EXHIBIT 10.3
MASTER AMENDMENT AND WAIVER
August 5, 2002
This Master Amendment and Waiver, dated as of August 5, 2002,
is entered into by and among HPSC BRAVO FUNDING, LLC (successor to HPSC BRAVO
FUNDING CORP.), a Delaware limited liability company ("Bravo"), HPSC, INC., a
Delaware corporation, TRIPLE-A ONE FUNDING CORPORATION, a Delaware corporation
("TRIPLE-A") and CAPITAL MARKETS ASSURANCE CORPORATION, a New York stock
insurance company ("CAPMAC").
Reference is made to that Amended and Restated Purchase and
Contribution Agreement, dated as of March 31, 2000 (as amended, restated,
supplemented or otherwise modified from time to time, the "PCA") between Bravo
and HPSC, Inc. Capitalized terms used but not defined herein shall have the
meaning as used in the PCA.
Reference is made to that Amended and Restated Lease
Receivables Purchase Agreement, dated as of March 31, 2000 (as has been amended,
restated, supplemented or otherwise modified from time to time, the "PRIOR
TRIPLE-A PURCHASE AGREEMENT") among Bravo, HPSC, Inc., Triple-A and CapMAC.
WHEREAS, the parties to the Prior Triple-A Purchase Agreement
intend to enter into that Second Amended and Restated Lease Receivables Purchase
Agreement dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "TRIPLE-A PURCHASE AGREEMENT").
WHEREAS, HPSC, Inc. did not comply with the financial
covenants set forth in SECTION 5.04(a)) of the PCA during certain fiscal
quarters in the period from January 1, 1996 to June 30, 2002 (the "FINANCIALS
DEFAULTS").
WHEREAS, HPSC, Inc. has requested Bravo to waive the Financial
Defaults and to amend the PCA.
WHEREAS, Bravo, Triple A and CapMAC wish to waive the
Financial Defaults and to amend the PCA, subject to the terms and conditions
hereof.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, parties hereto hereby agree as
follows:
SECTION 1. Subject to the conditions set forth in SECTION 3
hereof, the PCA is hereby amended to:
(a) amend and restate SECTION 5.02(a) in its entirety as the
following:
(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 Seller, (x) the Financial Covenants Compliance Certificate
for such fiscal quarter, and (y) the financial statements (including
the balance sheet, income statement and cash flow statement) of the
Seller and its consolidated Subsidiaries for such fiscal quarter and
for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter, in either case of (x) or (y)
certified by the chief financial officer, chief accounting officer or
treasurer of the Seller;
(b) amend and restate SECTION 5.02(b) in its entirety as the
following:
(b) as soon as available and in any event within 90
days after the end of each fiscal year of the Seller, (x) the Financial
Covenants Compliance Certificate for such fiscal year certified by the
chief financial officer, chief accounting officer or treasurer of the
Seller and (y) the financial statements (including the balance sheet,
income statement, statement of retained earnings and cash flow
statement) of the Seller and its consolidated Subsidiaries for the last
fiscal quarter of such fiscal year (each certified by the chief
financial officer, chief accounting officer or treasurer of the Seller)
and for such fiscal year (each audited and reported with unqualified
opinions by nationally recognized independent public accountants
acceptable to the Buyer. The Buyer acknowledges that any of the "Big 5"
accounting firms will be acceptable to the Buyer);
(c) amend SECTION 5.02(g) by adding the following at the
beginning thereof:
the "Compliance Certificate" and "Borrower's
Projections" as defined in the FootHill Credit Agreement, and the
certificate of independent certified public accountants prepared
pursuant to SECTION 6.3(b)(ii) of the FootHill Credit Agreement when
such reports are delivered to the "Agent" thereunder, and
(d) amend and restate SECTION 5.04(a)(i) in its entirety as
the following:
(i) as of the date set forth below, the Tangible Net
Worth to be less than the amount set forth opposite such date plus 100%
of the proceeds of any sale during the period from June 30, 2002 to
such date by the Seller or any of its Subsidiaries of (A) equity
securities issued by the Seller or any of its Subsidiaries, or (B)
warrants or subscription rights for equity securities issued by the
Seller or any of its Subsidiaries, or as of the end of any fiscal
quarter after June 30, 2005, to be less than the sum of (x)
$45,300,000, plus (y) 75% of actual positive Net Income for all fiscal
quarters commencing after March 31, 2005, plus (z) 100% of the proceeds
of any sale during the period from June 30, 2002 to such date by the
Seller or any of its Subsidiaries of (A) equity securities issued by
the Seller or any of its Subsidiaries, or (B) warrants or subscription
rights for equity securities issued by the Seller or any of its
Subsidiaries.
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Applicable Date Applicable Amount
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June 30, 2002 $33,000,000
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2
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September 30, 2002 $33,750,000
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December 31, 2002 $34,550,000
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March 31, 2003 $35,400,000
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June 30, 2003 $36,300,000
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September 30, 2003 $37,250,000
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December 31, 2003 $38,250,000
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March 31, 2004 $39,300,000
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June 30, 2004 $40,400,000
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September 30, 2004 $41,550,000
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December 31, 2004 $42,750,000
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March 31, 2005 $44,000,000
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June 30, 2005 $45,300,000
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(e) amend and restate SECTION 5.04(a)(ii) in its entirety as
the following:
(ii) the Debt to Worth Ratio as of the end of any
fiscal quarter to be more than 7.50 : 1.
(f) amend and restate SECTION 5.04(a)(iii) in its entirety as
the following:
(iii) the Net Income, for the fiscal quarter ending
June 30, 2002, to be less than $750,000, or for any subsequent fiscal
quarter, to be less than the minimum amount set forth opposite the last
day of such fiscal quarter:
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Minimum Net Income Fiscal Quarter ending
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$750,000 June 30, 2002
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$750,000 plus A the last day of any fiscal quarter ending thereafter
(the "Other Date")
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A = $50,000 x N
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N = the number of fiscal quarters from June 30, 2002
to and including the Other Date
(For example, if the Other Date is June 30, 2003, there are four fiscal
quarters from June 30, 2002 to June 30, 2003, i.e., 7/1/02 to 9/30/02,
10/1/02 to 12/31/02, 1/1/03-3/31/03 and 4/1/03-6/30/03. Therefore, N is
4. A = $50,000 x 4 = $200,000. The minimum Net Income for the fiscal
quarter ending June 30, 2003 is $750,000 + $200,000 = $950,000)
(g) amend SECTION 5.04(a)(iv) to replace the phrase "Third
Amended and Restated Credit Agreement, dated as of March 16, 1998 (as the same
may be amended, restated, supplemented or otherwise modified from time to time,
the "1998 Credit Agreement") among HPSC, Inc., American Commercial Finance
Company, and BankBoston, N.A." with the phrase "the FootHill Credit Agreement."
(h) amend SECTION 5.04(b) to delete the definitions of
"Consolidated EBIT", "Consolidated Net Income", "Consolidated Tangible Net
Worth" and "Total Interest Expense".
(i) amend SECTION 5.04(b) to add the following definitions:
"ALLOWABLE SUBORDINATED DEBT" means, the subordinated
Indebtedness, the aggregate outstanding balance of which does not
exceed $25,000,000 and which consists of (a) the 11% Senior
Subordinated Notes due 2007 issued by the Seller in the original
aggregate principal amount of $20,000,000 pursuant to the Indenture,
and (b) other subordinated Indebtedness, the terms and conditions of
which expressly subordinate such Indebtedness to the general unsecured
Indebtedness of the Seller.
"INTANGIBLE ASSETS" means, with respect to any
Person, that portion of the book value of all of such Person's assets
that would be treated as intangibles under GAAP.
"DEBT TO WORTH RATIO" means a ratio of (a) the
outstanding amount of Indebtedness (excluding Allowable Subordinated
Debt) of the Seller and its Subsidiaries on a consolidated basis, to
(b) the sum of (i) Tangible Net Worth, PLUS (ii) the outstanding
amount of the Allowable Subordinated Debt.
"NET INCOME" means, for any period, the net income
(exclusive of minority interests and extraordinary items) for such
period of Seller and its Subsidiaries on a consolidated basis,
determined in accordance with GAAP.
"TANGIBLE NET WORTH" means, as of any date of
determination, the result of (a) Seller's total stockholder's equity,
MINUS (b) the sum of (i) all Intangible Assets of the Seller, (ii) all
of the Seller's prepaid expenses, and (iii) all amounts due to the
Seller from Affiliates, calculated on a consolidated basis in
accordance with GAAP (except that such calculation of Tangible Net
Worth shall be made without regard to the accounting adjustments
required by Financial Accounting Standard No. 133).
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(j) amend the Definition List of the PCA to add the following
definition in the appropriate alphabetical order:
"CHANGE OF CONTROL" means a "Change of Control"
occurs under and as defined in the Indenture or the FootHill Credit
Agreement.
"FINANCIAL COVENANTS COMPLIANCE CERTIFICATE" means
the certificate substantially in form and substance attached to this
Agreement as EXHIBIT L hereto.
"FOOTHILL CREDIT AGREEMENT" means that Fifth Amended
and Restated Credit Agreement, dated as of August __, 2002 (as the same
may be amended, supplemented, restated or otherwise modified from time
to time) among the Seller, Foothill Capital Corporation and certain
financial institutions as lenders thereunder.
"INDENTURE" means the Indenture, dated as of March
20, 1997 among the Seller and State Street Bank & Trust Company, as
trustee.
(k) amend and restate SECTION 7.01(i) in its entirety as the
following:
(i) The Seller shall fail to observe any covenant
contained in SECTION 5.04 or a Change of Control occurs.
(l) amend the PCA to add SCHEDULE I hereto as EXHIBIT L
thereto.
SECTION 2. Subject to the conditions set forth in SECTION 3
hereof, Bravo, Triple-A and CapMAC waive the Financial Defaults; PROVIDED,
however, such waiver shall be void and ineffective if (a) HPSC, Inc.'s
Consolidated Tangible Net Worth as of June 30, 2002 is less than $33,000,000,
(b) the Seller or Bravo shall fail to deliver to CapMAC, by August 16, 2002,
audited and unqualified financial statements for the period from January 1, 1999
to December 31, 2001 and unaudited financial statements for the period from
January 1, 2002 to June 30, 2002, or (c) any such financial statement referred
to in the preceding clause (b) is not accurate, complete, or prepared in
accordance with GAAP (other than any footnote disclosures and year-end
adjustments which are not required to be reflected in the unaudited quarterly
financial statements).
SECTION 3. This Master Amendment shall become effective on the
later of (i) the day when CapMAC's receipt of the fully executed copies of this
Master Amendment and (ii) the day when the Triple-A Purchase Agreement becomes
effective.
SECTION 4. Each of Bravo and
HPSC Inc. represents and warrants
as follows:
(a) This Master Amendment, the PCA and the LRPA as previously
executed and as modified hereby, constitute legal, valid and binding obligations
of each of Bravo and
HPSC Inc (as applicable) and are enforceable against such
party in accordance with their terms.
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(b) Upon the effectiveness of this Master Amendment, each of
Bravo and
HPSC Inc. hereby reaffirms that the representations and warranties
such party made in the PCA and the LRPA (as applicable) are true and correct.
(c) Upon the effectiveness of this Master Amendment, each of
Bravo and
HPSC Inc. hereby reaffirms all covenants made in the PCA, the LRPA and
the other Facility Documents to which it is a party to the extent the same are
not modified hereby and agrees that all such covenants shall be deemed to have
been remade as of the effective date of this Master Amendment.
(d) Subsequent to the effectiveness of this Master Amendment,
No Wind-Down Event or Unmatured Wind-Down Event, Event of Termination, or
Unmatured Event of Termination has occurred or is continuing.
SECTION 5. Except as specifically set forth above, the PCA,
the LRPA, and all other documents, instruments and agreements executed and/or
delivered in connection therewith, shall remain in full force and effect, and
are hereby ratified and confirmed. The execution, delivery and effectiveness of
this Master Amendment shall not, except as expressly provided herein and for the
limited purposes set forth herein, operate as a waiver of any right, power or
remedy of HPSC Bravo, CapMAC or Triple-A nor constitute a waiver of any
provisions of the PCA, the LRPA, or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
SECTION 6. Section headings in this Master Amendment are
included herein for convenience of reference only and shall not constitute part
of this Master Amendment for any other purpose.
SECTION 7. This Master Amendment shall be governed by and
construed in accordance with the laws of the State of
New York.
SECTION 8. This Master Amendment may be executed by one or
more of the parties to this Master Amendment on any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
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IN WITNESS WHEREOF, this Master Amendment has been duly
executed as of the day and year first above written.
HPSC BRAVO FUNDING, LLC
By: /s/ Xxxx Xxxxxxxx
--------------------------------
Title: Manager
HPSC, INC.
By: /s/ Xxxx X. Xxxxxxx
--------------------------------
Title: Chairman and Chief Executive
Officer
CAPITAL MARKETS ASSURANCE CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------------
Title: Director
TRIPLE-A ONE FUNDING CORPORATION
By: Capital Markets Assurance
Corporation, its Attorney-in-Fact
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------------
Title: Director
Signature Page--Master Amendment
SCHEDULE I
(Attached)
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Exhibit L
Form of Financial Covenants Compliance Certificate
(Attached)
[with added certification language that no Event of Termination or Unmatured
Event of Termination is occurring.]
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