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EXHIBIT 10.22
SECOND AMENDMENT
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TO REVOLVING CREDIT AGREEMENT
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This SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT
AGREEMENT (this "Second Amendment") dated as of December 1, 1995, by and among
HPSC, INC. (the "Borrower"), a Delaware corporation, AMERICAN COMMERCIAL
FINANCE CORPORATION, a Delaware corporation ("ACFC" or the "Guarantor"), THE
FIRST NATIONAL BANK OF BOSTON ("FNBB"), BANK OF AMERICA ILLINOIS ("BOA"),
CORESTATES BANK, N.A. ("CoreStates"), THE DAIWA BANK, LIMITED ("Daiwa"),
NATIONSBANK, N.A. ("NationsBank") (FNBB, BOA, CoreStates, and Daiwa,
collectively, the Existing Banks)(the Existing Banks and NationsBank,
collectively, the "Banks"), and THE FIRST NATIONAL BANK OF BOSTON as Agent for
the Banks and BANK OF AMERICA ILLINOIS as co-agent for the Banks. Capitalized
terms used herein without definition shall have the meanings set forth in the
Credit Agreement (as defined below).
WHEREAS, the Borrower, the Agent and the Banks are parties to that
certain Amended and Restated Revolving Credit Agreement dated as of May 15,
1995, as amended by the First Amendment dated as of November 13, 1995, (as so
amended and as may be further amended, modified or supplemented and in effect
from time to time, the "Credit Agreement");
WHEREAS, the Borrower has requested that NationsBank agree to provide
an additional commitment to make loans to the Borrower in an amount equal to
the amount set forth opposite its name on SCHEDULE 1 subject to the terms and
conditions contained herein and in the Credit Agreement, and NationsBank,
subject to the terms and conditions contained herein and in the Credit
Agreement, has agreed to so provide an additional commitment;
WHEREAS, the Borrower has requested that certain other terms and
provisions of the Credit Agreement be amended and the Agent and the Banks
subject to the terms and conditions contained herein, have agreed to so amend
the Credit Agreement;
NOW, THEREFORE, in consideration of the premises contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. AMENDMENT TO THE CREDIT AGREEMENT. The Credit Agreement is hereby
amended as follows:
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(a) Section 1.1 of the Credit Agreement is hereby amended by deleting
the following definitions in their entirety: "Letter of Credit", "Letter of
Credit Fee", "Letter of Credit Application", "Letter of Credit Participation",
"Maximum Drawing Amount", "Reimbursement Obligation", "Uniform Customs" and
"Unpaid Reimbursement Obligations".
(b) Section 1.1 of the Credit Agreement is hereby amended by inserting
the following new definitions in the appropriate place in the alphabetical
sequence of definitions:
"ACFC CREDIT POLICY." ACFC's criteria for the extension of credit for
receivables and contracts as set forth on EXHIBIT J attached hereto and made a
part hereof.
"ACFC RECEIVABLE." An Account Receivable originated by ACFC pursuant
to ACFC's Credit Policy.
"CONDITIONAL SALES AGREEMENT." Each conditional sales agreement which
evidences any Accounts Receivable included as an Eligible Accounts Receivable
"CONTRACT FILE." With respect to each Contract, the executed original
counterpart of the Contract that constitutes an "instrument" for purposes of
9-105(1)(i) of the UCC, together with a duly executed allonge transferring such
instrument to the Agent.
"INSTRUMENT OF ADHERENCE." See sec.18.10.
"NEW BANK." See sec.18.10.
"RESERVE AMOUNT." $1,000,000.
"UCC." The Uniform Commercial Code as enacted and in effect from time
to time in the Commonwealth of Massachusetts.
(c) Section 1.1 of the Credit Agreement is hereby amended by deleting
the definition of "Borrowing Base" in its entirety and inserting in lieu
thereof the following text:
"BORROWING BASE. At the relevant time of reference thereto, an
amount determined by the Agent by reference to the most recent
Borrowing Base Report delivered to the Banks and the Agent pursuant to
sec.7.4(e), which is equal to the sum of the following:
(i) 80% of Eligible Accounts Receivable; PLUS
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(ii) 50% of the Residual Value of Equipment, PROVIDED, that
the amount included in the Borrowing Base pursuant to
this clause (ii) shall not exceed $1,000,000; MINUS
(iii) the Reserve Amount;
PROVIDED, HOWEVER, that (x) if the Total Commitment is less
than $60,000,000, ACFC Receivables included in the Borrowing Base shall
not comprise more than 25% of the Borrowing Base and (y) if the Total
Commitment is equal to or greater than $60,000,000, ACFC Receivables
included in the Borrowing Base shall not comprise more than 35% of the
Borrowing Base."
(d) Section 1.1 of the Credit Agreement is hereby further amended by
deleting the word "Shawmut"' appearing in the definition of "Banks".
(e) Section 1.1 of the Credit Agreement is hereby further amended by
inserting the text "(other than the purchase of computer software)" immediately
after the text "purchase or lease by the Borrower or any of its Subsidiaries of
Capital Assets" and before the text "that would be required to be capitalized"
appearing in the definition of "Capital Expenditures".
(f) Section 1.1 of the Credit Agreement is hereby further amended by
deleting the text ", and participate in the issuance, extension and renewal of
Letters of Credit for the account of," appearing in the definition of
"Commitment".
(g) Section 1.1 of the Credit Agreement is hereby further amended by
inserting the text "Customer Receivable or Practice Receivable relating to any"
after the text "or instrument which evidences any" and before the text "Account
Receivable included" appearing in the definition of "Contract".
(h) Section 1.1 of the Credit Agreement is hereby further amended by
inserting the text "or inventory or accounts" at the end of the definition of
"Customer".
(i) Section 1.1 of the Credit Agreement is hereby further amended by
deleting subsection (xiii) of the definition of "Eligible Accounts Receivable"
and inserting in lieu thereof the following new subsection (xiii):
"(xiii) that originated in the ordinary course of the
Borrower's or ACFC's business;".
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(j) Section 1.1 of the Credit Agreement is hereby further amended by
inserting the following new subsections (xviii) through (xxii) immediately
after subsection (xvii) of the definition "Eligible Accounts Receivable":
"(xviii) that if an ACFC Receivable, the Contract Files with
respect to the Contracts relating thereto have been delivered to the
Agent; (xix) that with respect to which all the representations and
warranties set forth in sec.6.21 of this Credit Agreement are true and
correct in all material respects on and as of the date hereof except to
the extent that any of such representations and warranties relate, by
the express terms thereof, solely to a date prior to the relevant date;
(xx) that with respect to which the Borrower or ACFC has filed and
maintained the effectiveness of UCC financing statements against the
Obligor in order to perfect any security interest granted in such
Contract in the related collateral of the Obligor; (xxi) that satisfies
all applicable requirements of the Borrower's Credit Policy or if an
ACFC Receivable, the ACFC Credit Policy; and (xxii) that is freely
assignable and arises under a Contract which is also freely
assignable;"
(k) Section 1.1 of the Credit Agreement is hereby further amended by
deleting the amount "$10,000,000" appearing in clause (ii) of the last sentence
of the definition of "Eligible Accounts Receivable" and inserting in lieu
thereof the amount "$12,500,000".
(l) Section 1.1 of the Credit Agreement is hereby further amended by
deleting the text ", the Letter of Credit Applications, the Letters of Credit"
appearing in the definition of "Loan Documents".
(m) Section 1.1 of the Credit Agreement is hereby further amended by
deleting the date "December 31, 1995" appearing in the definition of "Maturity
Date" and inserting in lieu thereof the date "December 31, 1996".
(n) Section 1.1 of the Credit Agreement is hereby further amended by
deleting the text "Letter of Credit Applications, Letters of Credit" appearing
in the definition of "Obligations".
(o) Section 2.1 of the Credit Agreement is hereby amended by deleting
the text "MINUS such Bank's Commitment Percentage of the sum of the Maximum
Drawing Amount and all Unpaid Reimbursement Obligations" and the text "PLUS the
Maximum Drawing Amount and all Unpaid Reimbursement Obligations" appearing in
the first sentence thereof.
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(p) Section 2.2 of the Credit Agreement is hereby amended by deleting
the text "MINUS the sum of the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations" appearing therein.
(q) Section 2.6 of the Credit Agreement is hereby amended by deleting
the time "1:00 p.m." appearing therein and inserting in lieu thereof the time
"12:00 noon (Boston time)".
(r) Section 2.8.1 of the Credit Agreement is hereby amended by
deleting the time "1:00 p.m." appearing therein and inserting in lieu thereof
the time "2:00 p.m.".
(s) Section 3.2 of the Credit Agreement is hereby amended by deleting
the text in its entirety and inserting in lieu thereof the text:
"If at any time the sum of the outstanding amount of the
Revolving Credit Loans exceeds the lesser of (i) the Total Commitment
and (ii) the Borrowing Base, for more than five (5) consecutive
Business Days, then the Borrower shall immediately pay the amount of
such excess to the Agent for the respective accounts of the Banks for
application to the Revolving Credit Loans. Each prepayment of the
Revolving Credit Loans shall be allocated among the Banks, in
proportion, as nearly as practicable, to the respective unpaid
principal amount of each Bank's Revolving Credit Note, with adjustments
to the extent practicable to equalize any prior payments or repayments
not exactly in proportion. In addition, collections of Accounts
Receivable shall be applied to the Revolving Credit Loans pursuant to
cash management arrangements satisfactory to the Agent and the Banks."
(t) Section 3A of the Credit Agreement is hereby amended by deleting
it in its entirety.
(u) Section 4.3.1 of the Credit Agreement is hereby amended by
deleting the text: "Reimbursement Obligations, Letter of Credit Fees" appearing
therein.
(v) Section 4.4 of the Credit Agreement is hereby amended by deleting
the text "and Letter of Credit Fees" appearing therein.
(w) Section 4.7 of the Credit Agreement is hereby amended by deleting
the text "Reimbursement Obligation" each time such text appears therein.
(x) Section 6 of the Credit Agreement is hereby amended by deleting
the text "The Borrower" appearing in the introductory text and inserting the
text "Each of the Borrower and ACFC" in lieu thereof.
(y) Section 6.17 of the Credit Agreement is hereby amended by deleting
the sentence "The Borrower will obtain Letters of Credit solely for the purpose
of complying with the requirements of sec.7.2 of the Stock Purchase Agreement"
appearing therein.
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(z) Section 6.19 of the Credit Agreement is hereby amended by
inserting the sentence "Each of Funding, Credident, and ACFC have no
Subsidiaries" at the end thereof.
(aa) Section 6.21 of the Credit Agreement is hereby amended by
deleting the text in its entirety and inserting in lieu thereof the following
text:
"Each Account Receivable included in Eligible Accounts
Receivable meets the following criteria:
(a) Either the Borrower or ACFC is the sole legal owner of the
Account Receivable, the Contracts and the Equipment (or will have a
first priority security interest in the Equipment), free and clear of
all liens other than Permitted Liens.
(b) Each of the Contracts is a legal, valid and binding full
recourse obligation of the Obligor thereunder, enforceable by the
Borrower or ACFC and their respective assigns against such Obligor in
accordance with the terms thereof, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights generally
and by any and all applicable requirements of any federal, state or
local law including, without limitation, usury, truth-in-lending and
equal credit opportunity laws applicable to each Contract have been
complied with.
(c) The Borrower and ACFC, and to the best of their respective
knowledge, the other parties to such Contract, had all requisite
authority and capacity to enter into such Contract; and no Obligor has
been released, in whole or in part, from any of its obligations in
respect of any Contract.
(d) Except as enforcement may be limited by bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally and by equitable principles,
the obligation of each Obligor to pay all amounts owed under each of
the Contracts to which such Obligor is a party throughout the term
thereof is and will be unconditional, without any right of set-off or
counterclaim or any defense by such Obligor, and without regard to any
event affecting the Equipment, if
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any, subject to such Contract, any claim of such Obligor against the
Borrower or ACFC or any change in circumstance of such Obligor or any
other circumstance whatsoever.
(e) There will be no facts or circumstances existing as of the
relevant time which give rise to any right of rescission, offset,
counterclaim or defense, including the 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 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.
(f) No Contract, and no provision of any Contract, has been
amended, terminated, altered, waived or modified since inception in any
respect that is adverse to the interests of the Borrower or ACFC except
for reissues that are consistent with Borrower's past practices, no
Contract has been satisfied, cancelled or subordinated, in whole or in
part, or rescinded, nor has any instrument been executed that would
effect any such satisfaction, cancellation, subordination or
rescission, except for Contracts that have been prepaid in full.
(g) No Obligor has been released by the Borrower or ACFC from
the terms of the related Contract.
(h) Each Contract was originated or acquired in (1) in the
Borrower's ordinary course of business, in accordance with the
Borrower's Credit Policy or (2) in ACFC's ordinary course of business,
in accordance with ACFC's Credit Policy. Each Contract is of a type
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customarily in use in the leasing or financing business and has not
been found, in the Agent's reasonable judgment, to be unacceptable.
(i) Each Obligor is a resident of the United States of America
and is not the Borrower or ACFC or an Affiliate of the Borrower or
ACFC.
(j) Each Lease requires the Obligor to assume all risk of loss
or malfunction of the related Equipment. Each Lease or Conditional
Sales Agreement requires the Obligor to pay all sales, use, property,
excise and other similar taxes imposed on or with respect to the
related Equipment. No Contract permits early termination or
prepayment, unless the amount required to be paid by or on behalf of
Obligor in respect thereof is equal to or greater than the applicable
termination amount as set forth in such Contract. 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.
(k) There are no proceedings or investigations pending against
the Borrower or ACFC or, to the best of their respective knowledge,
threatened or otherwise pending before any court, regulatory body,
administrative agency or other tribunal or government instrumentality
(A) asserting the invalidity or unenforceability of any Contract, (B)
seeking to prevent payment and performance of any Contract, or (C)
seeking any determination or ruling that might, in the aggregate,
adversely and materially affect the validity or enforceability of any
Contract.
(l) Each of the Borrower and ACFC has duly performed all
material obligations on its part required to be performed by it under
or in connection with each Contract, and has done nothing to materially
impair its rights thereunder.
(m) Each Contract 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
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"instrument" (as defined in Section 9-105 of the UCC). If the Contract
is chattel paper, then (i) there is only one counterpart of the
Contract that constitutes "chattel paper" for purposes of Section
9-105(b) and 9-308 of the UCC and (ii) either the Borrower or ACFC, as
applicable, has a first priority security interest in the Equipment
that is the subject of the Contract.
(n) Each Lease requires the related Obligor to maintain the
related Equipment, if any, in good and workable order. Each Lease or
Conditional Sales 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 Agent is named as loss payee under
all of the Borrower's or ACFC's physical damage insurance on the
Equipment, other than insurance of the Borrower or ACFC maintained
under Borrower's or ACFC's lessee insurance program pursuant to
equipment leases and conditional sales agreements with its lessees. To
the best of the Borrower's and ACFC'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 Borrower's and
ACFC's knowledge, the related Equipment was accepted by the Obligor
after reasonable opportunity to inspect and test the same and no
Obligor has informed the Borrower or ACFC of any defects therein.
(o) No Contract constitutes a "consumer lease" under the UCC.
(p) The Borrower and ACFC have marked their computer records,
to reflect the interest granted to the Agent hereunder.
(q) Each Contract permits the rights with respect to such
Contract, and all collateral related thereto, to be assigned by either
the Borrower or ACFC, as applicable, without the consent of any Person.
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(r) The Borrower or ACFC, as applicable, shall have taken
actions with respect to the collateral in respect of each Contract
related to any Account Receivable which has an outstanding balance
equal to or greater than $5,000 as is necessary to insure that the
Borrower or ACFC, as applicable, maintains, as against the Obligor
thereunder a perfected security interest in any collateral of the
Obligor relating thereto free and clear of adverse claims, or in the
case of any Lease, to ensure that the Borrower or ACFC, as the case may
be, would maintain such a perfected 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.
(s) The Borrower or ACFC, as applicable, shall have
taken actions with respect to the Accounts Receivable to ensure that
the Agent, for the benefit of itself and the Banks, has a priority
perfected security interest in such Accounts Receivable free and clear
of any adverse claims, including, without limitation, delivery of any
applicable Contract Files."
(z) Section 7 of the Credit Agreement is hereby amended by
deleting the text "The Borrower" appearing therein and inserting in lieu
thereof the text "Each of the Borrower and ACFC".
(aa) Section 7 of the Credit Agreement is hereby amended mutatis
mutandis to reflect the fact that ACFC is bound, with respect to itself,
by each of the agreements, covenants, and obligations set forth in
Sections 7.3, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14 and
7.15 to the same extent as the Borrower.
(bb) Section 7.1 of the Credit Agreement is hereby amended by
deleting the text ", the Letter of Credit Fees" appearing therein.
(cc) Section 7.2 of the Credit Agreement is hereby amended by
deleting the text in its entirety and inserting in lieu thereof the
text:
"The Borrower will, and will cause each of its Subsidiaries
(other than Credident and ACFC) to maintain its chief executive
office in Boston, Massachusetts or at such other place in the
United States of America as the Borrower shall designate upon
written notice to the Agent, where notices, presentations and
demands to or upon the Borrower and its Subsidiaries in respect
of the Loan Documents may be given or made. ACFC will maintain
its chief executive office in West Hartford, Connecticut, or at
such other place in the United States of America as ACFC shall
designate upon written notice to the Agent, where notices,
presentations and demands to or upon ACFC in respect of the Loan
Documents may be given or made."
(dd) Section 7.4 of the Credit Agreement is hereby amended
mutatis mutandis to reflect the fact that ACFC is required to deliver to
the Banks at the same times and in the same manner, the same reports and
other information with respect to ACFC as is required of the Borrower
pursuant to such Section (other than those set forth in Sections 7.4(a)
and 7.4(b)).
(ee) Section 7.4(a) of the Credit Agreement is hereby amended by
deleting the text: ", together with a written statement from such
accountants to the effect that they have read a copy of this Credit
Agreement, and that, in making the examination necessary to said
certification, they have obtained no knowledge of any Default or Event
of Default, or, if such accountants shall have obtained knowledge of any
then existing Default or Event of Default they shall disclose in such
statement any such Default or Event of Default; provided that such
accountants shall not be liable to the Banks for failure to obtain
knowledge of any Default or Event of Default".
(ff) Section 7.4(h) of the Credit Agreement is hereby amended by
deleting the text in its entirety and inserting in lieu thereof the
text: "within 5 days of receipt of the same by the Borrower copies of
(i) the monthly status reports under the Funding Indenture and (ii)
monthly settlement reports under the Funding II Credit Agreement and
from time to time if the Agent or any Bank so requests copies of (i)
other reports delivered under the Funding Indenture or the Funding II
Credit Agreement and (ii) other financial data and information with
respect to the Borrower or any of its Subsidiaries."
(gg) Section 7.4(i) of the Credit Agreement is hereby amended by
inserting the following text at the end thereof: "if such Schedule has
changed since it was last delivered to the Banks".
(hh) Section 7.4 of the Credit Agreement is hereby amended by
deleting the word "and" appearing at the end of subsection (h), by
inserting a semicolon in place of the period appearing at the end of
subsection (i), and by inserting the following new subsections (j), (k),
(l) and (m) immediately after subsection (i) thereof:
"(j) within fifteen (15) days after the end of each
calendar month or at such earlier time as the Agent may request,
the monthly management report for ACFC;
(k) as soon as practicable, but in any event not later than
one hundred (100) days after the end of each fiscal year of
ACFC, copies of any reports prepared by management with respect
to the financial conditions and results of operation of ACFC;
(l) as soon as practicable, but in any event not later than
forty-eight (48) days after the end of each of the first three
fiscal quarters of the fiscal year of ACFC, copies of any
reports prepared by management with respect to the financial
condition and results of operation of ACFC; and
(m) from time to time, such other information regarding the
financial condition and results of operation of the Borrower or
ACFC as any of the Banks or the Agent shall reasonably request."
(ii) Section 7.12 of the Credit Agreement is hereby amended by
deleting the text in its entirety and inserting in lieu thereof the
text: "The Borrower will use the proceeds of the Loans solely for
working capital purposes."
(jj) Section 7 of the Credit Agreement is hereby amended by
inserting the following new subsections 7.16, 7.17 and 7.18 immediately
following subsection 7.15 thereof:
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"7.16 CREDIT POLICY. The Borrower and ACFC shall comply in all
material respects with the Credit Policy and the ACFC Credit Policy, as
applicable, in regard to each Account Receivable and any related Contracts.
7.17 PERFECTED SECURITY INTEREST UNDER CONTRACTS. The Borrower and
ACFC shall take such actions with respect to each Account Receivable which
has an outstanding balance equal to or greater than $5,000 as is necessary
to insure that the Borrower or ACFC, as applicable, maintains against the
Obligor thereunder a perfected security interest in any collateral of the
Obligor relating thereto free and clear of adverse claims, or in the case
of any Lease, to ensure that the Borrower or ACFC, as the case may be,
would maintain such a perfected 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.
7.18 PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS. The
Borrower and ACFC, as applicable, shall
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at their own 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 Contacts."
(kk) Section 8 of the Credit Agreement is hereby amended by deleting
the introductory text in its entirety and inserting in lieu thereof the text:
"The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any Bank has any obligation to make any Loans hereunder:"
(ll) Section 8.1(k) of the Credit Agreement is hereby amended by
deleting the text in its entirety and inserting in lieu thereof the text:
"[Intentionally Omitted]".
(mm) Section 8.2(k) of the Credit Agreement is hereby amended by
deleting the text in its entirety and inserting in lieu thereof the text
"[Intentionally Omitted"].
(nn) Section 8.3(e) of the Credit Agreement is hereby amended by
deleting the amount "$7,000,000" appearing therein and inserting in lieu
thereof the amount "$10,000,000" and by inserting the text "and $12,500,000
during fiscal year 1996 and (iii) the aggregate amount of incremental
Investments by the Borrower and its Subsidiaries in Credident does not exceed
$100,000 during fiscal year 1996."
(oo) Section 8.4 of the Credit Agreement is hereby amended by
deleting the text ", PROVIDED, HOWEVER, that the Borrower may make payments
required to be made pursuant to the provisions of the Stock Purchase Agreement
so long as no Default or Event of Default has occurred and is continuing"
appearing therein.
(pp) Section 8 of the Credit Agreement is hereby amended by inserting
the following new subsection 8.12 immediately following subsection 8.11
thereof:
"8.12 CHANGE IN CREDIT POLICY. The Borrower shall not make any
change in the character of its business or in its Credit Policy, which
change would, in either case, impair the collectibility of any Contract.
ACFC shall not make any change in the character of its business or in the
ACFC Credit Policy, which change would, in either case, impair the
collectibility of any Contract."
(qq) Section 9.1 of the Credit Agreement is hereby amended by deleting
the percentage "400%" appearing therein and inserting in lieu thereof the
percentage "480%".
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(rr) Section 9.4 of the Credit Agreement is hereby amended by deleting
the amount "$1,000,000" appearing therein and inserting in lieu thereof the
amount "$1,700,000".
(ss) Section 9.6 of the Credit Agreement is hereby amended by deleting
the percentage "10%" appearing therein and inserting in lieu thereof the
percentage "9%".
(tt) Section 9.8 of the Credit Agreement is hereby amended by
inserting the text "ACFC will, at the end of each fiscal quarter, recognize a
provision for losses on its books for losses with respect to ACFC Receivables
at least equal to one percent (1%) of Net Customer Receivables of ACFC
originated during such fiscal quarter, as reduced by recoveries in such quarter
and otherwise adjusted in accordance with generally accepted accounting
principles" at the end thereof.
(uu) Section 9.9 of the Credit Agreement is hereby amended by deleting
the percent "90%" appearing therein and inserting in lieu thereof the number
"94%".
(vv) Section 10 of the Credit Agreement is hereby amended by deleting
the text "and of the Agent to issue, extend or renew any Letters of Credit"
appearing in the introductory text.
(ww) Section 10.14 of the Credit Agreement is hereby amended by
deleting the text in its entirety and inserting in lieu thereof the text
"[Intentionally Omitted]".
(xx) Section 11.2 of the Credit Agreement is hereby amended by
deleting the text "or to participate in the issuance, extension or renewal of
such Letter of Credit or in the reasonable opinion of the Agent would make it
illegal for the Agent to issue, extend or renew such Letter of Credit"
appearing at the end thereof.
(yy) Section 11.5 of the Credit Agreement is hereby amended by
deleting the text "or the issuance, extension or renewal of the requested
Letter of Credit" appearing at the end thereof.
(zz) Section 12.1(b) of the Credit Agreement is hereby amended by
deleting the text ", any Letter of Credit Fee" appearing therein.
(aaa) Section 12.1 of the Credit Agreement is hereby amended by
deleting the text ", and all Reimbursement Obligations" appearing in the final
paragraph thereof.
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(bbb) Section 12.1 of the Credit Agreement is hereby amended by
inserting the following new subsection (u) immediately following existing
subsection (t):
"(u) the Borrower shall cease to own one hundred percent (100%)
of the outstanding shares of common stock of ACFC."
(ccc) Section 12.3 of the Credit Agreement is hereby amended by
deleting the text: "or the Reimbursement Obligations" and the text "or
purchaser of any Letter of Credit Participation" appearing therein.
(ddd) Section 13 of the Credit Agreement is hereby amended by deleting
the text in its entirety and inserting in lieu thereof the text:
"Regardless of the adequacy of any collateral, during the
continuance of any Event of Default, any deposits or other sums
credited by or due from any of the Banks to the Borrower and any
securities or other property of the Borrower in the possession of such
Bank may be applied to or set off by such Bank against the payment of
Obligations and any and all other liabilities, direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
arising, of the Borrower to such Bank. Each of the Banks agrees with
each other Bank that (i) if an amount to be set off is to be applied to
Indebtedness of the Borrower to such Bank, other than Indebtedness
evidenced by the Notes held by such Bank, such amount shall be applied
ratably to such other Indebtedness and to the Indebtedness evidenced by
all such Notes held by such Bank, and (ii) if such Bank shall receive
from the Borrower, whether by voluntary payment, exercise of the right
of setoff, counterclaim, cross action, enforcement of the claim
evidenced by the Notes held by such Bank, by proceedings against the
Borrower at law or in equity or by proof thereof in bankruptcy,
reorganization, liquidation, receivership or similar proceedings, or
otherwise, and shall retain and apply to the payment of the Note or
Notes held by such Bank any amount in excess of its ratable portion of
the payments received by all of the Banks with respect to the Notes
held by such Bank, such Bank will make such disposition and
arrangements with the other Banks with respect to such excess, either
by way of distribution, PRO TANTO assignment of claims, subrogation or
otherwise as shall result in each Bank receiving in respect of the
Notes held by it, its proportionate payment as contemplated by this
Credit
15
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Agreement; PROVIDED that if all or any part of such excess
payment is thereafter recovered from such Bank, such disposition and
arrangements shall be rescinded and the amount restored to the extent
of such recovery, but without interest unless such Bank is required to
pay interest on the payment recovered from such Bank, in which case
each of the other Banks will pay its pro-rata share of such interest."
(eee) Section 14.5.3 of the Credit Agreement is hereby amended by
deleting the text "or to purchase any Letter of Credit Participation" and the
text ", Unpaid Reimbursement Obligations," and the text "and Unpaid
Reimbursement Obligations" each time any such text appears therein.
(fff) Section 14.6 of the Credit Agreement is hereby amended by
deleting the text "or the purchaser of any Letter of Credit Participation"
appearing therein.
(ggg) Section 18.1 of the Credit Agreement is hereby amended by
deleting the text ", its participating interest in the risk relating to any
Letters of Credit" appearing therein.
(hhh) Section 18.2(i) of the Credit Agreement is hereby amended by
deleting it in its entirety.
(iii) Section 18.2(g) and (h) of the Credit Agreement are hereby
amended by inserting the word "and" at the end of Section 18.2(g) and by
deleting the word "and" appearing at the end of Section 18.2(h) and by
substituting a period for the semicolon appearing at the end of Section 18.2.
(jjj) Section 18.3 of the Credit Agreement is hereby amended by
deleting the text: "and Letter of Credit Participations purchased by" appearing
therein.
(kkk) Section 18.5 of the Credit Agreement is hereby amended by
deleting the text "or Letter of Credit Fees" appearing therein.
(lll) Section 18.7 of the Credit Agreement is hereby amended by
deleting the text "or Reimbursement Obligations" each time such text appears
therein.
(mmm) Section 25 of the Credit Agreement is hereby amended by deleting
the text "or Letter of Credit Fees" each time such text appears therein.
(nnn) SCHEDULE 1 to the Credit Agreement is hereby amended by deleting
such Schedule in its entirety and substituting the SCHEDULE 1 attached hereto
in place thereof.
16
-17-
2. INTERBANK SETTLEMENTS. The Borrower and the Banks hereby agree
that all amounts paid to any Bank by any other Bank in connection with
interbank settlements with respect to Loans outstanding immediately prior to
the date hereof shall be deemed to constitute Loans under the Credit Agreement
as amended hereby.
3. NEW BANK. By its signature hereinbelow, NationsBank agrees to be
bound (to the extent of its Commitment), as a Bank, by the terms and conditions
of the Credit Agreement and the other Loan Documents, and to make Loans to the
Borrower in accordance with the terms of the Credit Agreement and in accordance
with its Commitment. By its signature hereinbelow, NationsBank further
represents, warrants, acknowledges and agrees as follows:
(a) the Agent and the Banks have made no representation or warranty
and shall have no responsibility with respect to any statements,
warranties or representations made in or in connection with the
Credit Agreement or any of the other Loan Documents or the
execution, legality, validity, enforceability, genuineness,
sufficiency, collectibility or value of the Credit Agreement or
any of the other Loan Documents, any Collateral, or any other
instrument or document furnished pursuant hereto;
(b) the Agent and the Banks have made no representation or warranty
and shall have no responsibility with respect to the financial
condition of the Borrower and its Subsidiaries or any other
Person primarily or secondarily liable in respect of any of the
Obligations, or the performance or observance by the Borrower and
its Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations of any of their
obligations under the Credit Agreement or any of the other Loan
Documents or any other instrument or document furnished pursuant
hereto or thereto;
(c) NationsBank confirms that it has received a copy of the Credit
Agreement and the other Loan Documents, together with copies of
the most recent financial statements referred to in sec.6.4 and
sec.7.4 of the Credit Agreement and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Amendment;
(d) NationsBank will, independently and without reliance upon the
other Banks or the Agent and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action
under the Credit Agreement;
17
-18-
(e) NationsBank represents and warrants that it qualifies as an
Eligible Assignee;
(f) NationsBank appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under
the Credit Agreement and the other Loan Documents as are
delegated to the Agent by the terms hereof or thereof, together
with such powers as are reasonably incidental thereto;
(g) NationsBank agrees that it will perform in accordance with
their terms all of the obligations that by the terms of the
Credit Agreement are required to be performed by it as a Bank; and
(h) NationsBank represents and warrants that it is legall authorized
to enter into this Amendment.
4. CONDITIONS TO EFFECTIVENESS. This Second Amendment shall become
effective as of the date hereof (the "Effective Date") upon the satisfaction of
each of the following conditions:
(a) this Second Amendment shall have been executed and delivered by
each of the Borrower, the Banks, the Agent and the Guarantor;
(b) the Borrower shall have executed and delivered to each of the
Banks (i) an Amended and Restated Revolving Credit Note or a
Revolving Credit Note, as the case may be, in substantially the
form of EXHIBIT A attached to the Credit Agreement in an amount
equal to such Bank's Commitment as set forth on SCHEDULE 1
attached to the Credit Agreement, as amended hereby, each such
Note to be in form and substance satisfactory to each Bank
(collectively, the "Replacement Notes").
(c) all corporate action necessary for the valid execution,
delivery and performance by the Borrower of the Credit Agreement,
as amended by this Second Amendment, and the Replacement Notes
shall have been taken, and evidence thereof satisfactory to the
Banks shall have been provided to the Banks; including, without
limitation, copies, certified by the Secretary or Assistant
Secretary of the Borrower as of the date hereof, of the
resolutions of the Borrower approving this Second Amendment; and
copies, certified by the Secretary or Assistant Secretary of the
Guarantor as of the date hereof, of the resolutions of the
Guarantor approving this Second Amendment, in a form satisfactory
to the Agent and all documents incident hereto shall be
satisfactory in form and substance to the Agent, and the Agent
shall have received all information and
18
-19-
counterpart originals or certified or other copies of such
documents as the Agent may reasonably request in a form
satisfactory to the Agent.
(d) each of the Banks shall have received a certificate of
the Secretary or Assistant Secretary of the Borrower or ACFC, as
applicable, stating (i) that no amendments to the charter
documents of the Borrower or ACFC have been adopted since May
15, 1995 (other than as set forth in such certificate); (ii)
stating that the information set forth in the Perfection
Certificates delivered to the Agent on May 15, 1995 remains true
and complete in all respects; (iii) setting forth the name,
title and specimen signature of each individual who shall be
authorized to (A) sign, in the name and on behalf of the
Borrower and ACFC this Second Amendment and the Replacement
Notes; and (B) to give notices and to take other action under
the Loan Documents, as amended hereby.
(e) the Banks and the Agent shall have received from counsel
to the Borrower and the Guarantor an opinion addressed to the
Banks dated the Effective Date, in form and substance
satisfactory to the Banks, regarding this Second Amendment, the
continuing effectiveness of the Security Documents, and the
Replacement Notes;
(f) the Banks shall have received copies of the projections of the
annual operating budgets for 1995 and 1996 fiscal years of the
Borrower and its Subsidiaries on a consolidated basis.
(g) the Banks shall have received satisfactory evidence that the
Security Documents are effective to create in favor of the
Agent, on behalf of the Banks, a legal, valid and enforceable
first (except for Permitted Liens entitled to priority under
applicable law) security interest in the Collateral, including
without limitation, results of UCC Searches with respect to the
Collateral;
(h) the Banks shall have received from each bank at which the
Borrower or any of its Subsidiaries (other than Funding)
maintains depository accounts an agreement, in form and
substance satisfactory to the Agent, concerning the Agent's
security interest for the benefit of the Banks and the Agent in
such accounts;
(i) the Banks shall have received an officer's certificate, in form
and substance satisfactory to the Agent, of the Borrower dated as
of the Effective Date as to the solvency of the Borrower and its
19
-20-
Subsidiaries following the consummation of the transactions
contemplated herein;
(j) the Banks shall have received the most recent (i) monthly status
reports under the Funding Indenture and (ii) monthly settlement
reports under the Funding II Credit Agreement delivered to the
Borrower;
(k) the Banks shall have received the most recent Accounts Receivable
aging report of (i) the Borrower and its Subsidiaries and
(ii) ACFC;
(l) the Banks shall have received the most recent Compliance
Certificate required to be delivered by the Borrower pursuant to
sec.7.4(c) of the Credit Agreement;
(m) the Banks shall have received the most recent Borrowing Base
Certificate required to be delivered by the Borrower pursuant
to sec.7.4(e) of the Credit Agreement;
(n) the Borrower shall have paid to the Agent for the pro-rata
accounts of the Banks an amendment fee in an amount equal to
$60,000.
5. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The Borrower
represents and warrants to the Agent and the Banks that:
(a) each and every one of the representations and warranties made
by the Borrower to the Agent and the Banks in sec.6 or elsewhere
in the Credit Agreement or in the other Loan Documents, as
amended by this Second Amendment, are true and correct in all
material respects on and as of the date hereof except to the
extent that any of such representations and warranties relate, by
the express terms thereof, solely to a date prior hereto;
(b) the Borrower has duly and properly performed, complied with and
observed each of its covenants, agreements and obligations
contained in sec.sec.7 and 8 or elsewhere in the Credit Agreement
or the other Loan Documents, as amended by this Second Amendment;
(c) the execution, delivery and performance of this Second
Amendment, the Replacement Notes, and the Credit Agreement, as
amended by this Second Amendment, and the transactions
contemplated hereby and thereby (i) are within the corporate
authority of the Borrower, (ii) have been duly authorized by all
necessary corporate proceedings on the part of the Borrower,
(iii) do not conflict with or result in any material breach or
contravention of any provision of
20
-21-
law, statute, rule or regulation to which the Borrower is
subject or any judgment, order, writ, injunction, license or
permit applicable to the Borrower so as to materially adversely
affect the assets, business or any activity of the Borrower as a
whole, and (iv) do not conflict with any provision of the
corporate charter or bylaws of the Borrower or any agreement or
other instrument binding upon the Borrower.
(d) the execution, delivery and performance of this Second
Amendment, the Replacement Notes and the Credit Agreement, as
modified by this Second Amendment, will result in valid and
legally binding obligations of the Borrower enforceable against
the Borrower in accordance with the respective terms and
provisions hereof and thereof, except as enforceability is
limited by bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting generally the enforcement of
creditors rights and except to the extent that availability of
the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any
proceeding therefor may be brought.
(e) the execution, delivery and performance by the Borrower of this
Second Amendment, the Replacement Notes and the Credit Agreement,
as modified by this Second Amendment, and the consummation by the
Borrower of the transactions contemplated hereby and thereby does
not require any approval or consent of, or filing with, any
governmental agency or authority other than those already
obtained.
6. RATIFICATION, ETC. Except as expressly amended by this Amendment,
the Credit Agreement and the Loan Documents and all documents, instruments and
agreements related thereto, including, but not limited to the Security
Documents, are hereby ratified and confirmed in all respects and shall continue
in full force and effect. The Borrower confirms and agrees that the
Obligations of the Borrower to the Banks under the Loan Documents, as amended
and supplemented hereby, are secured by, guarantied under, and entitled to the
benefits, of the Security Documents. The Guarantor confirms and agrees that
its guaranty of the Obligations of the Borrower to the Banks under the Loan
Documents, as amended and supplemented hereby, as set forth in the Guaranty
remains in full force and effect. The Borrower, the Guarantor, the Agent and
the Banks hereby acknowledge and agree that all references to the Credit
Agreement and the Obligations thereunder contained in any of the Loan Documents
shall be references to the Credit Agreement and the Obligations, as affected
and increased hereby and as the same may be amended, modified, supplemented, or
restated from time to time. The Borrower, the Guarantor, the Agent and the
Banks hereby acknowledge and agree that all references to the
21
-22-
Notes or Revolving Credit Notes contained in any of the Loan Documents
shall be references to the Replacement Notes, as the same may be amended,
modified, supplemented, or restated from time to time. The Security Documents
and the perfected first priority security interests of the Banks thereunder
shall continue in full force and effect, and the collateral security and
guaranties provided for in the Security Documents shall not be impaired by this
Amendment. The Credit Agreement and this Second Amendment shall be read and
construed as a single agreement.
7. MISCELLANEOUS. The Borrower hereby agrees to pay to the Agent, on
demand by the Agent, all reasonable out-of-pocket costs and expenses incurred
or sustained by the Agent or any of the Banks in connection with the
preparation of this Second Amendment and the documents referred to herein
(including reasonable legal fees). Nothing contained herein shall constitute a
waiver of, impair or otherwise affect any Obligations, any other obligation of
the Borrower or the Guarantor or any rights of the Agent or either of the Banks
consequent thereon. This Second Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument. Section headings in this Second
Amendment are included herein for convenience of reference only and shall not
constitute part of this Second Amendment for any other purpose. This Second
Amendment shall be governed by, and construed in accordance with, the laws of
the Commonwealth of Massachusetts (without reference to conflict of laws).
8. JOINDER BY GUARANTOR. The Guarantor is hereby joined to the Credit
Agreement for the purpose of making the representations and warranties set
forth in Section 6 and being made bound by the covenants set forth in Sections
7 (other than Section 7.1 and 7.2).
22
-23-
IN WITNESS WHEREOF, the undersigned have duly executed this Second
Amendment as a sealed instrument as of the date first set forth above.
HPSC, INC.
By:
------------------------------
Name:
Title:
AMERICAN COMMERCIAL
FINANCE CORPORATION
By:
------------------------------
Name:
Title
THE FIRST NATIONAL BANK
OF BOSTON, individually and
as Agent
By:
------------------------------
Name:
Title:
BANK OF AMERICA ILLINOIS,
individually and as co-agent
By:
------------------------------
Name:
Title:
CORESTATES BANK, N.A.
By:
------------------------------
Name:
Title:
23
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THE DAIWA BANK, LIMITED
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
NATIONSBANK, N.A.
By:
------------------------------
Name:
Title:
24
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
Schedule 1
----------
Banks; Addresses; Commitments; Commitment Percentages
dated as of December 1, 1995
BANK'S NAME AND ADDRESS COMMITMENT PERCENTAGE
----------------------- ---------- ----------
The First National Bank of Boston $15,000,000 25%
100 Federal Street
Boston, MA 02110
Attn.: Mitchell B. Feldman, Director
Phone: 617-434-5760
Fax: 617-434-0637
NationsBank, N.A. $15,000,000 25%
8 Fanueil Hall Market Place
Boston, MA 02109
Attn.: Mr. Guy Simmons
Phone: 617-973-6430
Fax: 617-973-6431
Bank of America Illinois $12,000,000 20%
231 South LaSalle Street
Chicago, IL 60697
Attn.: Nelson Albrecht, Assistant Vice President
Phone: 312-828-3166
Fax: 312-828-1997
CoreStates Bank, N.A. $12,000,000 20%
1339 Chestnut Street, FC-1-8-11-24
Philadelphia, PA 19107
Attn.: Verna R. Prentice, Vice President
Phone: 215-973-5866
Fax: 215-786-7704
The Daiwa Bank, Limited $ 6,000,000 10%
One Post Office Square, Suite 3820
Boston, MA 02109
Attn.: Alfred DeGemmis, Vice President
Phone: 617-451-3200
Fax: 617-423-4884
TOTAL $60,000,000 100%
25
EXHIBIT J
------- -
AMERICAN COMMERCIAL FINANCE CORPORATION - CREDIT POLICY
- -------------------------------------------------------
SUBJECT: Asset Based Lending - General Lending Policy
PURPOSE:
To define the parameters of our asset-based lending services.
SCOPE:
American Commercial Finance Corporation, ("ACFC") a subsidiary of HPSC, Inc.
POLICY STATEMENT:
- -----------------
ACFC provides secured asset-based loans to businesses for commercial
purposes. Its trading area is New England and upper New York state for loans
ranging in size from $500,000 to $3,000,000. The trading area for borrowers
engaged in the manufacture or distribution of medical equipment or supplies is
the United States.
PRODUCT TYPE:
- -------------
ACCOUNTS RECEIVABLE FINANCING
- -----------------------------
ACFC provides revolving accounts receivable financing secured by
eligible trade accounts. Advances generally will not exceed 80% of accounts
not more than 90 days (or less) in age from date of sale.
INVENTORY FINANCING
- -------------------
ACFC provides both revolving and "term like" inventory financing under
appropriate terms. Loans will not exceed 50% of borrower's active inventory,
at cost or market, whichever is lower.
TERM FINANCING
- --------------
ACFC provides term financing secured by all machinery & equipment. The
term portion generally does not exceed 50% of overall lines of credit. All
term loans have a repayment schedule, generally will not exceed 75% of
appraised liquidation value, and are cross-defaulted to all other loans.
PAGE 1 OF 5
26
AMERICAN COMMERCIAL FINANCE CORPORATION - CREDIT POLICY
- -------------------------------------------------------
SUBJECT: Asset Based Lending - Credit Authority
PURPOSE:
To establish credit authority within ACFC.
SCOPE:
American Commercial Finance Corporation, ("ACFC") a subsidiary of HPSC, Inc.
POLICY STATEMENT:
- -----------------
ACFC's credit committee approval is required of all asset-based loans.
PAGE 2 OF 5
27
AMERICAN COMMERCIAL FINANCE CORPORATION - CREDIT POLICY
- -------------------------------------------------------
SUBJECT: Asset Based Lending - Concentration of Credit
PURPOSE:
To establish guidelines for loan portfolio nix.
SCOPE:
American Commercial Finance Corporation, ("ACFC") a subsidiary of HPSC, Inc.
POLICY STATEMENT:
- ----------------
ACFC will maintain a portfolio in which no single borrower equals 10% of the
portfolio, nor will any single industry comprise more than 25% of the entire
portfolio, except the medical industry, which may be 50%.
The aforementioned goals will be implemented during the next 3-5 years of
portfolio development.
PAGE 3 OF 5
28
AMERICAN COMMERCIAL FINANCE CORPORATION - CREDIT POLICY
- -------------------------------------------------------
SUBJECT: Asset Based Lending -- Loan Administration
PURPOSE:
To establish administrative responsibilities for monitoring loans and
collateral at ACFC.
SCOPE:
American Commercial Finance Corporation, ("ACFC") a subsidiary of HPSC, Inc.
POLICY STATEMENT:
- -----------------
The Loan Administration officer of ACFC is responsible for maintaining lending
standards and for loan and collateral monitoring.
AUDITS
- ------
ACFC will perform, prior to commitment, examinations of proposed borrower's
books and records. Subsequent to a loan closing, and at a minimum, annual
examinations and semiannual examinations will be performed on loans rated less
than 6, and greater than 6 respectively. Reference is made to ACFC's
examination forms for scope.
RISK RATING
- -----------
Loan officers are responsible for risk rating each loan. ACFC's rating
matrix is the standard for establishing the rating. Each account relationship
is rated on the occasion of the receipt of a financial statement or 90 days
have elapsed since the date of the last rating.
LOAN LOSS RESERVES
- ------------------
Loan loss reserves at ACFC are based on the risk grades generated utilizing the
allocation percentages approved by the parent's Chief Financial Officer.
PROBLEM LOAN ADMINISTRATION
- ---------------------------
* NON-ACCRUAL - a borrower's inability to service debt as collateral
deteriorates is criteria for placing the account in a non-accrual status. The
president of ACFC can recommend a discretionary non-accrual to the parent's
Chief Financial Officer.
* CHARGE-OFFS - the President of ACFC will recommend charge-offs to the
parent's Chief Financial Officer.
PAGE 4 OF 5
29
AMERICAN COMMERCIAL FINANCE CORPORATION -- CREDIT POLICY
- --------------------------------------------------------
SUBJECT: Factoring Policy
PURPOSE:
To define ACFC's credit policy with respect to its factoring program.
SCOPE:
American Commercial Finance Corporation, ("ACFC") a subsidiary of HPSC, Inc.
POLICY STATEMENT:
- -----------------
ACFC's factoring program provides for the purchase of commercial invoices with
full recourse. Overall factoring program constraints are established by ACFC's
credit committee. Program guidelines which are subject to loan officer
modification are as follows:
1. The geographical territory is New England and upper New York state.
2. Excluded credits are retail/consumer and construction related businesses.
3. The maximum advance rate is 80% of invoice value. The minimum retainage is
15% of invoice value plus known dilution.
4. Each client debtor is notified of the invoice purchase.
5. Each invoice is confirmed with the client debtor prior to advance.
6. No overadvances are permitted.
LOAN LOSS RESERVES:
- -------------------
Loan loss reserve is approved by the parent's Chief Financial Officer.
COMMERCIAL INVOICES PAST DUE:
- -----------------------------
The factoring agreement provides for replacement or reimbursement for invoices
past due sixty days subject to loan officer modification. Once an invoice is
deemed uncollectible in the ordinary course, replacement or reimbursement is
mandatory.
CHARGE OFFS:
- -----------
The president of ACFC will recommend charge offs to the parent's Chief
Financial Officer.
Page 5 of 5