforce its respective
rights and interests in and under the Purchased Receivables, the Related
Security related thereto and the related Collections. The Servicer will at all
times apply the same standards and follow the same procedures with respect to
the decision to commence, and in prosecuting and litigating with respect to
Purchased Receivables as it applies and follows with respect to accounts,
chattel paper and instruments which are not Purchased Receivables. In no event
shall the Servicer be entitled to make the Deal Agent or EagleFunding a party to
any litigation without the Deal Agent's and EagleFunding's express prior written
consent. The Servicer shall segregate and set aside for the account of
EagleFunding all Collections of the Purchased Receivables and Related Security
in accordance with Section 2.05 of the Originator Purchase Agreement and Section
6.06 hereof and shall cause all such Collections to be remitted to a Lock-Box
Account and/or deposited directly into the Collection Account within one
Business Day after identification thereof by the Servicer and in any event
within four Business Days after the Servicer's receipt thereof. The Servicer
shall promptly review all checks and other instruments returned to it by the
Lock-Box Bank on account of restrictive endorsements, improper payees, incorrect
amounts or for any other reason and shall not deposit any such checks or
instruments in its own accounts unless it is determined to the Deal Agent's
satisfaction that such amounts do not constitute Collections; any such checks or
instruments which are determined to be Collections of the Purchased Receivables
or Related Security related thereto shall be promptly remitted to the Lock-Box
Account or the Collection Account as provided above. Provided that the
Termination Date shall not have occurred, the Originator, while it is Servicer,
may, in accordance with the Credit and Collection Policy, (i) amend, modify or
waive any term or condition of any Contract to reflect any Permitted Extension,
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(ii) adjust the Outstanding Balance of any Purchased Receivable to reflect the
reductions, adjustments or cancellations described in the first sentence of
Section 2.04(d) of this EagleFunding Purchase Agreement, (iii) in the case of a
Practice Finance Loan, so long as such prepayment would not cause a Wind-Down
Event under this EagleFunding Purchase Agreement, and subject to the payment of
any Termination Amount payable under such Contract, consent to the prepayment or
early termination of a Contract, and (iv) amend, modify or waive any provision
of a Delinquent Receivable or Defaulted Receivable so as to maximize the
collectibility thereof (it being understood that neither the Originator nor the
Seller may take any of the actions referred to in clauses (i) through (iv) above
at any time (x) after the occurrence of the Termination Date, or (y) during
which the Originator is not the Servicer, absent the prior consent of the Deal
Agent). The Servicer shall hold in trust for the Seller and EagleFunding in
accordance with their respective interests, all Records. Notwithstanding
anything to the contrary contained herein, following the occurrence of a
Wind-Down Event, the Deal Agent shall have the absolute and unlimited right to
direct the Servicer (whether the Servicer is the Originator or otherwise) to
commence or settle any legal action to enforce collection of any Receivable or
other Transferred Asset or to foreclose upon or repossess any Related Security.
(b) The Servicer shall, as soon as practicable following receipt,
turn over to the Originator the collections of any receivable which is not a
Transferred Asset, less, in the event the Originator is not the Servicer, all
reasonable and appropriate out-of-pocket costs and expenses of such Servicer of
servicing, collecting and administering such receivable.
(c) Notwithstanding anything to the contrary contained in this
EagleFunding Purchase Agreement, the Servicer, if the Deal Agent or its
designee, shall have no obligation to collect, enforce or take any other action
described in this Article VI with respect to any receivable that is not a
Purchased Receivable other than to deliver to the Seller the Collections and
documents with respect to any such receivable as described in the first two
sentences of Section 6.02(b) and to exercise the same degree of care with
respect to Collections and documents in its possession as it would exercise with
respect to its own property.
(d) In the event the Servicer accepts in payment of any Purchased
Receivable the taking or repossession of the Equipment the sale or lease of
which gave rise to such Purchased Receivable, the Servicer agrees to use its
reasonable efforts to resell or re-lease such Equipment for the account of
EagleFunding and shall remit to the Deal Agent the gross sale proceeds thereof
or, to the extent such Equipment is re-leased, shall deliver to
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the Deal Agent the chattel paper or other documents evidencing the rights to
payment arising from such re-lease, all of which documents shall constitute
Contracts and which rights to payment shall constitute Purchased Receivables,
and all of which Contracts and Purchased Receivables shall constitute part of
the Purchased Interests. Neither EagleFunding nor the Deal Agent shall have any
obligation to take any action or commence any proceedings to realize upon any
Purchased Receivable or to enforce any of its rights or remedies with respect
thereto. Any moneys collected by the Servicer pursuant to this subsection
6.02(d) shall be segregated by the Servicer, held in trust by the Servicer for
EagleFunding and shall be remitted to a Lock-Box Account or to the Collection
Account within one Business Day after identification thereof by the Servicer and
in any event within four Business Days after the Servicer's receipt thereof.
(e) The Servicer shall maintain all books of account and other
records pertaining to the Purchased Receivables and the other Purchased
Interests in such form as will enable EagleFunding or its designees to determine
at any time the status thereof. The Servicer will permit EagleFunding, the Deal
Agent and any Person designated by EagleFunding or the Deal Agent, during
regular business hours, to inspect, audit, check and make abstracts from all
books, accounts, records, or other papers pertaining to such Purchased
Interests. From time to time, at the request of EagleFunding or the Deal Agent,
the Servicer, at its own expense, will (i) deliver to EagleFunding and the Deal
Agent and any Person designated by EagleFunding or the Deal Agent any records
and invoices pertaining to the Purchased Interests and evidence thereof as
EagleFunding, the Deal Agent or such designee may deem necessary to enable it to
enforce its rights thereunder, and (ii) mark each computer record relating to,
and each invoice or other evidence of, the Purchased Interests (whether or not
such computer record or other item is the property of EagleFunding) as
EagleFunding or the Deal Agent may direct to reflect the interests of
EagleFunding and the Deal Agent in such Purchased Interests. The Servicer will
either (x) segregate, from all the documents relating to other receivables then
owned or being serviced by the Servicer, all documents relating to the Purchased
Interests, or (y) mark all documents relating to the Purchased Interests so as
to make such documents readily identifiable as property of EagleFunding and with
such legend as shall be specified by the Deal Agent, and will, in either such
event, hold all such documents in trust for EagleFunding and safely keep such
documents in filing cabinets or other suitable containers marked to show
EagleFunding's interest.
SECTION 6.03. Rights of the Deal Agent. At any time after the
occurrence of a Wind-Down Event:
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(a) The Deal Agent may notify the Obligors of the Purchased
Receivables, or any of them, of EagleFunding's ownership interest in
the Purchased Interests and direct such Obligors, or any of them, that
payment of all amounts payable under any Purchased Receivable be made
directly to EagleFunding or its designee (including, without
limitation, the Deal Agent).
(b) The Seller shall, at the Deal Agent's or EagleFunding's
request and at the Seller's expense, give notice of EagleFunding's
interest in the Purchased Interests to each Obligor (in substantially
the form of the Notice of Assignment) and direct that payments be made
directly to EagleFunding or its designee (including, without
limitation, the Deal Agent).
(c) The Seller shall, at the Deal Agent's request, assemble all
Records which the Deal Agent reasonably believes are necessary or
appropriate for the administration and enforcement of the Purchased
Interests, and shall make the same available to the Deal Agent at a
place selected by the Deal Agent or its designee.
(d) Each of the Seller and EagleFunding hereby authorize the Deal
Agent to take any and all steps in the Seller's name and on behalf of
the Seller necessary or desirable, in the determination of the Deal
Agent, to collect all amounts due under any and all Purchased
Receivables or Related Security related thereto, including, without
limitation, endorsing the Seller's name on checks and other instruments
representing Collections and enforcing such Purchased Receivables and
the related Contracts.
SECTION 6.04. Further Action Evidencing Transfers. (a) The Seller
agrees that from time to time, at its expense, it will promptly execute and
deliver all further instruments and documents, and take all further action that
EagleFunding may reasonably request in order to protect or more fully evidence
EagleFunding's ownership interest in the Purchased Receivables, the Related
Security and the Collections related thereto, or to enable EagleFunding to
exercise or enforce any of its rights hereunder or under any related document.
Without limiting the generality of the foregoing, the Seller will mark its
master data processing records evidencing such Purchased Receivables, Related
Security and Collections related thereto with a legend, acceptable to
EagleFunding, evidencing that EagleFunding has acquired an ownership interest
therein as
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provided in this EagleFunding Purchase Agreement and, upon the request of
EagleFunding, will execute and file such financing or continuation statements,
or amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate or as EagleFunding may reasonably
request. The Seller hereby authorizes EagleFunding to file one or more financing
or continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Purchased Receivables, Related Security and
Collections related thereto now existing or hereafter arising without the
signature of the Seller where permitted by law. A carbon, photographic or other
reproduction of this EagleFunding Purchase Agreement or any financing statement
covering the Purchased Receivables, Related Security and Collections related
thereto, or any part thereof, shall be sufficient as a financing statement. If
the Seller fails to perform any of its agreements or obligations under this
EagleFunding Purchase Agreement, EagleFunding may (but shall not be required to)
itself perform, or cause performance of, such agreement or obligation, and the
expenses of EagleFunding incurred in connection therewith shall be payable by
the Seller upon EagleFunding's demand therefor; provided, however, prior to
taking any such action, EagleFunding shall give notice of such intention to the
Seller and provide the Seller with a reasonable opportunity to take such action
itself.
(b) The Seller shall, on or prior to the date of each Receivables
Purchase hereunder, deliver or cause to be delivered the related Contract File
to the Custodian, in suitable form for transfer by delivery, or accompanied by
duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to EagleFunding. In the event that the Seller or the
Servicer receives any other instrument or any writing constituting chattel paper
which, in either event, evidences a Purchased Receivable or other Purchased
Interests, the Seller or the Servicer as applicable shall deliver such
instrument or chattel paper to the Custodian on behalf of EagleFunding within
three (3) Business Days after receipt, in suitable form for transfer by
delivery, or accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance satisfactory to EagleFunding.
SECTION 6.05. Responsibilities of the Seller. Anything herein to
the contrary notwithstanding, the Seller shall (i) perform all of its
obligations under the Contracts to the same extent as if such Contracts had not
been transferred to EagleFunding hereunder and the exercise by EagleFunding or
its assigns of their respective rights hereunder shall not relieve Seller from
such obligations and (ii) pay when due any taxes, including without limitation,
sales, excise and personal property taxes payable in connection with the
Purchased Interests, unless
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the Seller is contesting the payment of such taxes in good faith and by
appropriate proceedings and with respect to which no Adverse Claim has been
asserted or filed.
SECTION 6.06. Administration of Collections by Servicer. (a) The
Servicer shall identify on a timely basis all Collections which are on account
of the Purchased Interests, including all deposits to Lock Box Accounts. On each
Business Day, all Collections received in the Lock Box Accounts for the prior
Business Day (and such Business Day, if practicable) shall be transferred to the
Collection Account. If the Servicer receives any cash or checks, drafts, wire
transfers or other instruments for the payment of money on account or otherwise
in respect of the Purchased Interests, the Servicer shall segregate such cash
and other items, hold such cash and other items in trust for the benefit of
EagleFunding and the Deal Agent and shall cause such cash and other items
(properly endorsed, where required, so that such items may be collected by
EagleFunding) to be deposited in a Lock Box Account or directly in the
Collection Account immediately after the date any such cash or other item shall
have been identified as being on account of a Purchased Interest.
SECTION 6.07. Application of Collections. All Collections on
account of the Purchased Receivables of each Obligor shall be applied in the
order of maturity thereof unless specifically identified otherwise in writing by
such Obligor or directed by a court of competent jurisdiction. Any payment by an
Obligor in respect of any indebtedness or other obligations owed by such Obligor
to the Seller or the Servicer shall, except as otherwise specified by such
Obligor or otherwise required by law, be applied as a Collection of a Receivable
of such Obligor (in the order of the age by invoice date of such Receivables,
starting with the oldest such Receivable) to the extent of any amounts then due
and payable thereunder before being applied to any other indebtedness of such
Obligor to the Seller or the Servicer. The Servicer shall not influence or
instruct any Obligor who is indebted to the Seller in respect of any
indebtedness not included in the Purchased Interests to direct that its
remittances be applied to any such indebtedness prior to being applied to the
Purchased Interests.
SECTION 6.08. Servicing Fee. On each Settlement Date, as full
compensation for its servicing activities hereunder, the Servicer shall be
entitled to receive a fee (the "Servicing Fee") in an amount equal to 1.00%
times the Outstanding Balance of the Purchased Receivables as of the last day of
the prior calendar month times a fraction, the numerator of which is the number
of actual days elapsed in such calendar month and the denominator of which
equals 360, provided, that, if the Servicer hereunder is
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also the Servicer under the Originator Purchase Agreement, the Servicing Fee
hereunder shall be deemed paid to the extent of any payment by the Seller of the
"Servicing Fee" specified and defined in the Originator Purchase Agreement. In
the event that EagleFunding (or the Deal Agent) appoints a successor Servicer,
the Servicing Fee may be adjusted as required by such successor Servicer and as
agreed to by EagleFunding and the Deal Agent.
SECTION 6.09. Resignation; Successor Servicer. (a) The obligation
of the Servicer to service the Purchased Receivables is personal to the Servicer
and the parties recognize that another Person may not be qualified to perform
such obligations. Accordingly, the Servicer's obligation to service the
Purchased Interests hereunder shall be specifically enforceable and shall be
absolute and unconditional in all circumstances, including, without limitation,
after the occurrence and during the continuation of any Wind-Down Event or
Servicing Termination Event hereunder; provided, however, that a Successor
Servicer may be appointed pursuant to this Section 6.09.
(b) Notwithstanding the foregoing, the Servicer may resign from
the obligations and duties hereby imposed on it as Servicer upon determination
that (i) the performance of its duties hereunder is no longer permissible under
any applicable law and (ii) there is no reasonable action which the Servicer
could take to make the performance of its duties hereunder permissible under any
such applicable law. Any determination permitting the resignation of the
Servicer shall be evidenced as to clause (i) above by an opinion of counsel to
such effect delivered to EagleFunding and the Deal Agent. Except to the extent
inconsistent with any such applicable law, no such resignation shall become
effective until a Successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with the remaining provisions of this
Section 6.09.
(c) The Deal Agent shall, as promptly as possible after the
Servicer has given notice pursuant to Section 6.09(b) above or at any time after
the Deal Agent's designation of a successor Servicer pursuant to Section 6.01,
appoint a successor servicer (the "Successor Servicer") and such Successor
Servicer shall accept its appointment by a written assumption in a form
acceptable to the Deal Agent. Upon its appointment, the Successor Servicer shall
be the successor in all respects to the Servicer with respect to servicing
functions under this EagleFunding Purchase Agreement shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof, and all references in this EagleFunding
Purchase Agreement or any other
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Facility Documents to the Servicer shall be deemed to refer to the Successor
Servicer. The Servicer agrees to cooperate with the Successor Servicer in
effecting the transfer of its responsibilities, duties, liabilities and rights
hereunder, including, without limitation, the execution and delivery of
assignments of financing statements, the transfer to the Successor Servicer of
all cash amounts held by the Servicer or thereafter received with respect to the
Purchased Interests, the transfer of electronic records relating to the
Purchased Interests in such form as the Successor Servicer may reasonably
request and the transfer of all related Records, correspondence and other
documents relating to the Purchased Interests.
SECTION 6.10. Lock-Box Accounts; Collection Account. The Seller
has established and will maintain a system of operations, accounts and
instructions to the Lock-Box Banks and will establish and maintain the
Collection Account as provided in this Section 6.10. Pursuant to a Lock-Box
Agreement, each Lock-Box Bank shall be irrevocably instructed to wire all funds
in each Lock-Box Account to the Collection Account, which Collection Account
shall be maintained in the name of the Deal Agent. Neither the Seller, nor any
Person claiming by, through or under the Seller shall have any control over the
use of, or any right to withdraw any item or amount from, any Lock-Box Account
or the Collection Account except as expressly provided in the Lock-Box
Agreements. The Deal Agent on behalf of EagleFunding is hereby irrevocably
authorized and empowered, as the Seller's attorney-in-fact, to endorse any item
deposited in a Post Office Box or presented for deposit in any Lock-Box Account
or the Collection Account requiring the endorsement of the Seller, which
authorization is coupled with an interest.
SECTION 6.11. Collection Account. (a) The Seller shall establish
for the sole and exclusive benefit of the Deal Agent on behalf of itself,
EagleFunding, the Seller and their respective assigns, a cash collateral account
(the "Collection Account"). The Collection Account shall be a special purpose
segregated deposit account maintained with Bank of Boston but shall be under the
sole dominion and control of, and in the name of, the Deal Agent. All funds held
in the Collection Account, including investment earnings thereon, shall be
invested in Permitted Investments at the direction of the Seller; provided,
however, that from and after the Termination Date or otherwise upon the
occurrence and during the continuance of any Wind-Down Event, the Deal Agent
shall have the sole right to restrict the maturities of any investments held in
the Collection Account and to direct the withdrawal of any such investments for
the purposes of paying Capital, Yield and any Obligations owed hereunder. The
Deal Agent shall have the sole and exclusive right to withdraw or order a
transfer of funds from the Collection Account in
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accordance with the terms and provisions of this Section 6.11; provided,
however, that the Deal Agent agrees to turn over to the Originator any funds
which are deposited in the Collection Account and which do not constitute
Collections or other proceeds of Purchased Interests, less all reasonable and
appropriate out-of-pocket costs and expenses incurred by the Deal Agent in
connection with such misdirected funds.
(b) All Collections and other proceeds of the Purchased Interests
in the Collection Account shall be held in trust for the benefit of the Deal
Agent, EagleFunding, and the Seller and, except as otherwise provided in Section
6.11(d) below with respect to any Business Day from and after the Designated
Termination Date, such Collections and other proceeds shall be used solely for
the following purposes and in the following order of priority:
(i) To remit to the Seller any Collections representing sales or
other taxes or insurance payments for the purpose of satisfying the
Seller's obligations in respect of such taxes or insurance;
(ii) (A) First, to pay Yield and other Carrying Costs, except for
any accrued and unpaid amounts owing to the Swap Providers under the
Interest Rate Hedges, which are then due and payable, and (B) second,
to be retained in the Collection Account to the extent of any accrued
and unpaid amounts of Yield and other Carrying Costs which are not then
due and payable, until the next relevant payment date therefor, and not
to be applied to any of the following items;
(iii) If such day is a Settlement Date, to repay Capital as
provided in Section 2.04(b);
(iv) To pay any accrued and unpaid amounts owing to the Swap
Providers under the Interest Rate Hedges;
(v) To pay any other Obligations which are due and owing at such
time; and
(vi) If such day is a Settlement Date, to be remitted to the
Seller in partial satisfaction of the Purchaser's obligation under
Section 2.02(b); provided, however, that such funds shall only be
remitted to the Seller to the extent that, after giving effect to such
transfer of funds and such Purchases, the amount of Capital then
outstanding does not exceed the Capital Limit then in effect.
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The Seller, in making any request for funds to be withdrawn from the Collection
Account, shall certify to each of the Deal Agent and the Collection Account Bank
that the funds will be used for one of the purposes described above in this
Section 6.11(b).
If, on any Business Day prior to the Designated Termination Date,
the Collections of Purchased Interests on deposit in the Collection Account and
available for withdrawal under clause (ii)(A) above are less than the amount of
the obligations described in such clause, such available funds shall be
allocated in the priority set forth in Section 6.11(c) below; if, on any such
Business Day, the Collections of Purchased Interests on deposit in the
Collection Account and available for withdrawal under clause (v) above are less
than the amount of the obligations described in such clause, such available
funds shall be allocated to the Persons to whom such obligations are owed
ratably according to the respective amounts owed.
(c) On each Business Day prior to the Designated Termination Date,
to the extent that the Collections of Purchased Interests on deposit in the
Collection Account and available under clause (ii)(A) of Section 6.11(b) are
insufficient to pay all Carrying Costs which are then due and payable, such
funds shall be applied to the Carrying Costs in the following order of priority:
(i) To pay any accrued and unpaid Yield;
(ii) To pay the pro-rata portion of any accrued and unpaid fees
then owing under the Fee Letter;
(iii) To pay the pro-rata portion of any accrued and unpaid
expenses of the Deal Agent which are allocable to this EagleFunding
Purchase Agreement;
(iv) To pay any accrued and unpaid Servicing Fee; and
(v) To pay ordinary course expenses of the Seller to the extent
the same are due or past due.
If, on any such Business Day, the Collections of Purchased Interests on deposit
in the Collection Account and available for withdrawal under any of clause (ii)
or (v) above are less than the amount of the obligations described in such
clause, such available funds shall be allocated to the Persons to whom such
obligations are owed ratably according to the respective amounts owed.
(d) On each Business Day from and after the Designated Termination
Date, Collections and other proceeds of Purchased
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Interests shall be withdrawn from the Collection Account solely upon direction
of the Deal Agent to be applied against the Obligations in the following order
of priority:
(i) To remit to the Seller any Collections representing sales or
other taxes or insurance payments for the purpose of satisfying the
Seller's obligations in respect of such taxes or insurance;
(ii) (A) First, to pay any accrued and unpaid Servicing Fee (if
the Servicer is a party other than the Originator or an Affiliate
thereof) which is then due and payable, and (B) second, to be retained
in the Collection Account to the extent of any accrued and unpaid
amounts of such Servicing Fee which are not then due and payable, until
the next relevant payment date therefor, and not to be applied to any
of the following items;
(iii) (A) First, to pay accrued and unpaid Yield, and (B) second,
to be retained in the Collection Account to the extent of any accrued
and unpaid amounts of such Yield which are not then due and payable,
until the next relevant Payment Date, and not to be applied to any of
the following items;
(iv) (A) First, to pay any accrued and unpaid amounts owing to
Swap Providers under the Interest Rate Hedges which are then due and
payable, and (B) second, to be retained in the Collection Account to
the extent of any such accrued and unpaid amounts which are not then
due and payable, until the next relevant payment date therefor, and not
to be applied to any of the following items;
(v) To pay all amounts of Capital then outstanding;
(vi) (A) First, to pay the accrued and unpaid expenses of the Deal
Agent which are then due and payable, and (B) second, to be retained in
the Collection Account to the extent of any accrued and unpaid amounts
of such expenses which are not then due and payable, until the next
relevant payment date therefor, and not to be applied to any of the
following items;
(vii)(A) First, to pay the portion of any other accrued and unpaid
fees owing under the Fee Letter which are then due and payable, and (B)
second, to be retained in the Collection Account to the extent of any
accrued and unpaid amounts of such fees which are not then due and
payable, until the next relevant payment date therefor, and not to be
applied to any of the following items;
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(viii) (A) First, to pay to pay the portion of any other accrued
and unpaid Obligations which have not been paid pursuant to clauses (i)
through (v) above and which are then due and payable, and (B) second,
to be retained in the Collection Account to the extent of any accrued
and unpaid amounts of such Obligations which are not then due and
payable, until the next relevant payment date therefor, and not to be
applied to any of the following items;
(ix) To pay any other Carrying Costs which are due and owing but
have not been paid pursuant to clauses (i) through (viii) above; and
(x) To pay any accrued and unpaid Servicing Fee owed to the
Originator or an Affiliate thereof.
If, on any such Business Day, the funds on deposit in the Collection Account and
available for withdrawal under any of clauses (iii), (iv), (vi), (vii), (viii)
or (ix) above are less than the amount of the obligations described in such
clause, such available funds shall be allocated to the Persons to whom such
obligations are owed ratably according to the respective amounts owed. Any funds
remaining in the Collection Account after payment of the foregoing Obligations
and other fees and expenses shall be remitted to the Seller in consideration of
the Purchaser's obligation under Section 2.02(b).
SECTION 6.12. Custodian. All original counterpart copies of the
Contracts, and all other components of the Contract Files in respect of the
Purchased Interests shall at all times prior to the Collection Date be held by
the Person (the "Custodian") so designated from time to time in accordance with
this Section 6.12. Until the Deal Agent gives notice to the Seller of the
designation of a new Custodian, the Originator is hereby designated as, and
hereby agrees to perform the duties and obligations of, the Custodian pursuant
to the terms hereof. In the event, as a result of an audit or otherwise, the
Deal Agent reasonably believes that the performance and practices of the
Custodian threaten in any manner the perfection or priority of the Deal Agent's
interests in the Purchased Interests, the Deal Agent may, upon two Business Days
prior written notice, designate as Custodian either the Servicer (if not already
the Custodian) or the Deal Agent or any Affiliate of Bank of Boston and,
following the occurrence of a Servicing Termination Event or a Wind-Down Event,
any other Person to succeed the Originator or any successor Custodian, on the
condition in each case that any such Person so designated shall agree to perform
the duties and obligations of the Custodian pursuant to the terms hereof. Upon
taking possession of an original Contract File and the contents thereof, the
Custodian hereby agrees (i) to maintain possession
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of such original copies in trust for the Purchaser and the Deal Agent, (ii) to
exercise the same degree of care with respect to the possession of such Contract
File as it would if such Contract File were its own property, and (iii) to
return the original copy of the relevant Contract to the Servicer within two
Business Days of the Servicer's request therefor to the extent the Servicer
requires such original copy to conduct further business with, or take
enforcement action against, the Obligor of such Contract. Upon the appointment
of a successor Custodian, the Custodian being replaced shall make all Contract
Files available to the successor Custodian at a place selected by such successor
Custodian.
ARTICLE VII
WIND-DOWN EVENTS; REMEDIES
SECTION 7.01. Wind-Down Events. Each of the following events shall
constitute a "Wind-Down Event" within the meaning of this EagleFunding Purchase
Agreement:
(a) The occurrence of any Event of Termination under the
Originator Purchase Agreement;
(b) The Servicer or the Custodian (if the Seller or any Affiliate
of the Seller) shall fail to perform or observe any term, covenant or agreement
hereunder (other than as referred to in clause (ii) of this Section 7.01(b)) and
such failure shall remain unremedied for three Business Days after written
notice from the Deal Agent or (ii) either of the Servicer (if the Seller or any
Affiliate of the Seller) or the Seller shall fail to make any payment or deposit
to be made by it hereunder when due and, solely in the case of any such payments
which do not constitute payments of Capital or Yield, such failure shall remain
unremedied for three (3) Business Days after written notice from the Deal
Agent; or
(c) The Seller shall fail to perform or observe any term, covenant
or agreement contained in Section 5.03 and any such failure shall remain
unremedied for five (5) Business Days after written notice from the Deal Agent;
or
(d) Any representation or warranty made or deemed to be made by
the Seller (or any of its officers) under or in connection with this
EagleFunding Purchase Agreement, any Settlement Report or other information or
report delivered pursuant hereto shall prove to have been false or incorrect in
any material respect when made; provided, however, that (i) to the extent any
breach of any such representation or warranty may be cured within
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ten (10) Business Days, the Seller shall have ten (10) Business Days after
learning of such breach to make such representation and warranty true and
correct and (ii) if any such false or incorrect representation or warranty has
given rise to a deemed Collection as provided under Section 2.04 of this
EagleFunding Purchase Agreement, then, upon the Seller's payment of such deemed
Collection at the time and in the manner required under this EagleFunding
Purchase Agreement, the breach of such representation or warranty shall not give
rise to a Wind-Down Event under this subsection (d); or
(e) The Seller shall fail to perform or observe any other term,
covenant or agreement contained in this EagleFunding Purchase Agreement on its
part to be performed or observed and any such failure shall remain unremedied
for ten (10) Business Days after written notice from the Deal Agent (it being
understood that if any such failure gives rise to a deemed Collection under
Section 2.04 of this EagleFunding Purchase Agreement, then, the payment of such
deemed Collection at the time and in the manner required under this EagleFunding
Purchase Agreement shall be deemed a remedy of such failure); or
(f) The interest of the Deal Agent on behalf of the Purchaser in
the Purchased Interests shall for any reason, except to the extent permitted by
the terms hereof, cease to create a valid and perfected first priority interest
in such Purchased Interests; provided, however, if any such failure results in a
deemed Collection under Section 2.04 of this EagleFunding Purchase Agreement and
the Seller satisfies in full its payment obligations under such section with
respect to such deemed Collection, then such failure shall not give rise to a
Wind-Down Event under this subsection (f); or
(g) (i) An Insolvency Event shall occur with respect to the Seller
or (ii) the Seller shall take any corporate action to authorize the filing of
any Insolvency Proceeding; or
(h) As of the close of business on any Settlement Date, the
Capital Limit shall be less than the aggregate outstanding Capital; or
(i) The Originator shall cease to own 100% of the issued and
outstanding stock of the Seller; or
(j) There shall have occurred, since the initial Receivables
Purchase Date, a material adverse change in the financial condition of the
Seller or there shall have occurred any event which materially and adversely
affects the collectibility of the Receivables generally or the ability of the
Seller to perform hereunder; or
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(k) Either of EagleFunding or the Deal Agent shall determine that
continuation of this EagleFunding Purchase Agreement without exercise of
remedies under Section 7.02 will impose a material adverse regulatory,
accounting or tax impact on EagleFunding or the Deal Agent; or
(l) The sum of the Delinquency Ratios for each of the three most
recently concluded calendar months divided by a factor of three shall exceed
5.25%; or
(m) The Default Ratio shall exceed 3.25%; or
(n) [reserved];
(o) [reserved];
(p) The Seller shall fail to pay any principal or premium or
interest on any Indebtedness having a principal amount of $1,000,000 or greater,
when the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Indebtedness; or any other default under any
agreement or instrument relating to any such Indebtedness of the Seller or any
other event, shall occur and shall continue after the applicable grace period,
if any, specified in such agreement or instrument if the effect of such default
or event is to accelerate, or to permit the acceleration of, the maturity of
such Indebtedness; or any such Indebtedness shall be declared to be due and
payable or required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof; or
(q) The PBGC or the IRS shall have filed notice of one or more
Adverse Claims against the Seller (unless such Adverse Claim does not purport to
cover the Purchased Interests), and such notice shall have remained in effect
for more than thirty (30) days unless, prior to the expiration of such period,
such liens shall have been adequately bonded by the Seller; or
(r) A Servicing Termination Event shall have occurred; or
(s) As of the last day of any month, the average annualized
monthly prepayment rate (i.e., prepayments as a percentage of gross Receivables
balances) of all Receivables which have been prepaid for the twelve-month period
then ended shall exceed 10%.
SECTION 7.02. Remedies. During the existence of a Wind-Down Event,
the Deal Agent on behalf of EagleFunding may, by
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written notice to the Seller, take any or all of the following actions, at the
same or different times: (i) declare the Termination Date to have occurred; (ii)
declare the Obligations to be immediately due and payable and/or the commitment
of the Purchaser to make Receivables Purchases hereunder to be terminated; (iii)
pursue any other remedy under this EagleFunding Purchase Agreement and the other
Facility Documents and (iv) exercise any rights and remedies of a secured party
under Article 9 of the UCC, which rights and remedies shall be cumulative to
those provided for under this EagleFunding Purchase Agreement and the other
Facility Documents; provided, however, that in the case of any event described
in clause (i) of subsection 7.01(g) above, or in subsection 7.01(h) above, then,
automatically upon the occurrence of such event without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
the Seller, anything contained herein to the contrary notwithstanding, the
Termination Date shall be deemed to have occurred automatically and any
Obligations owed hereunder shall be immediately due and payable. The rights and
remedies of a secured party which may be exercised by the Deal Agent pursuant to
clause (iv) of this Section 7.02 shall include, without limitation, the right to
(y) identify and engage a Successor Servicer to act as Servicer for the
Receivables in the event of a Servicing Termination Event, and (z) without
notice except as specified below solicit and accept bids for and sell the
Purchased Interests or any part thereof in one or more parcels at a public or
private sale, at any exchange, broker's board or at any of the Deal Agent's
offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Deal Agent may deem commercially reasonable. The Seller
agrees that, to the extent notice of sale shall be required by law, 10 Business
Days' notice to the Seller of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification and that it shall be commercially reasonable for the Deal Agent to
sell the Purchased Interests on an as-is basis, without representation or
warranty of any kind. The Deal Agent shall not be obligated to make any sale of
Purchased Interests regardless of notice of sale having been given and may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
ARTICLE VIII
INDEMNIFICATION; REPURCHASES
SECTION 8.01. Indemnities by the Seller. (a) Without limiting any
other rights which EagleFunding may have hereunder
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or under applicable law, the Seller hereby agrees to indemnify EagleFunding and
its permitted successors and assigns (including, without limitation,
EagleFunding, and the Deal Agent) and their respective officers, directors,
agents and employees (each, an "Indemnified Party"), from and against any and
all damages, losses, claims, liabilities and related costs and expenses,
including reasonable attorneys' fees and disbursements (all of the foregoing
being collectively referred to as "Indemnified Amounts") awarded against or
incurred by any Indemnified Party relating to or resulting from any of the
following (excluding, however, (i) Indemnified Amounts to the extent resulting
from gross negligence or willful misconduct on the part of an Indemnified Party
or (ii) recourse (except with respect to payment and performance obligations
provided for in this EagleFunding Purchase Agreement) for uncollectible
Receivables):
(i) the transfer of any Receivable which was not, as of the
Receivables Purchase Date, an Eligible Receivable;
(ii) any representation or warranty made or deemed made by the
Seller or the Originator (or any of their respective officers) under or
in connection with the Originator Purchase Agreement or this
EagleFunding Purchase Agreement, any Settlement Report or any other
information or report delivered by the Seller or the Originator
pursuant hereto, which shall have been false or incorrect in any
material respect when made or deemed made or delivered;
(iii) the failure by the Seller or the Originator (individually or
as Servicer) to comply with any term, provision or covenant contained
in this EagleFunding Purchase Agreement or the Originator Purchase
Agreement, or any agreement executed in connection with this
EagleFunding Purchase Agreement or the Originator Purchase Agreement or
with any applicable law, rule or regulation with respect to any
Purchased Receivable, the related Contract, the Related Security or the
other Purchased Interests, or the nonconformity of any Purchased
Receivable, the related Contract, the Related Security or the other
Purchased Interests with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in EagleFunding or
to transfer to EagleFunding an ownership interest in the Purchased
Interests, free and clear of any Adverse Claim (including, without
limitation, free and clear of any Permitted Encumbrance except in favor
of EagleFunding or its assignees)
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whether existing on the Receivables Purchase Date or at any time
thereafter;
(v) the failure to file, or any delay in filing (other than
solely as a result of the action or inaction of EagleFunding),
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws against
the Obligor with respect to any Contract or Receivables which are, or
are purported to be, Purchased Interests, whether at the time of any
Purchase or at any subsequent time;
(vi) any dispute, claim, offset or defense (other than discharge
in bankruptcy of the Obligor) of the Obligor to the payment of any
Purchased Receivable (including, without limitation, a defense based on
such Purchased Receivable or the related Contract not being a legal,
valid and binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the sale
or lease of the Equipment and/or services related thereto or the
furnishing or failure to furnish such Equipment and/or services;
(vii) any failure of the Seller or the Originator, as Servicer or
otherwise, to perform its duties or obligations in accordance with the
provisions of Article VI hereof or Article VI of the Originator
Purchase Agreement;
(viii) any products liability claim or personal injury or property
damage suit or other similar or related claim or action of whatever
sort arising out of or in connection with the Equipment or any other
goods, merchandise and/or services which are the subject of any
Receivable or Contract;
(ix) the failure to pay when due any taxes, including, without
limitation, sales, excise or personal property taxes payable in
connection with the Purchased Interests;
(x) the termination, rejection or non-assumption by the Seller
of any Contract prior to the original term of such Contract, whether
such rejection, early termination or non-assumption is made pursuant to
an equitable cause, statute, regulation, judicial proceeding or other
applicable laws (including, without limitation, Section 365 of the
Bankruptcy Code);
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(xi) the failure of the Seller, the Originator and the Obligors
under the Contracts to maintain casualty and liability insurance for
the Equipment related to the Purchased Receivables in an amount at
least equal to the Discounted Receivables Balance for such Purchased
Receivables;
(xii) the failure of any Lock-Box Bank to remit any funds in the
Lock-Box Accounts as required hereunder; and
(xiii) the commingling of Collections of any Transferred Assets
with any other funds of the Seller.
Any amounts subject to the indemnification provisions of this Section 8.01 shall
be paid by the Seller to the applicable Indemnified Party within two Business
Days following the Indemnified Party's demand therefor.
SECTION 8.02. Repurchases of Designated Receivables. The following
rights are in addition to and not in limitation of any other rights or remedies
that the Purchaser and/or the Deal Agent may have hereunder.
(a) The Seller may, at any time upon not less than five Business
Days' prior written notice to the Deal Agent, elect to repurchase the Purchased
Asset relating to and including any Designated Receivable, which Purchase shall
take place on the Settlement Date next succeeding the Deal Agent's receipt of
such notice, for the repurchase price specified in subsection (d) of this
Section 8.02.
(b) [Reserved].
(c) At any time following the Termination Date when the Discounted
Receivables Balance is less than ten percent (10%) of the Discounted Receivables
Balance as of the Termination Date, the Seller may notify the Deal Agent of its
intent to repurchase all remaining Purchased Interests. On the Settlement Date
next succeeding any such notice, the Seller shall repurchase all outstanding
Purchased Interests for the repurchase price specified in subsection (d) of this
Section 8.02.
(d) In the case of a repurchase from the Purchaser by the Seller
of a Purchased Asset pursuant to this Section 8.02, the Seller shall, on the
Settlement Date coinciding with such repurchase pay to the Deal Agent as a
reduction of Capital an amount equal to the Outstanding Balance of the related
Purchased Receivable. The proceeds of any such repurchase shall be deemed to be
Collections of such Purchased Asset received by the Seller, and the amount of
each such Collection shall be applied as
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provided in Section 2.04. The repurchase of any Purchased Asset shall not
relieve the Seller of its obligation under Section 2.04(a) to pay Yield on the
Capital outstanding with respect to such Purchased Asset through the Payment
Date relating to such Capital. Any such repurchase shall be made without
recourse or warranty, express or implied (other than a representation and
warranty that such Asset is free and clear of any Adverse Claim created by or
through the Purchaser).
ARTICLE IX
THE DEAL AGENT
SECTION 9.01. Authorization and Action. EagleFunding hereby
appoints and authorizes the Deal Agent to take such action as agent on its
behalf and to exercise such powers under this EagleFunding Purchase Agreement as
are delegated to the Deal Agent by the terms hereof, together with such powers
as are reasonably incidental thereto, including, without limitation, the power
and authority to hold and to perfect any ownership interest or security interest
created pursuant hereto or in connection herewith on behalf of the Purchaser.
SECTION 9.02. Deal Agent's Reliance, Etc. Neither the Deal Agent
nor any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them as Deal Agent under or in
connection with this EagleFunding Purchase Agreement (including, without
limitation, any action taken or omitted to be taken by it or them if the Deal
Agent is designated as Servicer pursuant to Section 6.01) or any other agreement
executed pursuant hereto, except for its or their own negligence or willful
malfeasance or misfeasance. Without limiting the foregoing, the Deal Agent: (i)
may consult with legal counsel (including counsel for the Seller), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (ii) makes no warranty or
representation to any Person and shall not be responsible to any other Person
for any statements, warranties or representations made in or in connection with
this EagleFunding Purchase Agreement or in connection with any of the other
agreements executed pursuant hereto; (iii) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this EagleFunding Purchase Agreement on the part of the Seller
or to inspect the property (including the books and records) of the Seller; (iv)
shall not be responsible to EagleFunding or any
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other Person for the due execution, legality, validity, enforce ability,
genuineness or sufficiency of value of this EagleFunding Purchase Agreement or
any other agreement, instrument or document furnished pursuant hereto; and (v)
shall incur no liability under or in respect of this EagleFunding Purchase
Agreement or any other agreement executed pursuant hereto, by acting upon any
notice (including notice by telephone with respect to notices under Section
2.02), consent, certificate or other instrument or writing (which may be by
telex or facsimile) believed by it to be genuine and signed or sent by the
proper party or parties. Notwithstanding anything in this Section 9.02 to the
contrary, the foregoing provisions of this Section 9.02 shall not run in favor
of the Deal Agent in connection with any claim against the Deal Agent made by
EagleFunding.
SECTION 9.03. Deal Agent and Affiliates. With respect to any
interests which may be assigned by EagleFunding to Bank of Boston pursuant to
Section 10.04, Bank of Boston shall have the same rights and powers under this
EagleFunding Purchase Agreement as would EagleFunding if it were holding such
interests and may exercise the same as though it were not the Deal Agent. Bank
of Boston and its Affiliates may generally engage in any kind of business with
the Seller, the Originator or any Obligor, any of their respective Affiliates
and any Person who may do business with or own securities of the Seller, the
Originator or any Obligor or any of their respective Affiliates, all as if Bank
of Boston were not the Deal Agent and without any duty to account therefor to
EagleFunding or any Liquidity Provider.
SECTION 9.04. [Reserved].
SECTION 9.05. Resignation of the Deal Agent. The Deal Agent may
resign as Deal Agent hereunder at any time by giving not less than five (5)
Business Days' prior written notice to EagleFunding, the Seller, the Servicer
and the Custodian, such resignation to be effective on the earlier of (i) the
appointment and acceptance of a successor Deal Agent as provided below and (ii)
the 30th day following delivery of such notice. Upon any such resignation,
EagleFunding shall appoint a financial institution of its choosing as Deal
Agent. Following the appointment of a successor Deal Agent and such successor
Deal Agent's acceptance thereof, such successor Deal Agent shall succeed to and
become vested with all the rights, powers, privileges and duties of the
resigning Deal Agent as Deal Agent hereunder, and the resigning Deal Agent shall
be discharged from its duties and obligations as Deal Agent hereunder. After the
Deal Agent's resignation, the provisions of this Article IX shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as the Deal Agent.
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ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. No amendment to or waiver of any
provision of this EagleFunding Purchase Agreement nor consent to any departure
by the Seller, shall in any event be effective unless the same shall be in
writing and signed by (i) the Deal Agent, EagleFunding and the Seller (with
respect to an amendment) or (ii) the Deal Agent and EagleFunding (with respect
to a waiver or consent by it) or the Seller (with respect to a waiver or consent
by it), as the case may be, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that, at any time that the Commercial Paper is being rated by
one or more of Moody's, S&P and DCR (as applicable) (each, a "Rating Agency"),
at the request of EagleFunding, no material amendment or modification of any
other material provisions hereof, shall be effective absent written confirmation
by each such Rating Agency that such amendment or modification will not result
in a withdrawal or downgrading of the then-current rating of the Commercial
Paper by such Rating Agency. EagleFunding shall send, or shall cause to be sent,
copies of all amendments, modifications or supplements to this EagleFunding
Purchase Agreement to each Rating Agency then rating the Commercial Paper, at
the request of EagleFunding, prior to the execution thereof by all parties
thereto. This EagleFunding Purchase Agreement contains a final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire agreement (together with
the exhibits hereto) among the parties hereto with respect to the subject matter
hereof, superseding all prior oral or written understandings.
SECTION 10.02. Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including telex communication and communication by facsimile copy) and mailed,
telexed, transmitted or delivered, as to each party hereto, at its address set
forth under its name on the signature pages hereof or at such other address as
shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall be effective, upon receipt, or
in the case of delivery by mail, five days after being deposited in the mails,
or, in the case of notice by telex, when telexed against receipt of answer back,
or in the case of notice by facsimile copy, when verbal communication of receipt
is obtained, in each case addressed as
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aforesaid, except that notices and communications pursuant to Article II shall
not be effective until received.
SECTION 10.03. No Waiver; Remedies. No failure on the part of the
Deal Agent or EagleFunding to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
SECTION 10.04. Binding Effect; Assignability. This EagleFunding
Purchase Agreement shall be binding upon and inure to the benefit of the Seller,
EagleFunding, the Deal Agent and their respective successors and permitted
assigns (which successors of the Seller shall include a trustee in bankruptcy).
The Seller may not assign any of its rights and obligations hereunder or any
interest herein without the prior written consent of EagleFunding and the Deal
Agent. Each of EagleFunding and the Deal Agent may assign at any time its rights
and obligations hereunder and interests herein to any other Person without the
consent of the Seller. Without limiting the foregoing, the Seller hereby
acknowledges that EagleFunding has agreed pursuant to the Liquidity Agreement
and certain related agreements that, subject to the restrictions set forth
therein, certain parties providing credit enhancements and/or liquidity for
EagleFunding in connection with the EagleFunding Purchase Agreement shall be
entitled to exercise EagleFunding's rights under this EagleFunding Purchase
Agreement and in addition, shall constitute third-party beneficiaries of this
EagleFunding Purchase Agreement. The Seller hereby consents to the foregoing and
agrees to cooperate with any such Person electing to exercise EagleFunding's
rights under this EagleFunding Purchase Agreement. This EagleFunding Purchase
Agreement shall create and constitute the continuing obligations of the parties
hereto in accordance with its terms, and shall remain in full force and effect
until such time, after the Termination Date, as the Collection Date shall occur;
provided, however, that the rights and remedies with respect to any breach of
any representation and warranty made by the Seller pursuant to Article IV and
Article VIII shall be continuing and shall survive any termination of this
EagleFunding Purchase Agreement.
SECTION 10.05. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS
EAGLEFUNDING PURCHASE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE INTERESTS OF THE DEAL AGENT IN THE COLLATERAL
OR REMEDIES HEREUNDER OR THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. THE
- 57 -
<PAGE> 63
SELLER HEREBY AGREES TO THE JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE
STATE OF NEW YORK, AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL
DIRECTED TO THE SELLER AT THE ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME
SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID, OR, AT THE OPTION
OF EITHER EAGLEFUNDING OR THE DEAL AGENT, BY SERVICE UPON CT CORPORATION SYSTEM,
1633 BROADWAY, NEW YORK, NEW YORK 10019, WHICH THE SELLER HEREBY IRREVOCABLY
APPOINTS AS ITS AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS. THE
SELLER HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR DEAL AGENT ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN
CONNECTION WITH THIS EAGLEFUNDING PURCHASE AGREEMENT. INSTEAD, ANY DISPUTE
RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY. WITH RESPECT
TO THE FOREGOING CONSENT TO JURISDICTION, THE SELLER HEREBY WAIVES ANY OBJECTION
BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 10.05
SHALL AFFECT THE RIGHT OF EAGLEFUNDING OR THE DEAL AGENT TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF EAGLEFUNDING OR THE
DEAL AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST THE SELLER OR ITS PROPERTY
IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 10.06. Costs, Expenses and Taxes. (a) The Seller agrees to
pay on demand all reasonable costs and expenses in connection with the
preparation, execution, delivery and administration (including periodic auditing
fees as provided for in Section 5.01(c) and any requested amendments, waivers or
consents) of this EagleFunding Purchase Agreement and the other documents to be
delivered hereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for EagleFunding and the Deal Agent with
respect thereto and with respect to advising EagleFunding and the Deal Agent as
to its rights and remedies under this EagleFunding Purchase Agreement, and the
other agreements executed pursuant hereto and all costs and expenses, if any
(including reasonable counsel fees and expenses), in connection with the
enforcement of this EagleFunding Purchase Agreement and the other agreements and
documents to be delivered hereunder.
(b) In addition, the Seller shall pay any and all stamp, sales,
excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this
EagleFunding Purchase Agreement or the other agreements and documents to be
delivered
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<PAGE> 64
hereunder, and agrees to indemnify the Deal Agent, EagleFunding and their
respective assignees against any liabilities with respect to or resulting from
any delay in paying or omission to pay such taxes and fees.
SECTION 10.07. Execution in Counterparts; Severability. This
EagleFunding Purchase Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this EagleFunding Purchase Agreement shall be invalid, illegal
or unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions or obligations, or of such provision or obligation
in any other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 10.08. No Bankruptcy Petition Against EagleFunding. The
Seller covenants and agrees (which agreement shall, pursuant to the terms of
this EagleFunding Purchase Agreement, be binding upon its successors and
assigns) that it will not institute against EagleFunding, or join any other
Person in instituting against EagleFunding, any Insolvency Proceeding under
bankruptcy law or under any similar federal or state law, so long as any
promissory notes issued by the Purchaser shall be outstanding or there shall not
have elapsed one year and one day since the last day on which any such
promissory notes shall have been outstanding. The provisions of this Section
10.08 shall survive the termination of this EagleFunding Purchase Agreement.
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<PAGE> 65
IN WITNESS WHEREOF, the parties below have caused this
EagleFunding Purchase Agreement to be duly executed by their duly authorized
officers and delivered as of the day and year first above written.
HPSC CAPITAL FUNDING, INC.
By: /s/ [illegible signature]
--------------------------------
Title: President
Address: Sixty State Street
35th Floor
Boston, MA 02109-1803
Attn: President
Telephone:(617) 720-7250
Telecopy: (617) 720-7299
HPSC, INC., as Servicer and as Custodian
By: /s/ Renee Lefebvre
--------------------------------
Title: V.P. CFO
By:
--------------------------------
Title:
Address: Sixty State Street
35th Floor
Boston, MA 02109-1803
Attn: Vice President, Finance
Telephone:(617) 720-7251
Telecopy: (617) 720-7272
<PAGE> 66
EAGLEFUNDING CAPITAL CORPORATION
By: BancBoston Securities Inc., its
attorney-in-fact
By: /s/ [illegible signature]
--------------------------------
Title: MD
Address: 100 Federal Street
Boston, MA 02110
Mail Stop: 01-09-02
Attn: Mitchell Feldman
Telephone:(617) 434-5760
Telecopy: (617) 434-9591
BANCBOSTON SECURITIES INC., as Deal
Agent
By: /s/ [illegible signature]
--------------------------------
Title: MD
Address: 100 Federal Street
Boston, MA 02110
Mail Stop: 01-09-02
Attn: Mitchell Feldman
Telephone:(617) 434-5760
Telecopy: (617) 434-9591
<PAGE> 1
[Execution Version]
APPENDIX A
to
EAGLEFUNDING PURCHASE AGREEMENT
DEFINITIONS LIST
Attached.
<PAGE> 2
DEFINITIONS LIST
Unless otherwise defined therein, the capitalized terms used in the
documents listed below shall have the meanings set forth in the Definitions List
below.
1. Purchase and Contribution Agreement, dated as of June 27, 1997 (the
"Originator Purchase Agreement"), between the Originator and
Funding, as the same may be amended, restated, supplemented or
otherwise modified from time
to time.
2. Lease Receivables Purchase Agreement, dated as of June 27, 1997 (the
"EagleFunding Purchase Agreement"), among Funding, as "Seller",
EagleFunding as "Purchaser", the Originator as "Servicer" and
"Custodian" and the Deal Agent, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
3. Fee Letter Agreement, dated as of June 27, 1997 (the "Fee Letter"),
among the Originator, Funding, EagleFunding and the Deal Agent, as
the same may be amended, restated, supplemented or otherwise
modified from time to time.
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<PAGE> 3
"Adjusted Base Rate" means, on any date, a per annum rate of
interest equal to the sum of the Base Rate on such date and 0.0%.
"Adjusted Eurodollar Rate" means, with respect to any Purchase
Period for all Capital allocated to such Purchase Period, an interest rate per
annum equal to the sum of a per annum rate equal to 0.50% and the Eurodollar
Rate with respect to such Purchase Period.
"Administration Agreement" means that certain Amended and Restated
Administration Agreement, dated as of October 25, 1996, between EagleFunding and
BSI (as assignee of Bank of Boston), as the same may be amended, supplemented,
or otherwise modified from time to time.
"Administrative Fee" has the meaning assigned to such term in the
Fee Letter.
"Administrator" means BSI, in its capacity as "Administrator" under
the Administration Agreement (as assignee of Bank of Boston), and any successor
thereto in such capacity.
"Advance" means an "Advance" funded to EagleFunding under the
Liquidity Agreement.
"Adverse Claim" means a lien, security interest, charge, encumbrance
or other right or claim of any Person, other than Permitted Encumbrances.
"Affiliate" means, with respect to any Person, a Person: (i) that
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such Person; (ii) that
beneficially owns or holds 5% or more of any class of the voting stock (or, in
the case of a Person that is not a corporation, 5% or more of the equity
interest) of such Person; or (iii) 5% or more of the voting stock (or, in the
case of a Person that is not a corporation, 5% or more of the equity interest)
of which is beneficially owned or held, directly or indirectly, by such Person.
The term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting stock or an equity interest, by
contract, or otherwise.
"Affiliated Obligor" means any Obligor which is an Affiliate of
another Obligor.
"Aggregate Reserves" means, on any day, an amount equal to the sum
of (i) the Loss Reserve as computed in the most recent Settlement Report and
(ii) the Excess Concentration Reserve as computed in the most recent Settlement
Report.
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<PAGE> 4
"Agreement" means the EagleFunding Purchase Agreement.
"Alternative Rate" means, with respect to any Purchase Period for
all Capital allocated to such Purchase Period, an interest rate per annum equal
to the Adjusted Eurodollar Rate or the Adjusted Base Rate as the Seller shall
select in accordance with the terms of this Agreement; provided, however, that
the "Alternative Rate" for such Capital allocated to such Purchase Period shall
be the Adjusted Base Rate if (a) on or before the first day of such Purchase
Period, a Purchaser shall have notified the Deal Agent that a Eurodollar
Disruption Event has occurred, (b) such Purchase Period is a period of 1 to 29
days or (c) such Capital is less than $1,000,000.
"Bank of Boston" means BankBoston, N.A., a national banking
association, and any successor thereto.
"Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C. Section 101 et seq.), as amended from time to time, or any successor
statute.
"Base Rate" means, on any date, a fluctuating rate of interest per
annum equal to the higher of (a) the per annum rate of interest announced from
time to time by Bank of Boston at its head office in Boston, Massachusetts as
its "base rate", and (ii) 1/2 of one percent per annum above the Federal Funds
Rate.
"Base Rate Advance" means an Advance which bears interest at the
Base Rate.
"Benefit Plan" means a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which the
Originator or any ERISA Affiliate is, or at any time within the immediately
preceding six (6) years was, an "employer" as defined in Section 3(5) of ERISA.
"BSI" means BancBoston Securities Inc., a Massachusetts
corporation, and any successor thereto.
"Business Day" means any day other than a Saturday, Sunday or public
holiday or the equivalent for banks in New York City or Boston, Massachusetts;
provided that, when used in connection with any Eurodollar Rate Advance or other
matters concerning the Eurodollar Rate, the term "Business Day" means any such
day on which dealings are carried on in the London interbank market and on which
banks are open for business in London, England.
"Buyer" means HPSC Capital Funding, Inc., a Delaware corporation, in
its capacity as "Buyer" under the Originator Purchase Agreement.
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<PAGE> 5
"Capital" means the original amount paid to the Seller for each
Receivables Purchase under the EagleFunding Purchase Agreement pursuant to
Sections 2.01 and 2.02 of the EagleFunding Purchase Agreement, reduced from time
to time by Collections received and distributed on account of such Capital
pursuant to Section 2.04 thereof. If either EagleFunding or the Deal Agent is
required (or believes in good faith that it is required) by law to repay (as a
preference or otherwise) to any Obligor, the Originator, the Seller, a Lock-Box
Bank, a trustee for any Obligor, the Originator or the Seller, a court or any
other Person, any amount that previously caused a reduction in Capital, then
Capital shall be reinstated by the amount of such repayment and the Seller will
indemnify and hold EagleFunding or the Deal Agent harmless for the amount of
such repayment, interest thereon required (or believed in good faith by
EagleFunding or the Deal Agent to be required) to be paid in connection
therewith and all losses, liabilities, costs and expenses related thereto
(including but not limited to reasonable attorneys' fees and expenses).
"Capital Limit" means, on any day, (A) the Discounted Eligible
Receivables Balance on such day minus (B) the Aggregate Reserves on such day.
"Carrying Costs" means, at any time, the aggregate amount of (i) all
accrued and unpaid Yield, fees, premiums and other expenses owing by the Seller
to EagleFunding, the Deal Agent, the Swap Providers and/or the Servicer
(including, without limitation, all fees owed under the Fee Letter, collateral
audit fees and expenses, the Servicing Fee, the Liquidity Fee, and the
Administrative Fee) plus (ii) all ordinary course operating expenses incurred by
the Seller during such calendar month (including rent, salaries, professional
fees and expenses incurred in connection therewith).
"Carrying Costs Percentage" means a percentage, calculated as of the
last day of each month equal to the sum of (i) the sum of the per annum rates
used to calculate the Servicing Fee, the Administrative Fee and the Liquidity
Fee described in the Fee Letter plus (ii) a fraction (expressed as a percentage)
the numerator of which equals Carrying Costs described in clause (ii) of the
definition thereof which were incurred during the calendar month then ending and
the denominator of which equals the sum of the average amount of Capital
outstanding during such month.
"Certificate" means a certificate of assignment, substantially in
the form of Exhibit L to the Originator Purchase Agreement, evidencing the
assignment by the Originator to the Seller of the Transferred Assets.
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<PAGE> 6
"Collateral Agent" means Bankers Trust Company, a New York banking
corporation, in its capacity as "Collateral Agent" pursuant to the Liquidity
Agreement and the Liquidity Security Agreement, and any successor "Collateral
Agent" thereunder.
"Collection Account" means that account defined as such in Section
6.11 of the EagleFunding Purchase Agreement.
"Collection Account Bank" means the bank maintaining
the Collection Account.
"Collection Date" means the date following the Termination Date on
which (i) the aggregate outstanding Capital has been reduced to zero and (ii)
EagleFunding and the Deal Agent have received all accrued Yield, fees and other
amounts payable under the EagleFunding Purchase Agreement and the other Facility
Documents.
"Collections" means, with respect to any Purchased Asset or other
Receivable, as applicable, all cash collections and other cash proceeds of such
Purchased Asset or Receivable, including, without limitation, all cash proceeds
of Related Security related thereto, and in the case of any Purchased Assets,
all cash collections of any Purchased Receivables included therein, and, in
either such case, any Collection of such Purchased Asset or Receivable deemed to
have been received pursuant to Section 2.04 of the EagleFunding Purchase
Agreement (it being understood that the Seller shall pay, or shall cause the
Originator to pay, all such deemed Collection amounts to EagleFunding by
depositing the amount thereof into the Lock-Box Account).
"Commercial Paper" means the short-term promissory notes of
EagleFunding denominated in dollars, issued by EagleFunding in connection with
the transactions contemplated by the Facility Documents, including any portion
of such short-term promissory notes that are identified on the books and records
of EagleFunding as issued in respect of the transactions contemplated by the
Facility Documents.
"Contract" means each Lease, Equipment Finance Agreement, Practice
Finance Loan or Non-Equipment Finance Agreement or other agreement or instrument
which is purported to be transferred to Funding under the Originator Purchase
Agreement, whether by purchase or contribution to Funding's capital, as
identified on Exhibit A of the Originator Purchase Agreement, as such exhibit
may be supplemented from time to time in connection with any subsequent Purchase
as described in Section 2.02(b) of the Originator Purchase Agreement.
"Contract File" means, with respect to each Contract, the following
documents:
5
<PAGE> 7
(i) The executed original counterpart of each Contract that
constitutes "chattel paper" under 9-105(1)(b) of the UCC or that
constitutes an "instrument" for purposes of 9-105(1)(i) of the UCC;
(ii) Any evidence of insurance and any other documents evidencing or
related to any insurance policy maintained by the related Obligor pursuant
to the Contract that covers physical damage to the Equipment;
(iii) If the related Contract is a Lease, copies of such documents,
if any, indicating that the Equipment was, as of the date such Contract
arose, owned by the Originator (or if originated by a Person other than
the Originator, owned by such Person and assigned to the Originator at the
time as the related Contract is assigned to the Originator) and kept on
file by the Originator in accordance with its customary procedures
relating to such type of Contract, such Obligor and such item of
Equipment; and
(iv) Copies (if available) of UCC financing statements filed by the
Originator with respect to the related Equipment or, if no such copies are
available, other documentary evidence confirming the filing thereof.
"Contract Payment" means each periodic installment payable by an
Obligor under a Contract for rent, principal and/or interest, excluding all
supplemental or additional payments required by the terms of such Contract with
respect to sales or other taxes, insurance, maintenance, ancillary products and
services and other specific charges.
"Contract Payment Date" means, with respect to any Contract, each
date on which a Contract Payment is or becomes due and payable thereunder.
"CP Dealer Fee" means, on any day, the fees payable to the Dealer in
respect of any Commercial Paper.
"CP Disruption" means the inability of EagleFunding, at any time,
whether as a result of a prohibition or any other event or circumstance
whatsoever, to raise funds through the issuance of its commercial paper notes
(whether or not constituting Commercial Paper as defined above) in the United
States commercial paper market.
"Credit and Collection Policy" means those credit and collection
policies and practices relating to the Contracts and the Receivables described
in Exhibit D of the Originator Purchase Agreement, as modified in compliance
with Section 5.03(c).
6
<PAGE> 8
"Custodian" means the Person appointed from time to time as
"Custodian" by the Deal Agent under Section 6.12 of the EagleFunding Purchase
Agreement (as of the date of the effectiveness of the EagleFunding Purchase
Agreement, the Custodian shall be the Servicer).
"Custodian Fee" means that portion of the Servicing Fee which is
allocated for the account of the Custodian as compensation for its duties
hereunder in the event that the Custodian is not the Servicer, as the Seller,
the Servicer, the Deal Agent and the Custodian may from time to time agree.
"DCR" means Duff & Phelps Credit Rating Co., and any successor
thereto.
"Deal Agent" means BSI, in its capacity as Deal Agent pursuant the
EagleFunding Purchase Agreement, and any successor Deal Agent thereunder.
"Dealer" means any dealer or placement agent in respect
of the Commercial Paper.
"Default Ratio" means the ratio (expressed as a percentage),
computed as of the last day of each month by dividing (i) two times the
aggregate Outstanding Balance of all Purchased Receivables that became Defaulted
Receivables or were written off the books of the Purchaser as uncollectible
during the six-month period then ending by (ii) the average aggregate
Outstanding Balances of all Purchased Receivables during such six-month period.
"Defaulted Receivable" means a Purchased Receivable at any time: (i)
as to which any Scheduled Contract Payment or part thereof is unpaid for more
than 180 days from its original due date, (ii) as to which the Obligor thereof
has taken any action, or suffered any event to occur, of the type described in
the definition of Insolvency Event or (iii) which, consistent with the Credit
and Collection Policy, has been or should be written off the Originator's or the
Seller's books (as the case may be) as uncollectible.
"Delinquency Ratio" means the ratio (expressed as a percentage),
computed as of the last day of each month, by dividing (i) the aggregate
Outstanding Balance of all Purchased Receivables which became Delinquent
Receivables during the month then ending, by (ii) the sum of the aggregate
Outstanding Balances of all Purchased Receivables as of the last day of the
third month next preceding such month (so that, for example, the Delinquency
Ratio calculated as of June 30th would have a denominator equal to the sum of
the Outstanding Balances of all Purchased Receivables as of March 31st).
7
<PAGE> 9
"Delinquent Receivable" means a Purchased Receivable that is not a
Defaulted Receivable and (i) as to which any Scheduled Contract Payment or part
thereof, is unpaid for more than 90 days from its original due date or (ii)
which, consistent with the Credit and Collection Policy, has been or should be
classified as delinquent by the Originator.
"Designated Receivable" means a Purchased Receivable identified by
Funding to EagleFunding as a "Designated Receivable" pursuant to Section 2.02(a)
of the EagleFunding Purchase Agreement.
"Designated Termination Date" means the date of the declaration or
automatic occurrence of the Termination Date pursuant to Section 7.01 of the
Originator Purchase Agreement or Section 7.02 of the EagleFunding Purchase
Agreement.
"Dilution Factors" means with respect to the Purchased Receivables,
any credits, rebates, freight charges, cash discounts, volume discounts,
cooperative advertising expenses, royalty payments, warranties, cost of parts
required to be maintained by agreement (whether express or implied), allowances,
disputes, chargebacks, returned or repossessed goods, inventory transfers,
allowances for early payments and other allowances that are made or coordinated
with the Originator's usual practices.
"Discount Rate" means, with respect to any Receivable, the discount
rate used to calculate the aggregate Discounted Value of the Scheduled Contract
Payments payable under the related Contract as of the last day of the month
immediately preceding the month in which such Receivable was acquired from the
Originator. The Discount Rate for the Receivables so acquired on any date shall
be a rate equal to the sum of (i) the interest rate per annum quoted to the
Seller by the Swap Provider as the rate at which such Swap Provider is willing
to enter into an Interest Rate Hedge pursuant to which the Seller will pay a
fixed rate of interest calculated in conjunction with an Interest Rate Hedge
amortization prepared by the Seller and which complies with Section 5.01(n) of
the EagleFunding Purchase Agreement, and in return shall receive a floating
interest rate (calculated against the same principal amount) approximately equal
to the Eurodollar Rate, plus (ii) the Carrying Costs Percentage at such time;
provided, that the Seller may, at its option, with respect to the Receivables
transferred on any Settlement Date, designate a rate which is higher than the
rates calculated above to be the "Discount Rate" for such Receivables.
"Discounted Eligible Receivables Balance" means, as of any date of
determination, the aggregate of the Discounted Values for all Eligible
Receivables.
8
<PAGE> 10
"Discounted Receivables Balance" means, as of any date of
determination, the aggregate of the Discounted Values for all Purchased
Receivables.
"Discounted Value" means, with respect to any Receivable, the
present value of the aggregate amount of the remaining Scheduled Contract
Payments under the Contract relating thereto, with such aggregate amount
discounted to present value using the Discount Rate for such Scheduled Contract
Payments and a payment schedule as of the first day of each month commencing
with the first day of the month in which the Discounted Value is calculated and
assuming that each Scheduled Contract Payment is paid on the last Business Day
of the month in which such Scheduled Contract Payment is due; it being
understood that the Discounted Value for that portion of any Receivable which
constitute payments or charges excluded from the definition of Contract Payment
or which constitute the price for a purchase option shall be zero.
"DOL" means the United States Department of Labor and any successor
department or agency.
"EagleFunding" means EagleFunding Capital Corporation, a Delaware
corporation.
"EagleFunding Purchase Agreement" means the Lease Receivables
Purchase Agreement, dated as of June 27, 1997, among Funding, as Seller,
EagleFunding, as Purchaser, HPSC, as Servicer and Custodian, and BSI, as Deal
Agent, as the same may be amended, restated, supplemented or otherwise modified
from time to time.
"Eligible Obligor" means, at any time, an Obligor who is (x) a
licensed professional dental, medical or veterinary practitioner, or (y) a
corporation or similar entity engaged in a dental, medical or veterinary
practice, and which is licensed and/or qualified, as appropriate, in each
jurisdiction in which the nature of its practice would require such license or
qualification, and which (i) is not an Affiliate of the Seller or the
Originator; (ii) is not the subject of any Insolvency Proceeding; (iii) is not a
Identified Obligor, (iv) is a United States resident; (v) is not the United
States of America nor any state, or other local governmental agency, or any
department, agency or instrumentality thereof and (vi) is not an Obligor of any
Defaulted Receivable.
"Eligible Receivable" means, at any time, a Purchased Receivable:
(i) the Obligor of which is an Eligible Obligor;
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<PAGE> 11
(ii) which is not a Delinquent Receivable or a Defaulted Receivable;
(iii) which, according to the Contract under which such Receivable
arises, is required to be paid in full within 84 months of the original
commencement date of such Contract (or such longer period as may be
consented to by the Deal Agent;
(iv) which, if arising under a Lease or a Equipment Finance Agreement
arises under a Contract pursuant to which the Equipment related thereto
has been installed and accepted by the related Obligor;
(v) [reserved];
(vi) which is either an "account" (as defined in Section 9-106 of the
UCC) or "chattel paper" (as defined in Section 9-105 of the UCC) or an
"instrument" (as defined in Section 9-105 of the UCC) as in effect in any
jurisdiction which has adopted Article 9 of the UCC and, if the Contract
is chattel paper, then there is only one counterpart of the Contract that
constitutes "chattel paper" for purposes of Section 9-105(l)(b) and 9-308
of the UCC;
(vii) which is denominated and payable only in United States
dollars in the United States;
(viii) which arises under a Contract which has been duly
authorized and which is in full force and effect and constitutes the
legal, valid and binding obligation of the Obligor enforceable against
such Obligor in accordance with its terms and is not subject (at the time
each determination of eligibility is made hereunder) to any dispute,
offset or counterclaim whatsoever;
(ix) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and regula
tions relating to truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and
privacy) and with respect to which no party to the Contract related
thereto is in violation of any such law, rule or regulation applicable to
such Contract in any material respect;
(x) which has not been compromised, adjusted, rewritten or otherwise
modified (including by extension
10
<PAGE> 12
of time for payment or the granting of any discounts, allowances or
credits) for any reason unless such modification constitutes a Permitted
Extension;
(xi) which, (A)satisfies all applicable requirements of the Credit
and Collection Policy and (B) which is freely assignable and arises under
a Contract which is also freely assignable;
(xii) with respect to which, (A) prior to the Receivables Purchase
thereof, Funding has a first priority ownership interest therein, free and
clear of any Adverse Claim, and (B) from and after the Receivables
Purchase thereof, EagleFunding has a first priority ownership therein,
free and clear of any Adverse Claim;
(xiii) which arises under a Contract, none of the parties to which
have done or failed to do anything which would or might permit any other
party thereto to terminate such Contract or to suspend or reduce any
payments or obligations due or to become due thereunder;
(xiv) which does not constitute a "consumer lease" under the UCC;
(xv) which, if it arises under a Lease, such Lease requires the
Obligor to maintain insurance against loss or damage to the Equipment
subject to such Lease under an insurance policy which names the Originator
or the Seller as loss payee and which interest as loss payee has been
transferred to the Seller pursuant to the Originator Purchase Agreement
and to the Deal Agent pursuant to the EagleFunding Purchase Agreement;
(xvi) which arises under a Contract, no portion of which has been,
or is subject to rejection, early termination or non-assumption, prior to
the original term of such Contract, except, in the case of a Practice
Finance Loan, pursuant to a provision therein requiring payment of a
Termination Amount upon any such rejection, early termination or
non-assumption;
(xvii) which arises under a Contract that requires payments to be
made on a regular periodic basis (which basis shall be no less frequently
that monthly) and which payments, in the case of any Lease, do not
represent the payment of interim rents;
(xviii) which arises under a Contract that requires the Obligor to
be in possession of any Equipment subject thereto and does not permit the
subleasing of such Equipment to any
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other Person, and which Equipment is not in fact then subleased to any
Person;
(xix) to the extent that the amounts thereon are not payable on
account of sales taxes;
(xx) as to which the Deal Agent has not notified the Originator that
the Deal Agent has determined, in its reasonable discretion, that such
Receivable (or class of Receivables) is not acceptable for eligibility
hereunder (which notice shall state the reason(s) the Deal Agent has
elected to make such determination);
(xxi) which was originated by the Originator in the ordinary course
of its business;
(xxii) the Contract for which is either (A) a Lease in substantially
the form of Exhibit K-1 to the Originator Purchase Agreement; or (B) a
Equipment Finance Agreement in substantially the form of Exhibit K-2 to
the Originator Purchase Agreement; or (C) a Non-Equipment Finance
Agreement in substantially the form of Exhibit K-3 to the Originator
Purchase Agreement; or (D) a Practice Finance Loan in substantially the
form of Exhibit K-4 to the Originator Purchase Agreement;
(xxiii) with respect to which the Originator has filed and maintained
the effectiveness of UCC financing statements against the Obligor in order
to perfect any security interest granted under such Contract in the
related Equipment, provided that the failure to file or maintain the
effectiveness of any financing statements for an otherwise Eligible
Receivable whose Outstanding Balance is less than $5,000 shall, so long as
such failure is permitted by Section 5.01(j) of the EagleFunding Purchase
Agreement, not cause such Receivable to become ineligible;
(xxiv) the Contract for which was originated no earlier than December
1, 1993;
(xxv) the Obligor of which has been notified of the Seller's interest
as required under the Originator Purchase Agreement;
(xxvi) with respect to which the Contract File has been delivered to
the Custodian as contemplated under the EagleFunding Purchase Agreement;
(xxvii) with respect to which the Originator has marked the related
Contract with a legend, acceptable to the Deal
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Agent, evidencing that EagleFunding has acquired an ownership interest
therein; and
(xxviii) with respect to which the representations and warranties
contained in clauses (i) (ii) (iv) and (v) of Section 4.01(r) of the
Originator Purchase Agreement are true and correct in all material
respects and with respect to which all other representations and
warranties contained in such Section 4.01(r) are true and correct in all
material respects as of the date or dates therein made, in each such case
as if such representations and warranties were made with respect to the
Purchased Receivables only.
"Equipment" means each item of equipment that is the subject of a
Contract, including all parts, accessions and modifications thereto and all
replacements thereof.
"Equipment Finance Agreement" means a finance agreement
substantially in the form of Exhibit K-2 to the Originator Purchase Agreement,
evidencing an Obligor's indebtedness to the Originator on account of a loan
other than a Practice Finance Loan, the collateral securing repayment of which
constitutes primarily Equipment.
"ERISA" means the U.S. Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"ERISA Affiliate" means any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the IRC) as the Originator; (ii) partnership or other trade or business (whether
or not incorporated) under common control (within the meaning of Section 414(c)
of the IRC) with the Originator or (iii) member of the same affiliated service
group (within the meaning of Section 414(m) of the IRC) as the Originator, any
corporation described in clause (i) above or any partnership or other trade or
business described in clause (ii) above.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Rate" means, with respect to any Purchase Period for all
Capital allocated to such Purchase Period, an interest rate per annum equal to
the quotient, stated as a percentage, of (i) the per annum rate determined by
the Deal Agent at which Dollar deposits for such Purchase Period are offered by
Bank of Boston based on information presented on Telerate Page 3750 as of 11:00
a.m. London time on the second Business Day prior to the first day of such
Purchase Period,
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<PAGE> 15
divided by (ii) a number equal to 1.00 minus the Eurodollar Reserve Percentage,
if applicable.
"Eurodollar Rate Advance" means an Advance which bears interest at a
rate per annum calculated by reference to the Eurodollar Rate.
"Eurodollar Reserve Percentage" means, for any day with respect to a
Purchase Period to which Capital has been allocated under the EagleFunding
Purchase Agreement, means the maximum rate (expressed as a decimal) at which any
lender subject thereto would be required to maintain reserves under Regulation D
of the Board of Governors of the Federal Reserve System (or any successor or
similar regulations relating to such reserve requirements) against Eurocurrency
Liabilities, if such liabilities were Outstanding. The Eurodollar Reserve
Percentage shall be adjusted automatically on and as of the effective date of
any change in the maximum rate described above.
"Event of Termination" has the meaning assigned to that term in
Section 7.01 of the Originator Purchase Agreement.
"Excess Concentration Reserve" means, on any day, an amount equal to
the sum of:
(a) the aggregate amount of the Excess Obligor Concentration Amounts
for all Obligors on such day;
(b) the amount by which the aggregate Outstanding Balance of all
Eligible Receivables which constitute Non-Equipment Finance Agreements on
such day exceeds 35% of the Discounted Eligible Receivables Balance on
such day;
(c) the amount by which the aggregate Outstanding Balance of all
Eligible Receivables which constitute Practice Finance Loans on such day
exceeds 10% of the Discounted Eligible Receivables Balance on such day;
and
(d) the amount by which the aggregate Outstanding Balance on such day
of all Eligible Receivables owing from Obligors which are the Obligors of
Eligible Receivables having an aggregate Outstanding Balance of greater
than $250,000 exceeds 30% of the Discounted Eligible Receivables Balance
on such day.
"Excess Obligor Concentration Amount" means, on any day, for any
Obligor, the amount by which the aggregate Outstanding Balances of Eligible
Receivables owing by such Obligor at such time exceeds:
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(i) an amount equal to $300,000 (at any time during which the
Discounted Eligible Receivables Balance is less than or equal to $20,000,000);
and
(ii) the lesser of (x) the product of 1.50% and the Discounted
Eligible Receivables Balance on such day, and (y) $1,000,000 (at all other
times).
"Facility Documents" means, collectively, the Originator Purchase
Agreement, the EagleFunding Purchase Agreement, the Lock-Box Agreements, the
Liquidity Agreement, the Liquidity Security Agreement, the Interest Rate Hedge
Assignment and all Interest Rate Hedges and all other agreements, financing
statements, documents and instruments delivered pursuant thereto or in
connection therewith, in each case as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"Federal Funds Rate" means, for any day, a fluctuating interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day for such transactions received by Bank of
Boston from three Federal funds brokers of recognized standing selected by it.
"Fee Letter" means that certain fee letter, dated as of June 27,
1997, among Funding, EagleFunding, and the Deal Agent, as the same may be
amended, supplemented, restated or otherwise modified from time to time.
"Funding" means HPSC Capital Funding, Inc., a Delaware corporation.
"GAAP" means generally accepted accounting principles as in effect
from time to time and applied on a basis consistent with the audited financial
statements described in Section 4.01(e) of the Originator Purchase Agreement.
"HPSC" means HPSC, Inc., a Delaware corporation.
"Identified Obligor" means, at any time, any Obligor of whom the Deal
Agent has, following three Business Days' notice, advised the Originator that
such Obligor shall be considered an "Identified Obligor".
"Indebtedness" of any Person means (i) indebtedness of such Person
for borrowed money, (ii) obligations of such Person evidenced by bonds,
debentures, notes or other similar
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<PAGE> 17
instruments, (iii) obligations of such Person to pay the deferred purchase price
of property or services, (iv) obligations of such Person as lessee under leases
which shall have been or should be, in accordance with GAAP, recorded as capital
leases, (v) obligations secured by any lien or other charge upon property or
assets owned by such Person, even though such Person has not assumed or become
liable for the payment of such obligations, (vi) obligations of such Person in
connection with any letter of credit issued for the account of such Person and
(vii) obligations of such Person under direct or indirect guaranties in respect
of, and obligations (contingent or otherwise) to purchase or otherwise acquire,
or otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (vi)
above.
"Indemnified Party" has the meaning assigned to such term in Section
8.01 of the EagleFunding Purchase Agreement.
"Insolvency Event" means with respect to any Person, any of the
following events: such Person shall generally not pay its debts as such debts
become due or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any case or
proceeding shall be instituted by or against such Person seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation, dissolution, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property.
"Insolvency Proceeding" means any proceeding of the sort described in
the definition of Insolvency Event.
"Interest Rate Hedge Assignment" means an assignment in substantially
the form of Exhibit F to the EagleFunding Purchase Agreement pursuant to which
the Seller assigns to the Deal Agent all of its rights to payment under the
Interest Rate Hedges.
"Interest Rate Hedges" means interest rate swap or similar agreements
entered into by the Seller with the Swap Provider to provide protection to, or
minimize the impact upon, the Seller and EagleFunding of increasing interest
rates under the EagleFunding Purchase Agreement.
"Interim Financials" has the meaning assigned to that term in Section
4.01(e) of the Originator Purchase Agreement.
"IRC" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor statute.
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<PAGE> 18
"IRS" means the Internal Revenue Service of the United States of
America.
"Lease" means a lease agreement between the Originator and an Obligor
substantially in the form of Exhibit K-1 to the Originator Purchase Agreement,
pursuant to which the Originator originally leased Equipment to such Obligor.
"Liquidity Agent" means Bank of Boston in its capacity as the
"Liquidity Agent" for the Liquidity Providers under the Liquidity Agreement, or
any successor "Liquidity Agent" thereto.
"Liquidity Agreement" means that certain Liquidity Agreement dated as
of June 27, 1997, by and among EagleFunding, as Borrower, the Liquidity
Providers party thereto, the Liquidity Agent, and the Collateral Agent as the
same may be amended, restated, supplemented or otherwise modified from time to
time.
"Liquidity Providers" means the financial institutions party to the
Liquidity Agreement as "Liquidity Providers" thereunder.
"Liquidity Security Agreement" means that certain Liquidity Security
Agreement dated as of June 27, 1997, by and between EagleFunding and the
Collateral Agent, as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"Lock-Box Account" means an account maintained at a Lock-Box Bank for
the purpose of receiving Collections.
"Lock-Box Agreement" means an agreement, in substantially the form of
Exhibit G to the Originator Purchase Agreement, among the Originator, the
Seller, the Deal Agent and a Lock-Box Bank which agreement sets forth the rights
of the Deal Agent, the Originator, the Seller and the Lock-Box Bank with respect
to the disposition and application of the Collections received into the
applicable Lock-Box Account, including, without limitation, the right of the
Deal Agent to direct the Lock-Box Bank to remit all Collections of Transferred
Assets subject to a Purchase under the Originator Purchase Agreement directly to
the Deal Agent.
"Lock-Box Bank" means any of the banks holding one or more lock-box
accounts for receiving Collections from the Receivables.
"Loss Reserve" means, on any day, an amount equal to the greater of:
(a) the product of (i) 13.63% and (ii) Capital outstanding
on such day; or
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(b) $1,000,000.
"Moody's" means Moody's Investors Service, Inc., and any successor
thereto.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by either the Originator or any ERISA Affiliate.
"Non-Designated Receivable" means a Purchased Receivable identified
by Funding to EagleFunding as a "Non-Designated Receivable" pursuant to Section
2.02(a) of the EagleFunding Purchase Agreement.
"Non-Equipment Finance Agreement" means a finance agreement
substantially in the form of Exhibit K-3 to the Originator Purchase Agreement,
evidencing an Obligor's indebtedness to the Originator on account of a loan
other than a Practice Finance Loan, the collateral securing repayment of which
does not constitute primarily Equipment.
"Notice of Assignment" means a Notice of Assignment in substantially
the form of Exhibit B to the Originator Purchase Agreement.
"Obligations" means all present and future indebtedness and other
liabilities and obligations (howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, or due or to become due) of the
Seller to EagleFunding, the Deal Agent and/or the Indemnified Parties, arising
under or in connection with the EagleFunding Purchase Agreement or the
transactions contemplated hereby and shall include, without limitation, all
liability for Yield, closing fees, audit fees, expense reimbursements,
indemnifications, and other amounts due or to become due under the Facility
Documents, including, without limitation, interest, fees and other obligations
that accrue after the commencement of an Insolvency Proceeding (in each case
whether or not allowed as a claim in such Insolvency Proceeding).
"Obligor" means each Person obligated to make payments under a
Contract.
"Originator" means HPSC.
"Originator Purchase Agreement" means that certain Purchase and
Contribution Agreement, dated as of June 27, 1997, between the Originator and
Funding, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
"Originator Purchase Assets" means all right, title and interest of
Funding in, to and under the Originator Purchase
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<PAGE> 20
Agreement, including, without limitation, all obligations due and to become due
to Funding from the Originator under or in connection therewith, whether
constituting fees, expenses, costs, indemnities, insurance recoveries, damages
for breach or otherwise, and all rights, remedies, powers, privileges and claims
of Funding against the Originator under or with respect to the Originator
Purchase Agreement.
"Other Taxes" has the meaning assigned to such term in Section
2.09(b) of the EagleFunding Purchase Agreement.
"Outstanding Balance" means, with respect to any Purchased Receivable
at any time, the Discounted Value of the remaining Scheduled Contract Payments
under the related Contract, as such amounts are adjusted as a result of any of
the events described in Section 2.05 of the Originator Purchase Agreement.
"Payment Date" means, with respect to any Capital, the last day of
the Purchase Period then applicable to such Capital.
"PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"Permitted Encumbrance" means any of the following:
(a) liens, charges or other encumbrances for taxes and other
governmental assessments which are not yet due and payable;
(b) workers', mechanics', suppliers', carriers', warehousemen's,
landlords' liens and deposits, pledges or liens to secure statutory
obligations, surety or appeal bonds or other liens of like general
nature incurred in the ordinary course of business and not in
connection with the borrowing of money, provided in each case, the
obligation secured is not overdue or, if overdue, is being contested
in good faith by appropriate actions or proceedings, and provided,
further, that such liens do not, in the reasonable opinion of the
Seller, materially detract from the value of the Contract or the
Equipment subject thereto;
(d) liens, charges or encumbrances created in favor of the Seller
pursuant to the Originator Purchase Agreement or in favor of the Deal
Agent, or otherwise granted to EagleFunding or to a Liquidity Provider in
the Facility Documents; or
(e) with respect to Equipment, liens thereon created in favor of the
Originator pursuant to a Contract and assigned to the Seller pursuant to
the Originator Purchase Agreement.
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"Permitted Extension" means an extension of a Scheduled Contract
Payment in the ordinary course of business for reasons unrelated to an Obligor's
creditworthiness for a period not to exceed 2 months.
"Permitted Investments" means (i) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities on or before the first Settlement Date
after the date of acquisition; (ii) time deposits and certificates of deposit
having maturities on or before the first Settlement Date after the date of
acquisition, maintained with or issued by any commercial bank having capital and
surplus in excess of $500,000,000 and having the highest commercial paper rating
available by each of S&P, Moody's and DCR (if rated by DCR); (iii) money market
funds which have the highest applicable rating available by each of S&P, Moody's
and DCR (if rated by DCR); (iv) repurchase agreements having maturities on or
before the first Settlement Date after the date of acquisition for underlying
securities of the types described in clauses (i) and (ii) above or clause (v)
below with any institution with the highest long term debt rating and commercial
paper rating available by each of S&P, Moody's and DCR (if rated by DCR); and
(v) commercial paper maturing on or before the first Settlement Date after the
date of acquisition and having the highest commercial paper rating available by
each of S&P, Moody's and DCR (if rated by DCR).
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, government (or any agency or political subdivision thereof) or other
entity.
"Plan" means an employee benefit plan defined in Section 3(3) of
ERISA in respect of which the Originator or any ERISA Affiliate is, or within
the immediately preceding six years was, an "employer" as defined in Section
3(5) of ERISA.
"Post Office Box" means each post office box to which Obligors are
directed to mail payments in respect of the Receivables.
"Practice Finance Loan" means a note or instrument substantially in
the form of Exhibit K-4 to the Originator Purchase Agreement, evidencing an
Obligor's indebtedness to the Originator on account of a loan made to finance
working capital needs of such Obligor, in connection with such Obligor's
professional dental, medical or veterinary practice.
"Purchase" means a purchase (whether by means of cash payment or by
capital contribution) of Transferred Assets to Funding from the Originator
pursuant to Sections 2.01 and 2.02 of the Originator Purchase Agreement.
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"Purchase Date" means, with respect to any Purchase, the date on
which such purchase occurs.
"Purchase Limit" means, as of any date of determination, the lesser
of (i) $100,000,000, as such amount may be reduced pursuant to Section 2.03 of
the EagleFunding Purchase Agreement, and (ii) an amount requested by the Seller
and agreed to by the Deal Agent. Notwithstanding anything in the foregoing
sentence to the contrary, at all times on and after the Termination Date, the
"Purchase Limit" shall mean the aggregate outstanding Capital at such time.
"Purchased Assets" (i) at all times prior to the Termination Date,
(a) all then outstanding Purchased Receivables, (b) all Related Security
relating to such Purchased Receivables and (c) all Collections with respect to,
and other proceeds of, such Receivables; and (ii) at all times on and after the
Termination Date, (a) all Purchased Receivables outstanding as of the close of
business on the day preceding the Termination Date (including any interest or
finance charges accruing after the Termination Date which relate to any
Purchased Receivables outstanding as of the close of business on the day
preceding the Termination Date), (b) all Related Security relating to such
Purchased Receivables and (c) all Collections with respect to, and other
proceeds of, such Receivables.
"Purchased Interests" means, at any time, all then out standing
Purchased Assets, Originator Purchase Assets, payments owing to Funding or the
Deal Agent (as applicable) under Interest Rate Hedges relating to Purchased
Assets, and all Collections with respect to, and other proceeds of, the
Purchased Assets, including, without limitation, all Collections of a Purchased
Asset relating to payments due thereunder at any time during the month in which
such Purchased Asset became a Purchased Asset.
"Purchase Period" means, with respect to any outstanding Capital, a
period selected in accordance with Section 2.02 and Section 2.07 of the
EagleFunding Purchase Agreement.
Such Purchase Period shall be:
(i) if such Capital is funded through the issuance of Commercial
Paper, a period of from 1 to 60 days;
(ii) if such Capital is funded through Base Rate Advances, a period
of from 1 to 31 days;
(iii) if such Capital is funded through Eurodollar Rate Advances, a
period of one, two or three months;
provided, however, that
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(x) whenever the last day of a Purchase Period would otherwise occur
on a day other than a Business Day, the last day of such Purchase Period
shall be extended to occur on the next succeeding Business Day, unless
such extension would cause the last day of a Purchase Period described in
clause (iii) above to occur in the next following calendar month, in which
event the last day of such Purchase Period shall be deemed to occur on the
immediately preceding Business Day;
(y) whenever a Purchase Period described in clause (iii) above
commences on the last Business Day in a month or on a date for which there
is no numerically corresponding day in the month in which such Purchase
Period would otherwise end, the last day of such Purchase Period shall
occur on the last Business Day of the month in which such Purchase Period
ends; and
(z) no Purchase Period described in clause (iii) above may end later
than the Scheduled Termination Date.
"Purchased Receivables" means all Receivables purchased by
EagleFunding pursuant to the EagleFunding Purchase Agreement.
"Purchaser" means EagleFunding.
"Receivable" means all rights to payment arising under a Contract,
including, without limitation, (i) Contract Payments, including, but not limited
to, any rent, principal or interest payments, (ii) Termination Payments and
(iii) Residual Realizations, together with all supplemental or additional
payments required by the terms of such Contract with respect to insurance,
maintenance, ancillary products and services and other specific charges.
"Receivables Purchase" means a purchase of Receivables by
EagleFunding from the Seller pursuant to Sections 2.01 and 2.02 of the
EagleFunding Purchase Agreement.
"Receivables Purchase Date" means, with respect to any Receivables
Purchase, the date on which such Receivables Purchase is funded, which date,
other than in the case of the initial Receivables Purchase, shall be a
Settlement Date.
"Records" means all Contracts and other documents, books, records
and other information (including without limitation, computer programs, tapes,
discs, punch cards, data processing software and related property and rights)
maintained with respect to Contracts and the related Obligors.
"Related Security" means with respect to any Contract:
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(i) all security interests or liens and property subject thereto from
time to time purporting to secure payment of the Receivables arising under
such Contract, whether pursuant to such Contract or otherwise;
(ii) the assignment to Funding, and to the Deal Agent, of all UCC
financing statements covering any Equipment or covering any collateral
securing payment of the Receivables arising under such Contract;
(iii) all guarantees, indemnities, warranties, letters of credit,
insurance policies and proceeds and premium refunds thereof and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of the Receivables arising under such
Contract whether pursuant to the Contract related to such Receivable or
otherwise;
(iv) all of the Originator's right, title and interest in, to and
under the Equipment related to such Contract, whether as an ownership
interest, as collateral security, or which was repossessed from an Obligor
of a Receivable, to the extent that the Outstanding Balance of such
Receivable remains unpaid;
(v) all Records; and
(vi) all Collections and other proceeds of the foregoing, including,
without limitation, all insurance and condemnation proceeds and all
security deposits related to the relevant Equipment.
"Reportable Event" means any of the events described in Section 4043
of ERISA.
"Residual Realization" means, with respect to any Equipment, the
amount received or receivable by Funding or the Servicer upon the sale or other
disposition of the Equipment, whether from the Obligor upon the exercise of any
purchase option or from a sale or from insurance proceeds or otherwise.
"Revolving Credit Agreement" means the Revolving Credit Agreement
dated December 12, 1996, as amended as of March 26, 1997 and June 26, 1997, by
and among HPSC as borrower, American Commercial Finance Corporation, a Delaware
corporation, Bank of Boston, Bank of America Illinois, NationsBank, N.A.,
CoreStates Bank, N.A., The Sumitomo Bank, Limited (collectively, the "Banks"),
and Bank of Boston as managing agent for the Banks, as such agreement may be
amended, restated, supplemented or otherwise modified from time to time
hereafter.
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"Scheduled Contract Payments" means the Contract Payments due under
each Contract, as set forth in the appendix to Exhibit A of the Originator
Purchase Agreement (including any supplement to such exhibit delivered under
Section 2.02(b) thereof and also including any modification to such appendix as
the result of any modification, waiver or amendment to any Contract undertaken
in conformity with the Originator Purchase Agreement), excluding, however, (i)
in the case of any Contract which is not a Lease, starting with the final
Contract Payment owed thereunder and proceeding in reverse order of maturity,
the Contract Payments (or portions thereof) equal to any security deposit
related to such Contract and (ii) any Contract Payment that is due more than 84
months after the Original commencement date of such Contract. The term
"Scheduled Contract Payment" does not include any Contract Payment which is
payable in respect of any Residual Realization or which otherwise reflects the
residual value of the related Equipment.
"Scheduled Liquidity Commitment Termination Date" has the meaning
assigned to that term in the Liquidity Agreement.
"Scheduled Termination Date" means June 27, 2000.
"Seller" means HPSC Capital Funding, Inc., a Delaware corporation, in
its capacity as "Seller" under the EagleFunding Purchase Agreement.
"Servicer" has the meaning assigned to that term in Section 6.01 of
the EagleFunding Purchase Agreement.
"Servicing Fee" has the meaning assigned to that term in Section 6.08
of the EagleFunding Purchase Agreement.
"Servicing Termination Event" means either of the following events:
(a)(i) An Insolvency Event shall occur with respect to the Servicer
or the Custodian or (ii) the Servicer or the Custodian shall take any corporate
action to authorize the filing of any Insolvency Proceeding; or
(b) There shall have occurred a failure on the part of the Servicer
to observe or perform any of its duties or obligations as Servicer under the
EagleFunding Purchase Agreement or as "Servicer" under the Originator Purchase
Agreement, as determined by the Deal Agent in the exercise of its reasonable
judgment; or
(c) In the event that the Servicer is the Originator, an "Event of
Default" shall have occurred under the Revolving Credit Agreement, and either
(i) such event shall continue
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uncured and unwaived thereunder for more than 45 days after the occurrence
thereof, or (ii) the "Agent" under the Revolving Credit Agreement shall have
accelerated the maturity of the Indebtedness of the Originator thereunder or
exercised any of its other remedies thereunder (as appropriate).
"Settlement Date" means the 20th day of each month; provided, that if
in any month such day is not a Business Day, the "Settlement Date" for such
month shall be the first Business Day to occur after such 20th day.
"Settlement Report" means a report, in substantially the form of
Exhibit C to the Originator Purchase Agreement, furnished by the Originator to
the Seller pursuant to Section 2.05(b) thereof and to the Deal Agent pursuant to
Section 5.02(f) of the EagleFunding Purchase Agreement.
"Structuring Fee" has the meaning assigned to such term in the Fee
Letter.
"S&P" means Standard & Poor's Ratings Services, and any successor
thereto.
"Stop Event" means the occurrence of, without giving effect to any
waiver thereof, (i) a Wind-Down Event of the type described in Section 7.01(h)
of the EagleFunding Purchase Agreement, (ii) the occurrence of the acceleration
of all of EagleFunding's Indebtedness to the Liquidity Providers under the
Liquidity Agreement as the result of the occurrence of an "Event of Default"
thereunder or any similar occurrence, or (iii) an Insolvency Event with respect
to the Servicer (if the Servicer is the Originator or an Affiliate thereof). For
purposes of the Administration Agreement, the three Stop Events described in the
foregoing sentence shall be the sole Stop Events under this Agreement.
"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the Board of Directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Successor Servicer" means any Person which succeeds to the
Originator as the Servicer in accordance with the terms and provisions of the
EagleFunding Purchase Agreement.
"Swap Provider" means Bank of Boston or such other financial
institution reasonably acceptable to the Deal Agent which enters into an
Interest Rate Hedge with the Seller, provided that the Swap Provider must at all
times be a nationally recognized financial institution having a long-term debt
rating
25
<PAGE> 27
of at least A by S&P, at least A2 by Moody's, and at least A by DCR (if rated by
DCR).
"Taxes" has the meaning assigned to such term in Section 2.10(a) of
the EagleFunding Purchase Agreement.
"Termination Amount" means, with respect to any Contract which has
been prepaid or otherwise terminated prior to its stated maturity or termination
date, an amount equal to the then Outstanding Balance payable thereunder plus
the reasonable costs incurred in connection with such prepayment or termination,
including but not limited to the reasonable costs of any lien terminations and
similar expenses.
"Termination Date" means the earliest of (i) that Business Day which
the Originator designates as the Termination Date by notice to Funding and the
Deal Agent at least 60 days prior to such Business Day, (ii) that Business Day
which Funding designates as the Termination Date by notice to the Originator and
the Deal Agent at least 60 days prior to such Business Day, (iii) the date of
the declaration or automatic occurrence of the Termination Date pursuant to
Section 7.01 of the Originator Purchase Agreement, or Section 7.02 of the
EagleFunding Purchase Agreement, (iv) the date on which the "Liquidity
Commitments" of the Liquidity Providers under the Liquidity Agreement shall
terminate, and (v) the Scheduled Termination Date.
"Termination Payment" means any amount or amounts payable by an
Obligor upon termination or prepayment of a Contract prior to the payment of all
Contract Payments.
"Transferred Assets" means, at any time, Receivables, the related
Contracts, the related Equipment, all Related Security with respect to the
foregoing and all Collections with respect to, and other proceeds of, the
foregoing.
"UCC" means the Uniform Commercial Code as from time to time in
effect in the State of New York, except that, with respect to the perfection or
priority of any security interest created under the UCC, the term "UCC" means
the Uniform Commercial Code as in effect in the jurisdiction whose law governs
the perfection and effect of perfection or non-perfection of such security
interest.
"Unmatured Event of Termination" means any event which, with the
giving of notice or the passage of time or both, would constitute an Event of
Termination.
"Unmatured Wind-Down Event" means any event which, with the giving of
notice or the passage of time or both, would constitute a Wind-Down Event.
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<PAGE> 28
"Weighted Average Remaining Term" means the weighted average
remaining maturities of the Purchased Assets calculated to equal (i) the
aggregate amount of the remaining Scheduled Contract Payments of each Purchased
Receivable times the remaining term of such Purchased Receivable (expressed in
years, or fractions thereof), divided by (ii) the aggregate amount of the
remaining Scheduled Contract Payments of all the Purchased Receivables (each
such calculation to include, for purposes of calculating the Weighted Average
Remaining Term on any Settlement Date, any Purchased Receivables to be purchased
on such date).
"Wind-Down Event" has the meaning assigned to such term in Section
7.01 of the EagleFunding Purchase Agreement.
"Yield" means, with respect to all Capital during any Purchase
Period, the product of
YR x C x ED
--
AD
where:
C = the Capital allocated to such Purchase Period.
YR = the Yield Rate for the Capital allocated to such Purchase
Period.
ED = the actual number of days elapsed during such Purchase Period.
AD = 360; provided, however, that if the applicable Yield Rate is
the Base Rate, then AD = 365 or 366 days, as applicable, for
the current year.
provided, however that (i) no provision of this Agreement shall require the
payment or permit the collection of Yield in excess of the maximum permitted by
applicable law and (ii) Yield shall not be considered paid by any distribution
if at any time such distribution is rescinded or must otherwise be returned for
any reason.
"Yield Rate" for any Capital allocated to any Purchase Period means:
(i) at all times during which a Wind-Down Event is not in effect:
(a) to the extent that as of the first day of such Purchase
Period, EagleFunding funds such Capital, or portion thereof, for such
Purchase Period by issuing
27
<PAGE> 29
Commercial Paper, the rate (or if more than one rate, the weighted average
of the rates) at which Commercial Paper of EagleFunding having a term
equal to such Purchase Period and to be issued to fund the Purchase or
maintenance of such Capital by EagleFunding may be sold by any Dealer
selected by EagleFunding, as agreed between each such Dealer and
EagleFunding and notified by EagleFunding to the Deal Agent, including an
increment to such rate sufficient in amount to enable the Purchaser to
collect all amounts of CP Dealer Fees payable in respect of all Commercial
Paper issued for the term of such Purchase Period; provided, however, if
the rate (or rates) as agreed between any such Dealer and EagleFunding
with regard to any Purchase Period for any Capital is a discount rate (or
rates), the "Yield Rate" for such Purchase Period shall be the rate (or if
more than one rate, the weighted average of the rates) resulting from
converting such discount rate (or rates) to an interest-bearing equivalent
rate (or rates) per annum; provided further, however, that EagleFunding
shall not fund Capital by issuing Commercial Paper for any Purchase Period
if, on the first day of such Purchase Period, a Stop Event or a Wind Down
Event shall then be in effect; or
(b) to the extent that as of the first day of such Purchase
Period, EagleFunding funds or maintains such Capital, or portion thereof,
for such Purchase Period through the making of Base Rate Advances, a per
annum rate equal to the Adjusted Base Rate for such Purchase Period or
such other rate as the Deal Agent and the Seller shall agree to in
writing; or
(c) to the extent that as of the first day of such Purchase
Period, EagleFunding funds or maintains such Capital, or portion thereof,
for such Purchase Period through the making of Eurodollar Rate Advances
under the Liquidity Agreement, a per annum rate equal to the Adjusted
Eurodollar Rate for such Purchase Period; and
(ii) at all times during which a Wind-Down Event is in effect, the sum of
(a) the applicable rate for such Capital as determined pursuant to any of
subclauses (a), (b) and (c) of clause (i) above, and (b) a per annum rate equal
to 2.0%.
28
<PAGE> 1
[Execution Version]
PURCHASE AND CONTRIBUTION AGREEMENT
Dated as of June 27, 1997
Between
HPSC CAPITAL FUNDING, INC.
as the Buyer
and
HPSC, INC.
as the Originator and as the Servicer
<PAGE> 2
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms...................................1
SECTION 1.02. Other Terms.............................................1
SECTION 1.03. Computation of Time Periods.............................1
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Agreement to Sell and Contribute........................2
SECTION 2.02. Purchases from the Originator...........................3
SECTION 2.03. Servicing of Contracts and Equipment....................4
SECTION 2.04. Transfer of Records.....................................4
SECTION 2.05. Collections; Deemed Collections.........................4
SECTION 2.06. Payments and Computations, Etc..........................6
SECTION 2.07. Perfection of Liens; Further Assurances.................6
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase................7
SECTION 3.02. Conditions Precedent to All Purchases...................8
SECTION 3.03. Effect of Payment of Purchase Price.....................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Originator .............................................9
ARTICLE V
GENERAL COVENANTS OF THE ORIGINATOR
SECTION 5.01. Affirmative Covenants of the Originator................16
SECTION 5.02. Reporting Requirements of the Originator...............19
SECTION 5.03. Negative Covenants of the Originator...................20
i
<PAGE> 3
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Servicer................................23
SECTION 6.02. Duties of the Servicer.................................24
SECTION 6.03. Rights of the Buyer....................................26
SECTION 6.04. Further Action Evidencing Transfers....................27
SECTION 6.05. Responsibilities of the Originator.....................27
SECTION 6.06. Administration of Collections by Servicer..............28
SECTION 6.07. Application of Collections.............................28
SECTION 6.08. Servicing Fee..........................................28
SECTION 6.09. Resignation; Successor Servicer........................29
SECTION 6.10. Custodian..............................................29
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination..................................30
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Indemnities by the Originator..........................32
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc........................................34
SECTION 9.02. Notices, Etc...........................................35
SECTION 9.03. No Waiver; Remedies....................................35
SECTION 9.04. Binding Effect; Assignability..........................35
SECTION 9.05. GOVERNING LAW; WAIVER OF JURY TRIAL....................36
SECTION 9.06. Costs, Expenses and Taxes..............................37
SECTION 9.07. Execution in Counterparts; Severability................37
ii
<PAGE> 4
LIST OF EXHIBITS
EXHIBIT A List of Contracts
EXHIBIT B Form of Notice of Assignment
EXHIBIT C Form of Settlement Report
EXHIBIT D Description of Credit and Collection Policy
EXHIBIT E Form of Opinion(s) of Counsel for Originator
EXHIBIT F List of Offices of Originator where Records Are
Kept
EXHIBIT G Form of Lock-Box Agreement
EXHIBIT H List of Lock-Box Banks
EXHIBIT I Trade Names and Assumed Names
EXHIBIT J List of Computer Software
EXHIBIT K-1 Form of Lease
EXHIBIT K-2 Form of Equipment Finance Agreement
EXHIBIT K-3 Form of Non-Equipment Finance Agreement
EXHIBIT K-4 Form of Practice Finance Loan
EXHIBIT L Form of Certificate
iii
<PAGE> 5
PURCHASE AND CONTRIBUTION AGREEMENT
Dated as of June 27, 1997
HPSC CAPITAL FUNDING, INC., a Delaware corporation (the "Buyer"),
and HPSC, INC., a Delaware corporation, (the "Originator") agree as follows:
PRELIMINARY STATEMENTS. (1) Certain terms which are capitalized and
used throughout this Originator Purchase Agreement (in addition to those defined
above) are defined in the "Definitions List" (as defined in Article I of this
Originator Purchase Agreement).
(2) The Originator wishes to sell, contribute and assign to the
Buyer all right, title and interest of the Originator in, to and under the
Transferred Assets, and the Buyer, subject to the terms and conditions of this
Originator Agreement wishes to purchase, accept and acquire from the Originator
such Transferred Assets.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. (a) As used in this Originator
Purchase Agreement, capitalized terms used herein shall, unless otherwise
defined herein, have the meanings assigned to them in the Definitions List dated
as of the date hereof that refers to this Originator Purchase Agreement (the
"Definitions List"), the terms of which are incorporated herein by reference
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined).
(b) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Originator Purchase Agreement shall refer to
this Originator Purchase Agreement as a whole and not to any particular
provision of this Originator Purchase Agreement, and Section, subsection,
Schedule and Exhibit references are to Sections, subsections, Schedules and
Exhibits of this Originator Purchase Agreement unless otherwise specified.
SECTION 1.02. Other Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. All terms used in
Article 9 of the UCC in the State of New York, and not specifically defined
herein, are used herein as defined in such Article 9.
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<PAGE> 6
SECTION 1.03. Computation of Time Periods. Unless otherwise stated
in this Originator Purchase Agreement, in the computation of a period of time
from a specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding."
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Agreement to Sell and Contribute. (a) On the terms and
conditions hereinafter set forth, the Originator hereby agrees, from time to
time until the Termination Date, to sell in part and to contribute in part to
the Buyer, and the Buyer hereby agrees, from time to time until the Termination
Date, to purchase and acquire from the Originator, all of the Originator's
right, title and interest in, to and under the Receivables, the Contracts, all
Equipment, all Related Security with respect to the foregoing, and all
Collections and other proceeds of the foregoing. Except as provided in the
immediately succeeding sentence, nothing contained in this Originator Purchase
Agreement is intended to, nor shall it be deemed to, constitute a commitment on
the part of the Originator or on the part of the Buyer to consummate any
Purchase hereunder, it being understood that all such Purchases shall be made at
the discretion of each such party but otherwise subject to the terms and
conditions set forth herein. Notwithstanding the foregoing, the Buyer agrees,
subject to the satisfaction of the conditions set forth in Section 3.02, to
consummate any Purchase requested by the Originator pursuant to Section 2.02(b)
for which the notice of purchase specifies that the entire Purchase Price shall
be paid as a contribution to the Buyer's capital and not in cash. Nothing
contained in this Originator Purchase Agreement is intended to, nor shall it be
deemed to, constitute an assumption by the Buyer of any obligation under any
Contract, all of which obligations shall be retained by the Originator, and the
Originator hereby agrees to perform all such obligations.
(b) It is the intent of the Originator and the Buyer that the
transfer by the Originator to the Buyer of the Transferred Assets constitute a
sale, in part, and a contribution to capital, in part, which sales and
contributions are absolute and irrevocable, without recourse except as otherwise
provided in this Originator Purchase Agreement, and will provide the Buyer with
full ownership of the Transferred Assets. Each of Originator and the Buyer
hereby agrees to treat such transfer as a sale and a contribution for tax,
reporting and accounting purposes (except to the extent that such transfer is
not so recognized due to the reporting of taxes on a consolidated basis where
applicable and the application of consolidated financial reporting principles
under GAAP). The Originator agrees to
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<PAGE> 7
respond to any inquiries with respect to the transfer hereunder by confirming
the sale and contribution of the Receivables, Contracts and the Equipment to the
Buyer, and to note on its financial statements that such Receivables, Contracts
and Equipment have been sold and/or contributed to the Buyer.
SECTION 2.02. Purchases from the Originator.
(a) On the initial Purchase Date, the Originator shall sell to the
Buyer, and the Buyer shall purchase from the Originator, all of the Transferred
Assets arising under or in connection with the Contracts described on Exhibit A
hereto in consideration of which the Buyer will pay to the Originator an amount
in cash equal to 88.0% of the aggregate Discounted Value of all Receivables
included in such Transferred Assets. The remaining portion of such Transferred
Assets shall be a contribution to the capital of the Buyer in return for 999
shares of the capital stock of the Buyer.
(b) Each Purchase subsequent to the initial Purchase Date shall be
made on a Settlement Date upon not less than three Business Days' prior written
notice to the Buyer requesting such Purchase, which notice shall contain a
supplemental Exhibit A hereto setting forth a list of the Contracts to be
transferred to the Buyer on such Settlement Date. Each such notice of a proposed
Purchase shall accompany a Settlement Report and shall specify that portion of
the Purchase Price which is payable in cash for the Transferred Assets to be
transferred. Such notice shall be accompanied by a certification from the
Originator that, after giving effect to the Purchase proposed in such notice,
the conditions set forth in Section 3.02 hereto shall have been satisfied. The
purchase price (the "Purchase Price") for the new Transferred Assets included in
any Purchase shall be agreed to in writing by the Buyer and the Originator on or
before the applicable Settlement Date and shall be an amount not less than 95%
nor more than 100% times the aggregate Discounted Value of all Receivables
included in such Purchase.
(c) Except as otherwise provided below in this Section 2.02, the
Purchase Price for the Transferred Assets sold by the Originator under this
Originator Purchase Agreement shall be payable in full in cash by the Buyer, in
each case on the date of each such Purchase, except that the Buyer may, with
respect to any Purchase, offset against such Purchase Price any amounts owed by
the Originator to the Buyer hereunder and which remain unpaid. On the date of
each Purchase, the Buyer shall, upon satisfaction of the applicable conditions
set forth in Article III, make available to the Originator the portion of the
Purchase Price payable in cash referred to above in same day funds.
(d) If, on any Settlement Date, the Buyer has
insufficient funds to pay in full the Purchase Price owed on such
3
<PAGE> 8
day, then the Buyer shall so notify the Originator prior to consummating such
Purchase and the Originator shall, by accepting the cash proceeds tendered by
the Buyer, be deemed to have contributed to the capital of the Buyer Transferred
Assets having a Purchase Price equal to the otherwise unpaid portion of the
total Purchase Price otherwise owed on such day.
(e) Promptly after each Purchase hereunder (including the initial
Purchase), the Originator will send to each Obligor under the Contracts included
in such Purchase, with the next invoice sent to such Obligor, a Notice of
Assignment, substantially in the form attached hereto as Exhibit B, which shall,
inter alia, advise such Obligor of the absolute transfer by the Originator to
the Buyer of that Obligor's Contract, including the Receivables due thereunder,
and any related Equipment.
SECTION 2.03. Servicing of Contracts and Equipment. In connection
with the contribution, assignment, transfer, sale and conveyance of the
Transferred Assets to the Buyer, the Originator hereby agrees to service the
Contracts and Equipment for the benefit of the Buyer and its successors and
assigns in accordance with the terms and provisions of Article VI hereof.
SECTION 2.04. Transfer of Records. (a) The transfer of Transferred
Assets hereunder shall include the transfer to the Buyer of all of the
Originator's right and title to and interest in the Records relating to such
Transferred Assets, which transfer shall be effected automatically on the
Purchase Date for such Transferred Assets without any further documentation. In
connection with such transfer, the Originator hereby grants to the Buyer an
irrevocable, non-exclusive license to use, without royalty or payment of any
kind, all software used by the Originator to account for the Receivables and the
Contracts, to the extent necessary to administer the Transferred Assets, whether
such software is owned by the Originator or is owned by others and used by the
Originator under license agreements with respect thereto, such use to be subject
to the terms and conditions of any such license agreements with third parties
where applicable. The license granted hereby shall be irrevocable, and shall
terminate on the date on which the aggregate Receivables Balance shall have been
reduced to zero.
(b) The Originator shall take such action requested by the Buyer,
from time to time hereafter, that may be necessary or appropriate to ensure that
the Buyer and its assigns have (i) an enforceable ownership interest in the
Records relating to the Transferred Assets and (ii) an enforceable right
(whether by license or sublicense or otherwise) to use all of the computer
software used to account for the Transferred Assets and/or to recreate such
Records, such use to be subject to the terms and conditions of any license
agreements with third parties pursuant
4
<PAGE> 9
to which the Originator has the right to use the applicable computer software.
SECTION 2.05. Collections; Deemed Collections. (a) Any Collections
of Purchased Receivables subject to a Purchase hereunder received (or deemed to
have been received) by the Originator shall be remitted directly to the Buyer by
depositing such Collections in the Lock-box Account within one Business Day of
Originator's receipt.
(b) If on any day the Outstanding Balance of any Receivable is either (i)
reduced or adjusted as a result of any defective, rejected, returned,
repossessed or foreclosed merchandise, any defective or rejected services, any
cash discount or any other adjustment made or performed by the Originator or any
other Person (including, without limitation, those described in the definition
of "Dilution Factors"), or (ii) reduced or cancelled as a result of a setoff in
respect of any claim by the Obligor thereof against the Originator or any other
Person (whether such claim arises out of the same or a related transaction or an
unrelated transaction), the Originator shall be deemed to have received on such
day a Collection of such Receivable in the amount of such reduction,
cancellation or adjustment. If on any day any of the representations or
warranties in the first sentence of Section 4.01(h) is no longer true with
respect to a Receivable or if the Originator has breached its obligations under
Section 5.01(j), then the Originator shall be deemed to have received on such
day a Collection of such Receivable: (x) if such representation, warranty or
covenant relates to the non-existence of any Adverse Claims, the Originator
shall be deemed to have received a Collection of such Receivable in the dollar
amount of the Adverse Claims attaching thereto and (y) if such representation or
warranty relates to the validity or perfection of the transfer of such
Receivable under this Originator Purchase Agreement or the perfection of the
Buyer's security interest in any Equipment as against the Obligor thereunder,
then the Originator shall be deemed to have received a Collection of such
Receivable in an amount equal to the Outstanding Balance thereof. To the extent
that any such deemed Collection reduces the Outstanding Balance of such
Receivable to zero, then, upon the Originator's payment to the Buyer of such
deemed Collection, the Buyer shall re-assign to the Originator all of its
right, title and interest in and to the relevant Receivable, the Contract under
which such Receivable arose and the Related Security relating thereto. Prior to
the 15th day of each month (or if such day is not a Business Day, the
immediately succeeding Business Day), or at such more frequent intervals as may
be required in writing by the Buyer to the Originator from time to time, the
Originator shall prepare and forward to the Buyer, a Settlement Report as of
the close of business of the Originator on the last day of the immediately
preceding month (or the last
5
<PAGE> 10
day of such shorter interval, as the case may be), in substantially the form
set forth in Exhibit C.
(c) Although the Originator and the Buyer agree that the Originator
(except in its capacity as Servicer pursuant to Section 6.02(a)), shall have no
right to so terminate, reject or not assume a Contract, if the Originator in
its capacity as Servicer (or its successor in interest, including a trustee
appointed under the Bankruptcy Code) terminates, rejects or does not assume a
Contract, in whole or in part, prior to the expiration of the original term of
such Contract, whether such rejection, termination or non-assumption is made
pursuant to an equitable cause, statute, regulation, judicial proceeding or
other applicable law (including, without limitation, Section 365 of the
Bankruptcy Code), then (i) the Originator shall be deemed to have received
Collections with respect to Purchased Receivables arising under such Contract
in an amount equal to (A) in the event of a prepayment or termination of a
Contract consented to by the Originator at the Obligor's request, the excess,
if any, of the Termination Amount over all amounts paid by the Obligor on
account of such termination or (B) in the event of any other rejection,
termination or non-assumption, the amount, of the Outstanding Balance thereof
that has not been, or may not be paid as a result of such rejection,
termination or non-assumption. Upon the Originator's payment of any such deemed
Collections described in this Section 2.05(c), the Buyer shall re-assign to the
Originator all of its right, title and interest in and to the relevant
Receivable or Receivables, the Contracts under which such Receivable(s) arose
and the Related Security relating thereto.
SECTION 2.06. Payment and Computations, Etc. Except as otherwise
provided herein, all amounts to be paid or deposited by the Originator
hereunder shall be paid or deposited in accordance with the terms hereof no
later than 11:00 A.M. (Boston, Massachusetts time) on the day when due in
lawful money of the United States of America in immediately available funds to
a special account in the name of Buyer and maintained at Bank of Boston. The
Originator shall, to the extent permitted by law, pay to the Buyer interest on
all amounts not paid or deposited when due hereunder (whether owing by the
Originator individually or as Servicer) at 2% per annum above the Base Rate,
payable on demand; provided, however, that such interest rate shall not at any
time exceed the maximum rate permitted by applicable law. All computations of
interest and other fees hereunder shall be made on the basis of a year of 360
days for the actual number of days (including the first but excluding the last
day) elapsed.
SECTION 2.07. Perfection of Liens; Further Assurances. Upon the
request of the Buyer, the Originator shall, at its expense, promptly execute and
deliver all further instruments and
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<PAGE> 11
documents, and take all further action (including, without limitation, the
execution and filing of such financing or continuation statements, or amendments
thereto or assignments thereof), that may be necessary or desirable, or that the
Buyer may request, in order to (i) perfect and protect any security interest
granted or purported to be granted by an Obligor under any Contract and (ii)
perfect and protect any ownership or security interest granted or purported to
be granted to the Buyer hereunder or (iii) to enable the Buyer to exercise and
enforce its rights and remedies hereunder with respect to any Transferred
Assets; provided, that the Originator shall not be required to file financing
statements or to maintain the effectiveness of previously filed financing
statements with respect to any Receivables the Outstanding Balance of which
originally is or has thereafter been reduced below $5,000, respectively, so long
as the Outstanding Balance of Receivables subject to a Purchase hereunder for
which no such financing statements are in effect at any time remains less than
10% of the Discounted Receivables Balance. The Originator hereby authorizes the
Buyer to file one or more financing or continuation statements, and amendments
thereto and assignments thereof, relative to all or any part of the Transferred
Assets now existing or hereafter arising without the signature of the Originator
where permitted by law. A carbon, photographic or other reproduction of this
Originator Purchase Agreement or any financing statement covering the
Transferred Assets or any part thereof shall be sufficient as a financing
statement. The Originator will furnish to the Buyer from time to time statements
and schedules further identifying and describing the Transferred Assets and such
other reports in connection with the Transferred Assets as the Buyer may
reasonably request, all in reasonable detail.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase. The initial
Purchase shall be subject to the condition precedent that the Buyer shall have
received the following, each in form and substance satisfactory to the Buyer:
(a) The Certificate for the Buyer;
(b) This Originator Purchase Agreement executed by the
Buyer and the Originator;
(c) Acknowledgment copies of proper UCC-1 Financing Statements
executed by the Originator, as may be necessary or, in the opinion of the Buyer,
desirable under the UCC of all appropriate jurisdictions or any comparable law
to perfect the
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Buyer's interests in all Receivables, Contracts and Related Security in which an
interest may be assigned to it hereunder;
(d) Certified copies of Requests for Information or Copies (Form
UCC-11) (or a similar search report certified by a party acceptable to the
Buyer), dated a date reasonably near to the date hereof, listing all effective
financing statements which name the Originator (under its present name and any
previous names) as debtor and which are filed in the jurisdictions in which
filings were made pursuant to subsection (c) of this Section 3.01, together with
copies of such financing statements;
(e) Acknowledgment copies of proper financing statements (Form
UCC-3), if any, necessary to release all security interests and other rights of
any Person in the Receivables, Related Security and other Transferred Assets
previously granted by the Originator;
(f) A copy of the resolutions of the Board of Direc tors of the
Originator approving this Originator Purchase Agreement and the other Facility
Documents to be delivered by it hereunder and the transactions contemplated
hereby, certified by its Secretary or Assistant Secretary;
(g) The Certificate of Incorporation of the Originator certified
by the Secretary of State of Delaware;
(h) Good Standing Certificates for the Originator issued by the
Secretaries of State of the State of Delaware and The Commonwealth of
Massachusetts;
(i) A certificate of the Secretary or Assistant Secre tary of the
Originator certifying (i) the names and true signa tures of the officers
authorized on its behalf to sign this Originator Purchase Agreement and the
other Facility Documents to be delivered by it hereunder (on which certificate
the Buyer (and the Deal Agent) may conclusively rely until such time as the
Buyer (and the Deal Agent) shall receive from the Originator a revised
certificate meeting the requirements of this subsection (h)) and (ii) a copy of
the Originator's by-laws;
(j) The Lock-Box Agreements with the Lock-Box Banks in each case,
executed by the Originator and the Buyer and acknowledged and agreed to by the
applicable Lock-Box Bank together with an acknowledgment and authorization
executed by the Deal Agent, and acknowledged and agreed to by the applicable
Lock-Box Bank;
(k) Copies of all written agreements, if any, between each Lock-Box
Bank and Originator with respect to the opening or operation of the Lock-Box
Accounts;
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(l) An opinion of Hill & Barlow, counsel to the Originator, in
substantially the form of Exhibit E and as to such other matters as the Buyer
may reasonably request; and
(m) An opinion of Hill & Barlow, counsel to the Originator, in form
and substance reasonably satisfactory to the Deal Agent, to the effect that, in
the event of any Insolvency Proceeding filed by or against the Originator, the
Transferred Assets would not be treated as property of the Originator's estate
and that the Buyer's assets and liabilities would not be substantively
consolidated with those of the Originator.
SECTION 3.02. Conditions Precedent to All Purchases. Each Purchase
(including the initial Purchase) by the Buyer from the Originator shall be
subject to the further conditions precedent that (a) with respect to any such
Purchase, on or prior to the date of such Purchase, the Originator shall have
delivered to the Buyer (i) in form and substance satisfactory to the Buyer, a
completed Settlement Report as of the end of the immediately preceding calendar
month and containing such additional information as may be reasonably requested
by the Buyer, (ii) a notice of purchase and list of the Contracts to be
purchased as provided in Section 2.02(b), (iii) a completed Certificate with
respect to such Contracts and (iv) a notice from the Custodian confirming that
the Custodian has received the Contract Files for each Contract to be included
in such Purchase; (b) on the date of such Purchase the following statements
shall be true and the Originator by accepting the cash portion of the Purchase
Price shall be deemed to have certified that:
(i) The representations and warranties contained in Section 4.01
are correct on and as of such day as though made on and as of such date
and
(ii) No event has occurred and is continuing, or would result from
such Purchase which constitutes an Event of Termination or would
constitute an Event of Termination but for the requirement that notice be
given or time elapse or both;
and (c) the Buyer shall have received such other approvals or documents as the
Buyer may reasonably request.
SECTION 3.03. Effect of Payment of Purchase Price. Upon the payment
of the Purchase Price for any Purchase, (whether in cash or through a capital
contribution), title to the related Transferred Assets shall vest in the Buyer,
whether or not the conditions precedent to such Purchase were in fact satisfied;
provided, however, that the Buyer shall not be deemed to have waived any claim
it may have under this Originator Purchase Agreement for the failure by the
Originator in fact to satisfy any such condition precedent.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Originator.
The Originator represents and warrants as follows:
(a) Due Incorporation and Good Standing. The Originator is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction named at the beginning hereof and is duly qualified to
do business, and is in good standing, in every jurisdiction in which the nature
of its business requires it to be so qualified, except where the failure to be
so qualified would not materially adversely affect (i) the interests hereunder
of the Buyer, (ii) the collectibility of any Receivable, (iii) the business,
properties, operations, prospects, profits or condition (financial or otherwise)
of the Originator or (iv) the ability of the Originator (individually or as
Servicer) to perform its obligations hereunder.
(b) Due Authorization and No Conflict. The execution, delivery and
performance by the Originator of this Originator Purchase Agreement, the
Certificate, and all other agreements, instruments and documents to be delivered
hereunder, and the transactions contemplated hereby and thereby (including the
sale and contribution to the Buyer of the Transferred Assets contemplated
hereunder), are within the Originator's corporate powers, have been duly
authorized by all necessary corporate action, do not contravene (i) the
Originator's charter or by-laws, (ii) any law, rule or regulation applicable to
the Originator, (iii) any contractual restriction contained in any material
indenture, loan or credit agreement, lease, mortgage, security agreement, bond,
note, or other agreement or instrument binding on or affecting the Originator or
its property or (iv) any order, writ, judgment, award, injunction or decree
binding on or affecting the Originator or its property, and do not result in or
require the creation of any Adverse Claim upon or with respect to any of its
properties (other than in favor of the Buyer as contemplated hereunder); and no
transaction con templated hereby requires compliance with any bulk sales act or
similar law. This Originator Purchase Agreement and the Certi ficate have been
duly executed and delivered on behalf of the Originator.
(c) Governmental and Other Consents. Except for the filing of
financing statements pursuant to the UCC required to perfect the sales of
accounts and chattel paper under this Originator Purchase Agreement and the
security interests granted under the other Facility Documents and except for
consents under certain contractual agreements which have been obtained, no
authorization, consent, approval or other action by, and no
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registration, qualification, designation, declaration, notice to or filing with,
any governmental authority or other Person is or will be necessary in connection
with the execution and delivery of this Originator Purchase Agreement, the
Certificate or any other Facility Document to which the Originator is a party,
or any of the other documents contemplated hereby or thereby, consummation of
the transactions herein or therein contemplated, or performance of or compliance
with the terms and conditions hereof or thereof, to ensure the legality,
validity or enforceability hereof or thereof.
(d) Enforceability of Facility Documents. This Originator Purchase
Agreement, the Certificate and each of the other Facility Documents to be
delivered by the Originator in connection herewith constitute the legal, valid
and binding obligations of the Originator enforceable against the Originator in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency or similar laws relating to or affecting creditors'
rights generally and by equitable principles.
(e) Financial Statements. (i) The consolidated balance sheets of the
Originator and its consolidated Subsidiaries as at December 31, 1996, and the
related statements of income, retained earnings and cash flows of the Originator
and its consolidated Subsidiaries for the fiscal year then ended, certified by
its independent public accountants, and the unaudited interim consolidated
balance sheets of the Originator and its subsidiaries as of March 31, 1997 and
the related consolidated statements of income, retained earnings and cash flows
for the three months ending on such date (the "Interim Financials"), in each
case fairly present the consolidated financial condition of the Originator and
its consolidated Subsidiaries as at such dates and the consolidated results of
the operations of the Originator and its consolidated Subsidiaries for the
period ended on such dates, all in accordance with GAAP, and since December 31,
1996, there has been no material adverse change in any such condition or
operations, except as reflected in the Interim Financials. Neither the
Originator nor any of its subsidiaries has any material liabilities or
obligations other than those disclosed in the financial statements referred to
above or for which adequate reserves are reflected in such financial statements.
(f) No Litigation. There are no actions, suits or proceedings
pending, or to the knowledge of the Originator threatened, against or affecting
the Originator or any of its Subsidiaries, or the property of the Originator or
any of its Subsidiaries, in any court, or before any arbitrator of any kind, or
before or by any governmental body, which may materially adversely affect (i)
the business, properties, operations, prospects, profits or condition (financial
or otherwise)
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financial condition of the Originator or (ii) the ability of the
Originator to perform its obligations under this Originator Purchase Agreement
or the Certificate or (iii) the collectibility of the Receivables. Neither the
Originator nor any of its Subsidiaries is in default with respect to any order
of any court, arbitrator or governmental body except for defaults with respect
to orders of governmental agencies which defaults are not material to the
business or operations of the Originator or any of its Subsidiaries or the
Originator's ability to perform its obligations hereunder.
(g) Use of Proceeds. No proceeds of any Purchase will be used by the
Originator to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(h) Perfection of Interest in Transferred Assets. Prior to the
Buyer's Purchase and/or acquisition of each Transferred Asset hereunder, the
Originator is or will be the lawful owner of, and have good title to, such
Transferred Asset free and clear of any Adverse Claim and upon each Purchase
and/or acquisition by the Buyer of Transferred Assets hereunder, the Buyer shall
acquire a valid and perfected first priority ownership interest in each
Receivable then existing or thereafter arising and in the Related Security, the
other Transferred Assets and Collections and with respect thereto, in each case
free and clear of any Adverse Claim all such Purchases of Receivables and
related Transferred Assets constitute true and valid sales, and all such
Purchases and contributions of Receivables and related Transferred Assets
constitute true and valid transfers and assignments of all of Originator's
right, title and interest in, to and under such Transferred Assets (and not
merely a pledge of such Receivables and related Transferred Assets for security
purposes), enforceable against creditors of the Originator and no such
Transferred Assets shall constitute property of the Originator; and no effective
financing statement or other instrument similar in effect covering any
Receivable, the Related Security, Collections or the other Transferred Assets
shall at any time be on file in any recording office except such as may be filed
in favor of the Buyer (or its assignees) in accordance with this Originator
Purchase Agreement.
(i) Accuracy of Information. No Settlement Report (if prepared by
the Originator, or to the extent that information contained therein is supplied
by the Originator), information, exhibit, financial statement, document, book,
record or report (other than forecasts required to be delivered by the
Originator hereunder) furnished or to be furnished by the Originator to the
Buyer in connection with this Originator Purchase Agreement is or shall be
inaccurate in any material respect as of the date it is or shall be dated or
(except as otherwise disclosed to the Buyer, as the case may be, at such time)
as of the date so furnished, or
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contains or shall contain any material misstatement of fact or omits or shall
omit to state a material fact or any fact necessary to make the statements
contained therein not materially misleading.
(j) Location of Chief Executive Office and Records. The chief place
of business and chief executive office of the Originator are located at the
address of the Originator referred to in Section 9.02 hereof and the locations
of the offices where the Originator keeps all the Records are listed on Exhibit
F (or at such other locations, notified to the Buyer in accordance with Section
5.01(f), in jurisdictions where all action required by Section 6.03 has been
taken and completed).
(k) Lock-Box Accounts. Each Obligor under a Contract has, within one
month of the date of Purchase of such Contract, been instructed to remit payment
on all Receivables subject to a Purchase hereunder to a Post Office Box for
remittance to a Lock-Box Account or directly to a Lock-Box Account substantially
in the form of Exhibit G. From and after the effective date hereof, the
Originator will have no right, title and/or interest to any of the Lock-Box
Accounts and will maintain no lock-box accounts in its own name for the
collection of such Receivables. The Originator has delivered to the Deal Agent a
duplicate key to each Post Office Box and has filed a standing delivery order
with the United States Postal Service authorizing the Deal Agent to receive mail
delivered to each such Post Office Box. The account numbers of all Lock-Box
Accounts, together with the names and addresses of all the Lock-Box Banks
maintaining such Lock-Box Accounts and the related Post Office Boxes, are
specified in Exhibit H.
(l) No Trade Names. Except as described in Exhibit I, the
Originator has no trade names, fictitious names, assumed names or "doing
business as" names.
(m) Separate Corporate Existence. The Originator is entering into
the transactions contemplated by this Originator Purchase Agreement in reliance
on the Buyer's identity as a separate legal entity from the Originator and each
of its Affiliates other than the Buyer, and acknowledges that the Buyer and the
other parties to the Facility Documents are similarly entering into the
transactions contemplated by the other Facility Documents in reliance on the
Buyer's identity as a separate legal entity from the Originator and each such
other Affiliate.
(n) Taxes. The Originator has filed or caused to be filed all
Federal, state and local tax returns which are required to be filed by it, and
has paid or caused to be paid all taxes shown to be due and payable on such
returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate
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proceedings and with respect to which the Originator has set aside
adequate reserves on its books in accordance with GAAP and which have not given
rise to any Adverse Claims.
(o) Solvency. The Originator (i) is not "insolvent" (as such term is
defined in Section 101(32)(A) of the Bankruptcy Code, (ii) is able to pay its
debts as they mature; and (iii) does not have unreasonably small capital for the
business in which it is engaged or for any business or transaction in which it
is about to engage.
(p) No Fraudulent Conveyance. The transactions contemplated by this
Originator Purchase Agreement and by each of the Facility Documents are being
consummated by the Originator in furtherance of the Originator's ordinary
business, with no contemplation of insolvency and with no intent to hinder,
delay or defraud any of its present or future creditors. By its receipt of the
Purchase Prices hereunder and its ownership of the capital stock of the Buyer,
the Originator shall have received reasonably equivalent value for the
Transferred Assets sold or otherwise conveyed to the Buyer under this Originator
Purchase Agreement.
(q) Software. Attached as Exhibit J is a list of all computer
software used by the Originator to administer the Receivables and other
Transferred Assets. Each of the Buyer and the Deal Agent, as assignee of the
Buyer, has (or will have, concurrently with the effectiveness hereof) an
enforceable right (whether by license, sublicense or assignment) to use all of
the computer software used to account for the Transferred Assets to the extent
necessary to administer the Receivables and other Transferred Assets, such use
to be subject to the terms and conditions of any license agreement for such
software between the Originator and any third parties where applicable.
(r) Representations with Respect to Receivables and Contracts.
With respect to each Receivable:
(i) Each such Receivable, at the time of Purchase thereof, is an
Eligible Receivable. Each Contract relating to a Receivable: (a) if it
constitutes a Lease, is in substantially the form of Exhibit K-1 hereto;
(b) if it constitutes a Equipment Finance Agreement, is in substantially
the form of Exhibit K-2 hereto; (c) if it constitutes a Non-Equipment
Finance Agreement, is in substantially the form of Exhibit K-3 hereto; and
(d) if it constitutes a Practice Finance Loan, is in substantially the
form of Exhibit K-4 hereto.
(ii) There are no facts or circumstances existing as of the Purchase
Date thereof which give rise to any right of rescission, offset,
counterclaim or defense, including the
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defense of usury, to the obligations of any Obligor, including the
obligation of such Obligor to pay all amounts due thereunder, with respect
to any Contract to which such Obligor is a party; and neither the
operation of any of the terms of any Contract nor the exercise of any
right thereunder will render such Contract unenforceable in whole or in
part or subject to any right of rescission, offset, counterclaim or
defense, including the defense of usury (other than limitations on
enforcement which may subsequently arise as a result of bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the
enforcement of creditors, rights generally and by general equitable
principles), and no such right of rescission, offset, counterclaim or
defense has been asserted with respect thereto.
(iii) [Reserved].
(iv) Each Lease requires the Obligor to assume all risk of loss or
malfunction of the related Equipment. Each Lease and Equipment Finance
Agreement requires the Obligor to pay all sales, use, property, excise and
other similar taxes imposed on or with respect to the related Equipment
and permits the rights with respect to such Contract, and all collateral
related thereto, to be assigned by the Originator without the consent of
any Person. No Contract permits early termination or prepayment, unless,
in the case of a Practice Finance Loan, the amount required to be paid by
or on behalf of the Obligor in respect thereof is equal to or greater than
the applicable Termination Amount. No Contract provides for the
substitution, exchange or addition of any Equipment subject thereto which
would result in any reduction of the amount of payments or change the
timing of payments due under such Contract.
(v) Each Lease requires the related Obligor to maintain the related
Equipment, if any, in good and workable order. Each Lease and Equipment
Finance Agreement requires the related Obligor to obtain and maintain
physical damage insurance on the Equipment subject thereto and to name the
lessor or lender thereunder as loss payee and an additional insured with
respect thereto. The Deal Agent is named as loss payee under all physical
damage insurance on the Equipment that is carried by the Originator or the
Buyer. To the best of Originator's knowledge, the Equipment was properly
delivered to the Obligor in good repair, without defects and in
satisfactory order and the related Equipment, if any, is in good operating
condition and repair. To the best of the Originator's knowledge, the
related Equipment was accepted by the Obligor after reasonable opportunity
to
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inspect and test the same and no Obligor has informed the Originator of
any defects therein.
(vi) [Reserved].
(vii) [Reserved].
(viii) [Reserved].
(ix) As of the Purchase Date thereof, the Originator has delivered
the Contract File for the related Contract to the Buyer or to the
Custodian on the Buyer's behalf together with duly executed instruments of
transfer or assignment in blank for each Contract constituting an
instrument or chattel paper.
(x) [Reserved].
(s) Other Indebtedness. The Originator is not in default under any
material indenture, loan or credit agreement with respect to any Indebtedness,
the effect of which is to cause, or which would, with the giving of notice of
the lapse of time or both, permit the holder or holders thereof to cause, such
Indebtedness to become due prior to its stated maturity.
(t) Investment Company. The Originator is not an "investment
company" or a company controlled by an "investment company" within the meaning
of the Investment Company Act of 1940.
(u) ERISA. Neither the Originator nor any of its ERISA Affiliates
maintains, contributes to or has any obligation to contribute to any Plan which
could reasonably be expected to, individually or in the aggregate, materially
adversely affect the ability of the Originator to perform its obligations under
this Originator Purchase Agreement or any other Facility Document to which it is
a party or which could expose the Buyer to any material liability under ERISA.
No accumulated or waived funding deficiency (as defined in Section 302(a)(2) of
ERISA or Section 412(a) of the Internal Revenue Code) exists with respect to any
Benefit Plan, and the Originator has not failed to satisfy the minimum funding
requirements under ERISA or the Internal Revenue Code with respect to any
Benefit Plan. Neither the Originator nor any of its ERISA Affiliates has
incurred any liability to or on account of a Benefit Plan or Multiemployer Plan
pursuant to Section 515, 4062, 4063, 4064, 4201 or 4204 of ERISA or expects to
incur any liability under any of the foregoing sections on account of the
termination of participation in or contributions to any such Plan or
Multiemployer Plan.
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ARTICLE V
GENERAL COVENANTS OF THE ORIGINATOR
SECTION 5.01. Affirmative Covenants of the Originator. From the
effective date hereof until the later of the Termination Date or the Collection
Date, the Originator will, unless the Buyer shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects with
all applicable laws, rules, regulations and orders with respect to it, its
business and properties and all Receivables and related Contracts.
(b) Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction except where the failure to preserve
and maintain such existence, rights, franchises, privileges and qualifications
would not materially adversely affect (i) the interests hereunder of the Buyer,
(ii) the collectibility of any Receivable, (iii) the business, properties,
operations, prospects, profits or condition (financial or otherwise) condition
of the Originator or (iv) the ability of the Originator (individually or as
Servicer) to perform its obligations here under and under the other Facility
Documents to which it is a party.
(c) Audits. At any time and from time to time upon prior written
notice to the Originator and during regular business hours, permit the Buyer and
its designees (including the Deal Agent), or their respective agents or
representatives, (i) to examine and make copies of and abstracts from all
Records, and (ii) to visit the offices and properties of the Originator for the
purpose of examining such Records, and to discuss matters relating to the
Receivables or the Originator's performance hereunder with any of the officers
or employees of the Originator having knowledge of such matters. Each such audit
shall be at the sole expense of the Originator.
(d) Keeping of Records and Books of Account. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing the Receivables in the event of the
destruction of the originals thereof) and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records adequate
to permit the daily identification of all Collections of and adjustments to each
Receivable).
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(e) Performance and Compliance with Receivables and Contracts. At
its expense timely and fully perform and comply, in all material respects, with
all material provisions, covenants and other promises required to be observed by
it under the Contracts.
(f) Location of Records. Keep its chief place of business and chief
executive office, and the offices where it keeps the Records, at the address(es)
of the Originator referred to in Section 4.01(j), or, in any such case, upon 30
days' prior written notice to the Buyer, at such other locations within the
United States where all action required by Section 2.08 and by Section 6.04
shall have been taken and completed.
(g) Credit and Collection Policies. Comply in all material respects
with its Credit and Collection Policy attached hereto as Exhibit D in regard to
each Receivable and the related Contract.
(h) Collections. Instruct all Obligors to cause all Collections to
be deposited directly to a Post Office Box or Lock-Box Account and if the
Originator shall receive any Collections (including, without limitation, any
Collections deemed to have been received pursuant to Section 2.05), the
Originator shall hold such Collections in trust for the benefit of the Buyer and
remit such Collections to the Buyer by depositing such Collections into a
Lock-Box Account within one Business Day following Originator's identification
thereof and in any event within four Business Days following Originator's
receipt thereof.
(i) Compliance with ERISA. Establish, maintain and operate all Plans
to comply in all material respects with the provisions of ERISA, the IRC, and
all other applicable laws, and the regulations and interpretations thereunder.
(j) Perfected Security Interest under Contracts. Take such action
with respect to each Receivable as is necessary to ensure that the Buyer
maintains, as against the Obligor thereunder, a perfected first priority
security interest in any Equipment relating thereto free and clear of Adverse
Claims or, in the case of any Lease, to ensure that the Buyer would maintain
such a perfected first priority security interest in the event that a court or
other Person were to determine that such Lease purported to transfer to the
Obligor an ownership (rather than a leasehold) interest in the Equipment subject
thereto (in each such case, including, without limitation, the filing of a
continuation statement with respect to a financing statement originally filed
under the UCC of any appropriate jurisdiction prior to the date on which the
effectiveness of such financing statement would lapse under the UCC of such
jurisdiction); provided, that the Originator shall not be required to file
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financing statements or to maintain the effectiveness of previously filed
financing statements with respect to any Eligible Receivables the Outstanding
Balance of which originally is or has thereafter been reduced below $ 5,000,
respectively, so long as the aggregate Outstanding Balance of Receivables for
which no such financing statements are in effect at any time remains less than
10.0% of the Discounted Receivables Balance.
(k) Maintenance of Insurance. Maintain, or cause each Obligor to
maintain, with respect to the Contracts and the Equipment related thereto,
casualty and general liability insurance which provide at least the same
coverage as a fire and extended coverage insurance policy as is comparable for
other companies in related businesses. Such insurance policies (and
self-insurance where permitted) shall be maintained in an amount which is not
less than the Discounted Value for the Receivables arising under the relevant
Contracts. Each such casualty and liability policy if maintained by an Obligor,
shall name the Originator or the Buyer as loss payee and additional insured and
the Originator shall have assigned any such interest to the Buyer. The
Originator shall remit, or shall cause to be remitted, the proceeds of any such
insurance policy to a Lock-Box Account.
(l) Separate Identity. Take all actions required to maintain the
Buyer's status as a separate legal entity, including, without limitation, (i)
not holding the Buyer out to third parties as other than an entity with assets
and liabilities distinct from the Originator and the Originator's other
Subsidiaries; (ii) not holding itself out to be responsible for the debts of the
Buyer or, other than by reason of owning capital stock of the Buyer, for any
decisions or actions relating to the business and affairs of the Buyer; (iii)
causing any financial statements consolidated with those of the Buyer to address
(by footnote or otherwise and in language reasonably satisfactory to the Buyer
and the Deal Agent) the separate corporate existence of the Buyer and the
Buyer's ownership of the Receivables; (iv) taking such other actions as are
necessary on its part to ensure that all corporate procedures required by its
and the Buyer's respective certificates of incorporation and by-laws are duly
and validly taken; (v) keeping correct and complete records and books of account
and corporate minutes; (vi) not acting in any other manner that could
foreseeably mislead others with respect to the Buyer's separate identity; and
(vii) taking such other actions as may be necessary on its part to ensure that
the Buyer is in compliance at all times with Section 5.01(l) of the EagleFunding
Purchase Agreement.
(m) Taxes. File or cause to be filed, and cause each of its
Subsidiaries with whom it shares consolidated tax liability to file, all
federal, state and local tax returns which are required to be filed by it,
except where the failure to file such
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returns could not reasonably be expected to have a material adverse effect on
the collectibility of the Transferred Assets or the ability of the Originator to
perform its obligations hereunder or under any other Facility Document to which
it is a party or which could otherwise be reasonably expected to expose the
Buyer to a material liability. The Originator shall pay or cause to be paid all
taxes shown to be due and payable on such returns or on any assessments received
by it, other than any taxes or assessments, the validity of which are being
contested in good faith by appropriate proceedings and with respect to which the
Originator or the applicable subsidiary shall have set aside adequate reserves
on its books in accordance with GAAP and which proceedings could not reasonably
be expected to have a material adverse effect on the collectibility of the
Transferred Assets or the ability of the Originator to perform its obligations
hereunder or under any other Facility Document to which it is a party or which
could otherwise be reasonably expected to expose the Buyer to a material
liability.
(n) Segregation of Collections. Prevent the deposit into any of the
Lock-Box Accounts of any funds other than Collections in respect of the
Transferred Assets and, to the extent that any such funds are nevertheless
deposited into any of such Lock-Box Accounts, promptly identify any such funds
to the Servicer for segregation and remittance to the owner thereof.
(o) Independent Director. Take all actions, in its capacity as the
sole shareholder of the Buyer, necessary or appropriate to maintain at all times
at least one independent director on the Buyer's Board of Directors (an
"Independent Director") whom (i) is not a stockholder (whether direct, indirect
or beneficial, other than a holder of indirect stock ownership of the Originator
or of any affiliate through a mutual fund or similar diversified investment
pool), customer, advisor or supplier of the Originator or any of its
affiliates); (ii) is not a director, officer, employee or affiliate of the
Originator or any of its affiliates, other than the Buyer (the Originator and
its affiliates other than the Buyer being hereinafter referred to as the "Parent
Group"); (iii) is not a person related to any person referred to in clauses (i)
and (ii); (iv) is not a trustee, conservator or receiver for any member of the
Parent Group; and (v) has prior experience as an independent director for a
corporation whose charter documents require the unanimous written consent of all
independent directors thereof before such corporation could consent to the
institution of bankruptcy or insolvency proceedings against it or could file a
petition seeking relief under any applicable federal or state law relating to
bankruptcy.
SECTION 5.02. Reporting Requirements of the Originator. From the
effective date hereof until the later of
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the Termination Date or the Collection Date, the Originator will, unless the
Buyer shall otherwise consent in writing, furnish to the Buyer:
(a) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the Originator,
consolidated balance sheets of the Originator and its consolidated Subsidiaries
as of the end of such quarter, and consolidated statements of income and
retained earnings of the Originator and its consolidated Subsidiaries each for
the period commencing at the end of the previous fiscal year and ending with the
end of such quarter, certified by the chief financial officer, chief accounting
officer or treasurer of the Originator;
(b) as soon as available and in any event within 105 days after the
end of each fiscal year of the Originator, a copy of the consolidated balance
sheets of the Originator and its consolidated Subsidiaries as of the end of such
year and the related consolidated statements of income and retained earnings of
the Originator and its consolidated Subsidiaries for such year each reported on
by nationally recognized independent public accountants acceptable to the Buyer
(the Buyer acknowledges that any of the "Big 6" accounting firms will be
acceptable to the Buyer);
(c) promptly after the sending or filing thereof, copies of all
reports which the Originator sends to any of its security holders and copies of
all reports and registration statements which the Originator files with the
Securities and Exchange Commission or any national securities exchange other
than registration statements relating to employee benefit plans and to
registrations of securities for selling security holders;
(d) as soon as possible and in any event within five Business Days
after the occurrence of each Event of Termination or each event which, with the
giving of notice or lapse of time or both, would constitute an Event of
Termination, the statement of the chief financial officer, chief accounting
officer or treasurer of the Originator setting forth details of such Event of
Termination or event and the action which the Originator proposes to take with
respect thereto;
(e) promptly after the filing or receiving thereof, copies of all
reports and notices with respect to any Reportable Event defined in Article IV
of ERISA which the Originator or any Subsidiary of the Originator files under
ERISA with the IRS or the PBGC or the DOL or which the Originator or any
Subsidiary of the Originator receives from the PBGC;
(f) promptly upon the effectiveness thereof, any change in the
Credit and Collection Policy; and
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(g) promptly, from time to time, such other information, documents,
records or reports respecting the Receivables or the conditions or operations,
financial or otherwise, of the Originator or any Subsidiary of the Originator as
the Buyer may from time to time reasonably request in order to protect the
interests of the Buyer under or as contemplated by this Originator Purchase
Agreement.
SECTION 5.03. Negative Covenants of the Originator. From the
effective date hereof until the later of the Termination Date or the Collection
Date, the Originator will not, without the written consent of the Buyer:
(a) Sales, Liens, Etc. Against Receivables and Transferred Assets.
Except as otherwise provided herein, sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist, any Adverse
Claim upon or with respect to, any Receivable, Related Security or Collections,
or any related Contract, or upon or with respect to any Lock-Box Account to
which any Collections of any Receivables are sent, or assign any right to
receive income in respect thereof, or upon any other Transferred Asset, except
that the Originator shall have no responsibility for any Adverse Claim created
by an Obligor upon or with respect to any Equipment owned by such Obligor so
long as such Adverse Claim is subordinate to the security interest of the
Originator in such Equipment.
(b) Extension or Amendment of Receivables. Extend, amend or
otherwise modify, the terms of any Receivable, or amend, modify or waive, any
term or condition of any Contract related thereto, except to the extent that
the Originator, in its capacity as Servicer, may make such amendments in
accordance with the Credit and Collection Policy or as otherwise permitted
under Article VI hereof.
(c) Change in Business or Credit and Collection Policy. Without
the prior written consent of the Deal Agent, make any material change in the
character of its business or make any change in the Credit and Collection
Policy, which change would, in either case, impair the collectibility of any
Transferred Asset.
(d) Change in Payment Instructions or Obligors. (i) After giving
the payment instructions described in the first sentence of Section 4.01(k),
make any change in such instructions to Obligors regarding payments to be made
to the Buyer or payments to be made to any Lock-Box Bank or (ii) add or
terminate any bank as a Lock-Box Bank from those listed in Exhibit H unless the
Buyer shall have received (A) ten Business Days' prior notice of such addition,
termination or change, (B) prior to the effective date of such addition,
termination or change,
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(x) executed copies of Lock-Box Agreements executed by each new Lock-Box Bank
and (y) copies of all agreements and documents signed by the Originator or the
respective Lock-Box Bank with respect to any new Lock-Box Account, and (C) the
prior written consent of the Buyer to such addition, termination or change
(which consent shall not be unreasonably withheld).
(e) Merger Etc. (i) Merge with or into or consolidate with or into
a convey, transfer, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) or acquire all or substantially all of the
assets or capital stock or other ownership interest of, any Person, or permit
any Subsidiary of the Originator to do so, except that (A) any Subsidiary of the
Originator (other than the Buyer) may merge or consolidate with or transfer
assets to or acquire assets from any other Subsidiary of the Originator, (B) any
Subsidiary of the Originator (other than the Buyer) may merge into or transfer
assets to the Originator or any other Person and (C) the Originator or any
Subsidiary of the Originator may acquire the capital stock or assets of any
other Person; provided in each case that immediately after giving effect to such
proposed transaction, no Event of Termination or event which, with the giving of
notice or lapse of time, or both, would constitute an Event of Termination,
would exist, and in the case of any such merger to which the Originator is a
party, the Originator is the surviving corporation.
(f) Change in Corporate Name. Make any change to its corporate name
or use any trade names, fictitious names, assumed names or "doing business as"
names other than those described in Exhibit I, unless the Originator has given
to the Buyer at least thirty (30) days' prior written notice thereof and, prior
to the effective date of any such name change or use, the Originator delivers to
the Buyer such Financing Statements (Form UCC-1 and UCC-3) executed by the
Originator which the Buyer may reasonably request to reflect such name change or
use, together with such other documents and instruments that the Buyer may
request in connection therewith.
(g) ERISA Matters. (i) Engage or permit any ERISA Affiliate to
engage in any prohibited transaction for which an exemption is not available or
has not previously been obtained from the DOL; (ii) permit to exist any
accumulated funding deficiency, as defined in Section 302(a) of ERISA and
Section 412(a) of the IRC, or funding deficiency with respect to any Benefit
Plan other than a Multiemployer Plan; (iii) fail to make any payments to any
Multiemployer Plan that the Originator or any ERISA Affiliate may be required to
make under the agreement relating to such Multiemployer Plan or any law
pertaining thereto; (iv) terminate any Benefit Plan so as to result in any
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liability; or (v) permit to exist any occurrence of any reportable event
described in Title IV of ERISA which represents a material risk of a liability
of the Originator or any ERISA Affiliate under ERISA or the IRC; provided,
however, the Originator and its ERISA Affiliates may take or allow such
prohibited transactions, accumulated funding deficiencies, payments,
terminations and reportable events described in clauses (i) through (iv) above
so long as such events occurring within any fiscal year of the Originator, in
the aggregate, involve a payment of money by or an incurrence of liability of
the Originator or any ERISA Affiliate (collectively, "ERISA Liabilities") in an
amount which does not exceed $500,000.
(h) Terminate or Reject Contracts. Without limiting Section 5.03(b)
and except as otherwise expressly permitted pursuant to Section 2.05, terminate
or reject any Contract prior to the term of such Contract, whether such
rejection or early termination is made pursuant to an equitable cause, statute,
regulation, judicial proceeding or other applicable law (including, without
limitation, Section 365 of the Bankruptcy Code), unless in the case of a
Practice Finance Loan prior to such termination or rejection, the Originator
shall have paid to the Buyer an amount equal to the Termination Amount thereof.
(i) Accounting Treatment. Prepare any financial statements or other
statements which shall account for the transactions contemplated by this
Originator Purchase Agreement in any manner other than as the sale of, or a
capital contribution of, the Transferred Assets by the Originator to the Buyer
(it being understood that non-recognition of such transaction due to the
application of consolidated financial reporting principles under GAAP or the
filing of tax returns on a consolidated basis shall not constitute a violation
of this covenant).
(j) Certificate of Incorporation. Cause the Buyer to amend its
Certificate of Incorporation or By-laws in any manner which would require the
consent of the Buyer's independent director or directors, without the Deal
Agent's prior written consent.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Servicer. Consistent with the Buyer's
ownership of the Transferred Assets, the Buyer shall have as against the
Originator the sole right to service, administer and collect the Receivables, to
assign such right and
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to delegate such right. The servicing, administering and collection of the
Receivables and the other Transferred Assets shall be conducted by the Person
(the "Servicer") so designated by the Buyer from time to time in accordance with
this Section 6.01. Until the Deal Agent gives notice to the Originator of the
designation of a new Servicer, the Originator is hereby designated as, and
hereby agrees to perform the duties and obligations of, the Servicer pursuant to
the terms hereof. The Buyer may, at any time upon ten Business Days prior
written notice, designate as Servicer any Person to succeed the Originator on
the condition any such Person so designated shall agree to perform, and shall
have assumed, the duties and obligations of the Servicer pursuant to the terms
hereof (including, without limitation Section 6.09(c)), and shall be acceptable
to the Deal Agent; provided that the Buyer's right to so designate a successor
Servicer at any time is personal to the Buyer and may not be assigned to any
other Person (including the Deal Agent). The Deal Agent may at any time from and
after a Servicing Termination Event designate as Servicer any other Person to
succeed the Originator or any Successor Servicer, on the condition in each case
that any such Person so designated shall agree to perform the duties and
obligations of the Servicer pursuant to the terms hereof. The Servicer may, with
the prior written consent of the Buyer and the Deal Agent, subcontract with any
other Person for servicing, administering or collecting the Transferred Assets,
provided that the Servicer shall remain liable for the performance of the duties
and obligations of the Servicer pursuant to the terms hereof. The Servicer shall
use reasonable care in performing its duties as Servicer hereunder and, without
limiting the foregoing, shall service the Transferred Assets in accordance with
the Credit and Collection Policy. The Servicer acknowledges that the Buyer may,
from time to time, pursuant to the EagleFunding Purchase Agreement, grant to the
Deal Agent, for the benefit of EagleFunding, all of its right, title and
interest in and to all or any portion of the Transferred Assets, and has
assigned to the Deal Agent all of its rights under this Originator Purchase
Agreement, including its rights with respect to the Servicer under this Article
VI, as more fully described in Section 9.04 hereunder.
SECTION 6.02. Duties of the Servicer. (a) The Servicer shall take or
cause to be taken all such actions as may be necessary or advisable to collect
each Transferred Asset from time to time, all in accordance with applicable
laws, rules and regulations, with reasonable care and diligence, and in accord
- -ance with the Credit and Collection Policy. The Buyer hereby appoints as its
agent the Servicer, from time to time designated pursuant to Section 6.01, to
enforce its respective rights and interests in and under the Receivables, the
Related Security, the related Contracts and the other Transferred Assets. The
Servicer will at all times apply the same standards and follow the same
procedures with respect to the decision to commence, and in
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prosecuting and litigating with respect to Receivables as it applies and follows
with respect to accounts, chattel paper and instruments which are not
Transferred Assets. In no event shall the Servicer be entitled to make the Deal
Agent or the Buyer a party to any litigation without the Buyer's and the Deal
Agent's express prior written consent. The Servicer shall segregate and set
aside for the account of the Buyer all Collections of Transferred Assets in
accordance with Section 2.05 hereof and Section 6.11 of the EagleFunding
Purchase Agreement and shall cause all such Collections to be remitted to a
Lock-Box Account and/or deposited directly into the Collection Account within
one Business Day after identification thereof by the Servicer and in any event
within four Business Days after the Servicer's receipt thereof. The Servicer
shall promptly review all checks and other instruments returned to it by the
Lock-Box Bank on account of restrictive endorsements, improper payees, incorrect
amounts or for any other reason and shall not deposit any such checks or
instruments in its own accounts unless it is determined to the Buyer's
satisfaction that such amounts do not constitute Collections; any such checks or
instruments which are determined to be Collections shall be promptly remitted to
the Lock-Box Account or the Collection Account as provided above. Provided that
the Termination Date shall not have occurred, the Originator, while it is
Servicer, may, in accordance with the Credit and Collection Policy, (i) amend,
modify or waive any term or condition of any Contract to reflect any Permitted
Extension, (ii) adjust the Outstanding Balance of any Transferred Asset to
reflect the reductions, adjustments or cancellations described in the first
sentence of Section 2.05(b) hereof, (iii) in the case of a Practice Finance
Loan, so long as such prepayment would not cause an Event of Termination under
Section 7.01(m) hereof and subject to the payment of any Termination Amount
payable under such Contract, consent to the prepayment or early termination of
such Contract, and (iv) amend, modify or waive any provision of a Delinquent
Receivable or Defaulted Receivable so as to maximize the collectibility thereof
(it being understood that neither the Originator nor the Buyer may take any of
the actions referred to in clauses (i) through (iv) above at any time (x) after
the occurrence of the Termination Date, or (y) during which the Originator is
not the Servicer, absent the prior consent of the Deal Agent). The Originator
shall deliver to the Servicer, and the Servicer shall hold in trust for the
Originator and the Buyer in accordance with their respective interests, all
Records. Notwithstanding anything to the contrary contained herein, following
the occurrence of an Event of Termination, the Deal Agent shall have the
absolute and unlimited right to direct the Servicer (whether the Servicer is the
Originator or otherwise) to commence or settle any legal action to enforce
collection of any Receivable or other Transferred Asset or to foreclose upon or
repossess any Related Security.
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(b) The Servicer shall as soon as practicable following receipt turn
over to the Originator the collections of any receivable which is not a
Transferred Asset less, in the event the Originator is not the Servicer, all
reasonable and appropriate out-of-pocket costs and expenses of such Servicer of
servicing, collecting and administering such receivable.
(c) Notwithstanding anything to the contrary contained in this
Originator Purchase Agreement, the Servicer, if the Deal Agent or its designee,
shall have no obligation to collect, enforce or take any other action described
in this Article VI with respect to any receivable that is not a Transferred
Asset other than to deliver to the Originator the Collections and documents with
respect to any such receivable as described in the first two sentences of
Section 6.02(b) and to exercise the same degree of care with respect to
Collections and documents in its possession as it would exercise with respect to
its own property.
(d) The Servicer will, at the Servicer's cost and expense and as
agent in the name of and on behalf of the Buyer, but subject at any time to the
right of the Buyer to direct and control, endeavor to collect, as and when the
same becomes due, all amounts owing on each Receivable. In the event of default
by an Obligor under any Receivable, the Servicer shall have the power and
authority, on behalf of the Buyer, to take such action in respect of the
enforcement and collection of such Receivable as the Servicer, in the absence of
contrary instructions from the Buyer, may deem advisable. In any such suit for
enforcement or collection, the Servicer shall be entitled to sue thereon in its
own name or as agent for the Buyer, in either case, for the account of the
Buyer.
(e) In the event the Servicer accepts in payment of any Receivable
the taking of repossession of the Equipment the sale or lease of which gave rise
to such Receivable, the Servicer agrees to use its reasonable efforts to resell
or re-lease such Equipment for the account of the Buyer and shall remit to the
Buyer the gross sale proceeds thereof or, to the extent such Equipment is
re-leased, shall deliver to the Buyer the chattel paper or other documents
evidencing the rights to payment arising from such re-lease, all of which
documents shall constitute Contracts and which rights to payment shall
constitute Receivables, and all of which Contracts and Receivables shall
constitute part of the Transferred Assets. Neither the Buyer nor the Deal Agent
shall have any obligation to take any action or commence any proceedings to
realize upon any Receivable or to enforce any of its rights or remedies with
respect thereto. Any moneys collected by the Servicer pursuant to this
subsection 6.02(e) shall be segregated by the Servicer, held in trust by the
Servicer for the Buyer and shall be remitted to a Lock-Box Account or to the
Collection Account within one Business Day
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after identification thereof by the Servicer and in any event within four
Business Days after the Servicer's receipt thereof.
(f) The Servicer shall maintain all books of account and other
records pertaining to the Receivables and the other Transferred Assets in such
form as will enable the Buyer or its designees to determine at any time the
status thereof. The Servicer will permit the Buyer, the Deal Agent and any
Person designated by the Buyer or the Deal Agent, during regular business hours,
to inspect, audit, check and make abstracts from all books, accounts, records,
or other papers pertaining to such Transferred Assets. From time to time, at the
request of the Buyer or the Deal Agent, the Servicer, at its own expense, will
(i) deliver to the Buyer and the Deal Agent and any Person designated by the
Buyer or the Deal Agent any records and invoices pertaining to the Transferred
Assets and evidence thereof as the Buyer, the Deal Agent or such designee may
deem necessary to enable it to enforce its rights thereunder, and (ii) mark each
computer record relating to, and each invoice or other evidence of, the
Transferred Assets (whether or not such computer record or other item is the
property of the Buyer) as the Buyer or Deal Agent may direct to reflect the
interests of the Buyer and the Deal Agent in such Transferred Assets. The
Servicer will either (x) segregate, from all the documents relating to other
receivables then owned or being serviced by the Servicer, all documents relating
to the Transferred Assets or (y) mark all such documents relating to the
Transferred Assets so as to make such documents readily identifiable as property
of the Buyer and with such legend as shall be specified by the Deal Agent, and
will, in either such event, hold all such documents in trust for the Buyer and
safely keep such documents in filing cabinets or other suitable containers
marked to show the Buyer's interest.
SECTION 6.03. Rights of the Buyer. At any time:
(a) The Buyer may notify the Obligors of the Receivables, or any of
them, of the Buyer's ownership interest in Transferred Assets and direct
such Obligors, or any of them, that payment of all amounts payable under
any Receivable be made directly to the Buyer or its designee (including,
without limitation, the Deal Agent).
(b) The Originator shall, at the Deal Agent's or Buyer's request and
at the Originator's expense, give notice of the Buyer's interest in the
Transferred Assets to each Obligor (in substantially the form of the
Notice of Assignment) and direct that payments be made directly to the
Buyer or its designee (including, without limitation, the Deal Agent).
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(c) The Originator shall, at the Buyer's request, assemble all
Records which the Buyer reasonably believes are necessary or appropriate
for the administration and enforcement of the Transferred Assets, and
shall make the same available to the Buyer at a place selected by the
Buyer or its designee.
(d) The Originator hereby authorizes the Buyer and the Deal Agent to
take any and all steps in the Originator's name and on behalf of the
Originator necessary or desirable, in the determination of the Buyer
and/or the Deal Agent, to collect all amounts due under any and all
Transferred Assets or related Receivables, including, without limitation,
endorsing the Originator's name on checks and other instruments
representing Collections and enforcing such Receivables and the related
Contracts.
SECTION 6.04. Further Action Evidencing Transfers. The Originator
agrees that from time to time, at its expense, it will promptly execute and
deliver all further instruments and documents, and take all further action that
the Buyer may reasonably request in order to perfect, protect or more fully
evidence the Buyer's interest in the Transferred Assets, or to enable the Buyer
to exercise or enforce any of its rights hereunder or under any related
document. Without limiting the generality of the foregoing, the Originator will
mark its master data processing records evidencing such Transferred Assets with
a legend, acceptable to the Buyer, evidencing that the Buyer has acquired an
ownership interest therein as provided in this Originator Purchase Agreement
and, upon the request of the Buyer, will execute and file such financing or
continuation statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as may be necessary or appropriate or as the Buyer
may reasonably request. The Originator hereby authorizes the Buyer to file one
or more financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any of the Transferred Assets now
existing or hereafter arising without the signature of the Originator where
permitted by law. A carbon, photographic or other reproduction of this
Originator Purchase Agreement or any financing statement covering the
Transferred Assets, or any part thereof, shall be sufficient as a financing
statement. If the Originator fails to perform any of its agreements or
obligations under this Originator Purchase Agreement, the Buyer may (but shall
not be required to) itself perform, or cause performance of, such agreement or
obligation, and the expenses of the Buyer incurred in connection therewith shall
be payable by the Originator upon the Buyer's demand therefor; provided,
however, prior to taking any such action, the Buyer shall give notice of such
intention to the Originator and provide the Originator with a reasonable
opportunity to take such action itself.
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SECTION 6.05. Responsibilities of the Originator. Anything herein to
the contrary notwithstanding, the Originator shall (i) perform all of its
obligations under the Contracts to the same extent as if such Contracts had not
been transferred to the Buyer under this Originator Purchase Agreement and the
exercise by the Buyer or its assigns of their respective rights hereunder shall
not relieve Originator from such obligations and (ii) pay when due any taxes,
including without limitation, sales, excise and personal property taxes payable
in connection with the Transferred Assets, unless the Originator is contesting
the payment of such taxes in good faith and by appropriate proceedings and with
respect to which no Adverse Claim has been asserted or filed.
SECTION 6.06. Administration of Collections by Servicer. (a) The
Servicer shall identify on a timely basis all collections which are on account
of the Transferred Assets. including all deposits to Lock Box Accounts. On each
Business Day, all Collections received in the Lock Box Accounts for the prior
Business Day (and such Business Day, if practicable) shall be transferred to the
Collection Account. If the Servicer receives any cash or checks, drafts, wire
transfers or other instruments for the payment of money on account or otherwise
in respect of the Transferred Assets, the Servicer shall segregate such cash and
other items, hold such cash and other items in trust for the benefit of the
Buyer and the Deal Agent and shall cause such cash and other items (properly
endorsed, where required, so that such items may be collected by the Buyer) to
be deposited in a Lock Box Account or directly in the Collection Account
immediately after the date any such cash or other item shall have been
identified as being on account of a Transferred Asset.
SECTION 6.07. Application of Collections. All Collections on account
of the Receivables of each Obligor shall be applied in the order of maturity
thereof unless specifically identified otherwise in writing by such Obligor or
directed by a court of competent jurisdiction. Any payment by an Obligor in
respect of any indebtedness or other obligations owed by such Obligor to the
Originator or the Servicer shall, except as otherwise specified by such Obligor
or otherwise required by law, be applied as a Collection of a Receivable of such
Obligor (in the order of the age by invoice date of such Receivables, starting
with the oldest such Receivable) to the extent of any amounts then due and
payable thereunder before being applied to any other indebtedness of such
Obligor to the Originator or the Servicer. The Servicer shall not influence or
instruct any Obligor who is indebted to the Originator in respect of any
indebtedness not included in the Transferred Assets to direct that its
remittances be applied to any such indebtedness prior to being applied to the
Transferred Assets.
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SECTION 6.08. Servicing Fee. On each Settlement Date, as full
compensation for its servicing activities hereunder, the Servicer shall be
entitled to receive a fee (the "Servicing Fee") in an amount equal to 1.00%
times the Outstanding Balance of the Receivables as of the last day of the prior
calendar month times a fraction, the numerator of which is the number of actual
days elapsed in such calendar month and the denominator of which equals 360. In
the event that the Buyer (or the Deal Agent) appoints a successor Servicer, the
Servicing Fee may be adjusted as required by such successor Servicer and as
agreed to by the Buyer and the Deal Agent.
SECTION 6.09. Resignation; Successor Servicer. (a) The obligation of
the Servicer to service the Receivables is personal to the Servicer and the
parties recognize that another Person may not be qualified to perform such
obligations. Accordingly, the Servicer's obligation to service the Transferred
Assets hereunder shall be specifically enforceable and shall be absolute and
unconditional in all circumstances, including, without limitation, after the
occurrence and during the continuation of any Event of Termination or Servicing
Termination Event hereunder; provided, however, that a Successor Servicer may be
appointed pursuant to this Section 6.09.
(b) Notwithstanding the foregoing, the Servicer may resign from the
obligations and duties hereby imposed on it as Servicer upon determination that
(i) the performance of its duties hereunder is no longer permissible under any
applicable law and (ii) there is no reasonable action which the Servicer could
take to make the performance of its duties hereunder permissible under any such
applicable law. Any determination permitting the resignation of the Servicer
shall be evidenced as to clause (i) above by an opinion of counsel to such
effect delivered to the Buyer and the Deal Agent. Except to the extent
inconsistent with any such applicable law, no such resignation shall become
effective until a Successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with the remaining provisions of this
Section 6.09.
(c) The Deal Agent shall, as promptly as possible after the Servicer
has given notice pursuant to Section 6.09(b) above or at any time after the
Buyer's or the Deal Agent's designation of a successor Servicer pursuant to
Section 6.01, appoint a successor servicer (the "Successor Servicer") and such
Successor Servicer shall accept its appointment by a written assumption in a
form acceptable to the Deal Agent. Upon its appointment, the Successor Servicer
shall be the successor in all respects to the Servicer with respect to servicing
functions under this Originator Purchase Agreement and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof and thereof, and all references in
this Originator Purchase Agreement or any
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other Facility Documents to the Servicer shall be deemed to refer to the
Successor Servicer. The Servicer agrees to cooperate with the Successor Servicer
in effecting the transfer of its responsibilities, duties, liabilities and
rights hereunder, including, without limitation, the execution and delivery of
assignments of financing statements, the transfer to the Successor Servicer of
all cash amounts held by the Servicer or thereafter received with respect to the
Transferred Assets, the transfer of electronic records relating to the
Transferred Assets in such form as the Successor Servicer may reasonably request
and the transfer of all related Records, correspondence and other documents
relating to the Transferred Assets.
SECTION 6.10. Custodian. All original counterpart copies of the
Contracts, and all other components of the Contract Files in respect of the
Purchased Interests shall at all times prior to the Collection Date be held on
behalf of the Buyer by the Person (the "Custodian") so designated from time to
time in accordance with Section 6.12 of the EagleFunding Purchase Agreement.
Promptly upon the Originator's possession of an original Contract File or any of
the contents thereof, the Originator hereby agrees to deliver such Contract File
(or such contents) directly to the Custodian pursuant to the terms of Section
6.12 of the EagleFunding Purchase Agreement.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination. If any of the following
events ("Events of Termination") shall occur:
(a) (i) The Servicer (if the Originator or any Affiliate of the
Originator) shall fail to perform or observe any term, covenant or agreement
hereunder (other than as referred to in clause (ii) of this Section 7.01(a)) and
such failure shall remain unremedied for three Business Days after written
notice from the Buyer or (ii) either the Servicer (if the Originator or any
Affiliate of the Originator) or the Originator shall fail to make any payment or
deposit to be made by it hereunder when due and with respect to such payments
which do not relate to the remittance of Collections, such failure shall remain
unremedied for three Business Days after written notice from the Buyer; or
(b) The Originator shall fail to perform or observe any term,
covenant or agreement contained in Article VI and any such failure shall remain
unremedied for five Business Days after written notice from the Buyer; or
32
<PAGE> 37
(c) Any representation or warranty made or deemed to be made by the
Originator (or any of its officers) under or in connection with this Originator
Purchase Agreement, any Settlement Report or other information or report
delivered pursuant hereto shall prove to have been false or incorrect in any
material respect when made; provided, however, that (i) to the extent any breach
of any such representation or warranty may be cured within ten Business Days,
the Originator shall have ten Business Days after learning of such breach to
make such representation and warranty true and correct and (ii) if any such
false or incorrect representation or warranty has given rise to a deemed
collection as provided under Section 2.05, then, upon the Originator's payment
of such deemed Collection at the time and in the manner required under this
Originator Purchase Agreement, the breach of such representation or warranty
shall not give rise to an Event of Termination under this subsection (c); or
(d) The Originator shall fail to perform or observe any other term,
covenant or agreement contained in this Originator Purchase Agreement on its
part to be performed or observed and any such failure shall remain unremedied
for ten Business Days after written notice from the Buyer (it being understood
that, if any such failure gives rise to a deemed Collection as provided under
Section 2.05, then the payment of such deemed Collection at the time and in the
manner required under this Originator Purchase Agreement shall be deemed a
remedy of such failure); or
(e) The Originator shall fail to pay any principal of or premium or
interest on any Indebtedness when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any, speci-
fied in the agreement or instrument relating to such Indebtedness; or any other
default under any agreement or instrument relating to any such Indebtedness of
the Originator or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument if
the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall be declared to be due and payable or required to be prepaid (other than by
a regularly scheduled required prepayment) prior to the stated maturity thereof;
or
(f) Any Purchase or acquisition by the Buyer of Transferred Assets
shall for any reason, except to the extent permitted by the terms hereof, cease
to create a valid and perfected first priority interest in each Receivable, the
Related Security and the Equipment and Collections with respect thereto;
provided, however, if any such failure results in a deemed Collection under
Section 2.05 hereof and the Originator satisfies
33
<PAGE> 38
in full its payment obligations under such section, then such failure shall not
give rise to an Event of Termination under this subsection (f); or
(g) (i) An Insolvency Event shall occur with respect to the
Originator or the Buyer or (ii) the Originator or the Buyer shall take any
corporate action to authorize the filing of any Insolvency Proceeding; or
(h) There shall have been any material adverse change in the
financial condition or operations of the Originator since December 31, 1996
(except as disclosed in the Interim Financials described in Section 4.01(e)), or
there shall have occurred any event which materially adversely affects the
collectibility of the Receivables generally or there shall have occurred any
other event which materially adversely affects the ability of the Originator to
collect Receivables generally or the ability of the Originator to perform
hereunder; or
(i) The Originator shall fail to observe any covenant
contained in Section 5.04; or
(j) [reserved]; or
(k) [reserved]; or
(l) [reserved]; or
(m) The Originator shall fail to pay any principal or premium or
interest on any Indebtedness having a principal amount of $1,000,000 or greater,
when the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Indebtedness; or any other default under any
agreement or instrument relating to any such Indebtedness of the Originator or
any other event, shall occur and shall continue after the applicable grace
period, if any, specified in such agreement or instrument if the effect of such
default or event is to accelerate, or to permit the acceleration of, the
maturity of such Indebtedness; or any such Indebtedness shall be declared to be
due and payable or required to be prepaid (other than by a regularly scheduled
required prepayment) prior to the stated maturity thereof; or
(n) The PBGC or the IRS shall have filed notice of one or more
Adverse Claims against the Originator (unless such Adverse Claim does not
purport to cover the Purchased Interests), and such notice shall have remained
in effect for more than thirty (30) days unless, prior to the expiration of such
period, such liens shall have been adequately bonded by the Originator; or
34
<PAGE> 39
(o) A Servicer Termination Event shall have occurred;
then, and in any such event, the Buyer may by notice to the Originator declare
the Termination Date to have occurred, except that, in the case of any event
described in clause (i) of subsection (g) above, the Termination Date shall be
deemed to have occurred automatically upon the occurrence of such event. Upon
any such declaration or automatic occurrence, the Buyer shall have, in addition
to all other rights and remedies under this Originator Purchase Agreement or
otherwise, all other rights and remedies provided under the UCC of the
applicable jurisdiction and other applicable laws, which rights shall be
cumulative.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Indemnities by the Originator. (a) Without limiting
any other rights which the Buyer may have hereunder or under applicable law, the
Originator hereby agrees to indemnify the Buyer and its permitted successors and
assigns (including, without limitation, EagleFunding, and the Deal Agent) and
their respective officers, directors, agents and employees (each, an
"Indemnified Party"), from and against any and all damages, losses, claims,
liabilities and related costs and expenses, including reasonable attorneys' fees
and disbursements (all of the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by any Indemnified Party
relating to or resulting from any of the following (excluding, however, (i)
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of an Indemnified Party or (ii) recourse (except with
respect to payment and performance obligations provided for in this Originator
Purchase Agreement) for uncollectible Receivables):
(i) the transfer of any Receivable which was not,
as of the date of Purchase, an Eligible Receivable;
(ii) any representation or warranty made or deemed made by the
Originator (or any of its officers) under or in connection with this
Originator Purchase Agreement, any Settlement Report or any other infor-
mation or report delivered by the Originator pursuant hereto, which shall
have been false or incorrect in any material respect when made or deemed
made or delivered;
(iii) the failure by the Originator (individually or as Servicer) to
comply with any term, provision or covenant contained in this Originator
Purchase
35
<PAGE> 40
Agreement or the EagleFunding Purchase Agreement or any agreement executed
in connection with this Originator Purchase Agreement or the EagleFunding
Purchase Agreement or with any applicable law, rule or regulation with
respect to any Receivable, the related Contract, the Related Security or
the other Transferred Assets, or the nonconformity of any Receivable, the
related Contract, the Related Security or the other Transferred Assets
with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the Buyer or to
transfer to the Buyer an interest in the Transferred Assets, free and
clear of any Adverse Claim (including, without limitation, free and clear
of any Permitted Encumbrance except in favor of the Buyer or its
assignees) whether existing at the time of the Purchase of such Receivable
or at any time thereafter;
(v) the failure to file, or any delay in filing (other than solely
as a result of the action or inaction of the Buyer), financing statements
or other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws against the Originator with respect
to any Contract or Receivables which are, or are purported to be,
Transferred Assets, whether at the time of any Purchase or at any
subsequent time;
(vi) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Receivable
(including, without limitation, a defense based on such Receivable or the
related Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any other
claim resulting from the sale or lease of the Equipment and/or services
related thereto or the furnishing or failure to furnish such Equipment
and/or services;
(vii) any failure of the Originator, as Servicer
or otherwise, to perform its duties or obligations in
accordance with the provisions of Article VI;
(viii) any products liability claim or personal injury or property
damage suit or other similar or related claim or action of whatever sort
arising out of or in connection with the Equipment or any other goods,
merchandise and/or services which are the subject of any Receivable or
Contract;
36
<PAGE> 41
(ix) the failure to pay when due any taxes, including, without
limitation, sales, excise or personal property taxes payable in
connection with the Transferred Assets;
(x) the termination, rejection or non-assumption by the Originator
of any Contract prior to the original term of such Contract, whether such
rejection, early termination or non-assumption is made pursuant to an
equitable cause, statute, regulation, judicial proceeding or other
applicable laws (including, without limitation, Section 365 of the
Bankruptcy Code);
(xi) the failure of the Originator and the Obligors under the
Contracts to maintain casualty and liability insurance for the Equipment
related to the Receivables in an amount at least equal to the Discounted
Receivables Balance;
(xii) the failure of any Lock-Box Bank to remit any
funds in the Lock-Box Accounts as required hereunder; and
(xiii) the commingling of Collections of any Transferred
Assets with any other funds of the Originator.
Any amounts subject to the indemnification provisions of this Section 8.01 shall
be paid by the Originator to the applicable Indemnified Party within two
Business Days following the Indemnified Party's demand therefor.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment to or waiver of any
provision of this Originator Purchase Agreement nor consent to any departure by
the Originator, shall in any event be effective unless the same shall be in
writing and signed by (i) the Originator and the Buyer (with respect to an
amendment) or (ii) the Buyer (with respect to a waiver or consent by it) or the
Originator (with respect to a waiver or consent by it), as the case may be, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. The Buyer shall send, or shall
cause to be sent, copies of all amendments, modifications or supplements to this
Originator Purchase Agreement to each rating agency then rating the Commercial
Paper, prior to the execution thereof by all parties thereto. This Originator
Purchase Agreement contains a final and complete integration of all prior
expressions by the parties hereto with respect to the subject matter hereof and
shall constitute the entire agreement (together with the exhibits
37
<PAGE> 42
hereto) among the parties hereto with respect to the subject matter hereof,
superseding all prior oral or written under standings.
SECTION 9.02. Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including telex communication and communication by facsimile copy) and mailed,
telexed, transmitted or delivered, as to each party hereto, at its address set
forth under its name on the signature pages hereof or at such other address as
shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall be effective, upon receipt, or
in the case of delivery by mail, five days after being deposited in the mails,
or, in the case of notice by telex, when telexed against receipt of answer back,
or in the case of notice by facsimile copy, when verbal communication of receipt
is obtained, in each case addressed as aforesaid, except that notices and
communications pursuant to Article II shall not be effective until received.
SECTION 9.03. No Waiver; Remedies. No failure on the part of the
Buyer to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 9.04. Binding Effect; Assignability. This Originator
Purchase Agreement shall be binding upon and inure to the benefit of the
Originator, the Buyer and their respective successors and permitted assigns
(which successors of the Originator shall include a trustee in bankruptcy). The
Originator may not assign any of its rights and obligations hereunder or any
interest herein without the prior written consent of the Buyer and the Deal
Agent. The Buyer may assign at any time its rights and obligations hereunder and
interests herein to any other Person without the consent of the Originator.
Without limiting the foregoing, the Originator acknowledges that pursuant to the
terms of the EagleFunding Purchase Agreement, the Buyer is assigning to
EagleFunding, all of its rights, remedies, powers and privileges hereunder and
that EagleFunding may further assign such rights, remedies, powers and
privileges to the extent permitted in the EagleFunding Purchase Agreement. The
Originator agrees that each of EagleFunding, and the Deal Agent acting on behalf
of EagleFunding, as the assignee of the Buyer, shall, subject to the terms of
the EagleFunding Purchase Agreement, have the right to enforce this Originator
Purchase Agreement and to exercise directly all of the Buyer's rights and
remedies under this Originator Purchase Agreement (including, without
limitation, the rights and remedies under Sections 6.01, 6.02, 6.03, 6.04, and
8.01, and the Originator hereby consents to the
38
<PAGE> 43
foregoing and agrees to cooperate fully with EagleFunding and/or the Deal Agent
in the exercise of such rights and remedies. Without limiting the foregoing, the
Originator hereby acknowledges that each of the Buyer, EagleFunding and the Deal
Agent have agreed pursuant to the EagleFunding Purchase Agreement and certain
related agreements that, subject to the restrictions set forth therein, each of
the Deal Agent and certain parties providing credit enhancement and/or liquidity
for EagleFunding in connection with the EagleFunding Purchase Agreement shall be
entitled to exercise the Buyer's rights under this Originator Purchase
Agreement. The Originator hereby consents to the foregoing and agrees to
cooperate with any such Person electing to exercise the Buyer's rights under
this Originator Purchase Agreement. This Originator Purchase Agreement shall
create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until such
time, after the Termination Date, as the Collection Date shall occur; provided,
however, that the rights and remedies with respect to any breach of any
representation and warranty made by the Originator pursuant to Article IV and
the indemnification and payment provisions of Article VIII and Article IX shall
be continuing and shall survive any termination of this Originator Purchase
Agreement.
SECTION 9.05. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS ORIGINATOR
PURCHASE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE INTERESTS OF THE BUYER IN THE TRANSFERRED ASSETS OR REMEDIES
HEREUNDER OR THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THE ORIGINATOR HEREBY AGREES TO
THE JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK, AND
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ORIGINATOR AT
THE ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN
THE U.S. MAILS, POSTAGE PREPAID, OR, AT THE BUYER'S OPTION, BY SERVICE UPON CT
CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK, NEW YORK 10019, WHICH THE
ORIGINATOR HEREBY IRREVOCABLY APPOINTS AS ITS AGENT FOR THE PURPOSE OF ACCEPTING
SERVICE OF PROCESS. THE ORIGINATOR HEREBY WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE BETWEEN THE ORIGINATOR AND THE BUYER ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH
THIS ORIGINATOR PURCHASE AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL
BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY. WITH RESPECT TO THE FOREGOING
CONSENT TO JURISDICTION, THE ORIGINATOR HEREBY WAIVES ANY OBJECTION BASED ON
FORUM NON CONVENES, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL
39
<PAGE> 44
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS
SECTION 9.05 SHALL AFFECT THE RIGHT OF THE BUYER TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE BUYER TO BRING ANY
ACTION OR PROCEEDING AGAINST THE ORIGINATOR OR ITS PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION.
SECTION 9.06. Costs, Expenses and Taxes. (a) In addition to the
rights of indemnification under Article VIII hereof, the Originator agrees to
pay on demand all reasonable costs and expenses in connection with the
preparation, execution, delivery and administration (including periodic auditing
and any requested amendments, waivers or consents) of this Originator Purchase
Agreement and the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Buyer (and the Deal Agent) with respect thereto and with respect to advising the
Buyer (and the Deal Agent) as to its rights and remedies under this Originator
Purchase Agreement, and the other agreements executed pursuant hereto and all
costs and expenses, if any (including reasonable counsel fees and expenses), in
connection with the enforcement of this Originator Purchase Agreement and the
other agreements and documents to be delivered hereunder.
(b) In addition, the Originator shall pay any and all stamp, sales,
excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Originator
Purchase Agreement or the other agreements and documents to be delivered
hereunder, and agrees to indemnify the Buyer and its assignees against any
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees.
SECTION 9.07. Execution in Counterparts; Severability. This
Originator Purchase Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Originator Purchase Agreement or the Certificate shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
40
<PAGE> 45
IN WITNESS WHEREOF, the parties have caused this Originator Purchase
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
ORIGINATOR/SERVICER: HPSC, INC.
By:/s/Rene Lefebvre
-----------------------------------
Name: Rene Lefebvre
Title: VP, CEO
By:/s/
-----------------------------------
Name:
Title:
Address: Sixty State Street
35th Floor
Boston, MA 02109-1803
Attn:
Telephone: (617) 720-7251
Telecopy: (617) 720-7272
BUYER: HPSC CAPITAL FUNDING, INC.
By:
-----------------------------------
Name:
Title: PRESIDENT
Address: Sixty State Street
35th Floor
Boston, MA 02109-1803
Attn:
Telephone: (617) 720-7250
Telecopy: (617) 720-7299
<PAGE> 1
EXHIBIT 10.4
HPSC, INC.
Agreement to Furnish Copies of Omitted Exhibits
to Certain Agreements with EagleFunding Capital Corporation
HPSC, Inc. ("Registrant") is not filing as exhibits to its Form 10-Q for
its quarter ended September 30, 1997 copies of the following exhibits to (i) the
Lease Receivables Purchase Agreement dated as of June 27, 1997 among HPSC
Capital Funding, Inc., as Seller, Registrant, as Servicer and Custodian,
EagleFunding Capital Corporation, as Purchaser, and BancBoston Securities, Inc.,
as Deal Agent (the "LRPA"), and (ii) the Purchase and Contribution Agreement
dated as of June 27, 1997 between HPSC Capital Funding, Inc., as Buyer, and
Registrant, as the Originator and the Servicer (the "PCA"):
EXHIBITS TO LRPA:
- ----------------
EXHIBIT A Form of Notice of Sale
EXHIBIT B Form of Opinion of Counsel for Seller
EXHIBIT C Form of Officer's Certificate
EXHIBIT D List of Offices of Seller and Where Records are Kept
EXHIBIT E Form of Interest Rate Hedge Assignment
EXHIBIT F Form of Lock-Box Agreement
EXHIBIT G List of Lock-Box Accounts, Lock-Box Banks and their Post
Office Boxes
EXHIBITS TO PCA:
- ----------------
EXHIBIT A List of Contracts
EXHIBIT B Form of Notice of Assignment
EXHIBIT C Form of Settlement Report
EXHIBIT D Description of Credit and Collection Policy
EXHIBIT E Form of Opinion(s) of Counsel for Originator
EXHIBIT F List of Offices of Originator Where Records are Kept
EXHIBIT G Form of Lock-Box Agreement
EXHIBIT H List of Lock-Box Banks
EXHIBIT I Trade Names and Assumed Names
EXHIBIT J List of Computer Software
EXHIBIT K-1 Form of Lease
EXHIBIT K-2 Form of Equipment Finance Agreement
EXHIBIT K-3 Form of Non-Equipment Finance Agreement
EXHIBIT K-4 Form of Practice Finance Loan
EXHIBIT L Form of Certificate
<PAGE> 2
Registrant agrees to furnish to the Securities and Exchange Commission,
upon request, copies of such omitted exhibits.
HPSC, Inc.
(Registrant)
By: /s/ John W. Everets
----------------------------
John W. Everets
Chairman of the Board
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 11,418
<SECURITIES> 0
<RECEIVABLES> 231,584
<ALLOWANCES> 4,174
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,418
<DEPRECIATION> 1,039
<TOTAL-ASSETS> 206,307
<CURRENT-LIABILITIES> 0
<BONDS> 125,729
0
0
<COMMON> 48
<OTHER-SE> 34,706
<TOTAL-LIABILITY-AND-EQUITY> 206,307
<SALES> 0
<TOTAL-REVENUES> 16,531
<CGS> 0
<TOTAL-COSTS> 9,072
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 821
<INTEREST-EXPENSE> 7,470
<INCOME-PRETAX> 1,359
<INCOME-TAX> 595
<INCOME-CONTINUING> 764
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<EPS-PRIMARY> .19
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