**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

** **

**FORM 10-K**

 

| **ý** | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|-------------------------------------------------------------------------------------------|

 

**For thefiscal year ended DECEMBER 31, 2002**

 

**or**

 
| **o** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934** |
|-------|-------------------------------------------------------------------------------------------|

 

**Commission file number 0-11618**

 

| **HPSC, INC.**                                                                      |
|-------------------------------------------------------------------------------------|
| (Exact name of registrant as specified in its charter)                              |
|                                                                                |   |   |
| **Delaware**                                                                        |   | **04-2560004** |
| (State or other jurisdiction of  incorporation or organization)                     |   | (IRS Employer Identification No.) |
|                                                                                |   |   |
| **60  STATE STREET, BOSTON, MASSACHUSETTS 02109**                                   |
| (Address of principal executive offices) (Zip Code)                                 |
|                                                                                |   |   |
| Registrant’s  telephone number, including area code:   **(617) 720-3600** |
|                                                                                |   |   |
| Securities  registered pursuant to section 12(b) of the Act:                        |
|                                                                                |   |   |
| **NONE**                                                                            |

 

Securitiesregistered pursuant to section 12(g) of the Act:

 
| **Title of Class**                         |   | **Name of Exchange  on which Registered** |
|--------------------------------------------|--------|-------------------------------------------|
|                                       |   |                                      |
| **COMMON  STOCK-PAR VALUE $.01 PER SHARE** |   | American Stock Exchange                   |

 

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

**YES****ý          NO****o**

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of regulation S-K is not contained herein, and will not be contained,to the best of the registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or any otheramendment to this Form 10-K. o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Exchange Act Rule 12b-2).

 

**YES****o        NO****ý**

 

Theaggregate market value of the voting stock held by non-affiliates of theregistrant was $22,846,502 at March 24, 2003 representing 3,195,315shares.

 

Thenumber of shares of common stock, par value $.01 per share, outstanding as ofMarch 24, 2003 was 4,134,254.

 

 

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**DOCUMENTS INCORPORATED BY REFERENCE**

 

Portionsof the Proxy Statement for the Annual Meeting of Stockholders to be held May15, 2003 (the "2003 Proxy Statement") are incorporated by referenceinto Part III of this annual report on Form 10-K.

 

The2003 Proxy Statement, except for the parts therein which have been specificallyincorporated by reference, shall not be deemed "filed" as part ofthis annual report on Form 10-K.

 

Portionsof the Company’s 2002 Annual Report to Shareholders (the “2002 Annual Report”)are incorporated by reference into Parts I, II and IV of this annual report onForm 10-K.

 

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#### **PART I**

### ** **

### ***Item 1.***  BUSINESS

 

### **GENERAL**

 

HPSC,Inc. ("HPSC" or the "Company") is a specialty financecompany engaged primarily in financing licensed healthcare providers throughoutthe United States. HPSC was incorporated in Delaware 1975 under the nameHealthco Professional Services Corporation. On April 25, 1983, the Companychanged its name to HPSC, Inc. A majority of the Company’s revenues comes fromits financing of equipment and other healthcare practice related expenses.Through its wholly-owned subsidiary, American Commercial Finance Corporation("ACFC"), the Company also provides asset-based lending to commercialand industrial businesses, principally in the eastern United States.  New originations at ACFC were discontinuedin 2002 and the Company is currently winding down the portfolio. The Companyperiodically sells leases and notes in its securitization facilities and tovarious banks.

 

HPSCprovides financing, in the form of leases and notes due in installments, to thedental, ophthalmic, chiropractic, optometry, veterinary, podiatry and othermedical and healthcare professions. At December 31, 2002, approximately 96% ofthe Company’s consolidated net investment in leases and notes consisted offinancing contracts with licensed healthcare professionals. Approximately 70%of these leases and notes are for equipment financing while approximately 30%relate to practice financing, leasehold improvements, office furniture, workingcapital and supplies. HPSC competes in the portion of the healthcare financemarket where the size of the transaction is $250,000 or less, sometimesreferred to as the "small-ticket" market. The average size of anobligor’s original obligation to the Company under a contract originated by theCompany in 2002 was approximately $40,000. The Company’s finance and leaseagreements are non-cancelable and provide for a full payout at a fixed interestrate over a term of 12 to 84 months. The Company markets its financing servicesto healthcare providers in a number of ways, including direct marketing throughtrade shows, conventions, advertising, cooperative arrangements with equipmentvendors, and through its sales staff located in 22 offices throughout theUnited States.

 

AtDecember 31, 2002, the net investment of owned and managed financing contractsin the licensed professional financing segment was $743 million, consisting ofmore than 24,600 active contracts with approximately 16,100 customers. Licensedprofessional financing contract originations were $308 million, $250 million,and $242 million, for the years ended December 31, 2002, 2001 and 2000,respectively.

 

Theremaining 4% of the Company’s portfolio consists of notes receivable due toACFC and progress payment notes receivable due to HPSC. The notes to ACFC ($12,826,000 at December31, 2002) consist of secured, asset-based, revolving lines of credit of$4 million or less to small and medium-sized manufacturers and distributors, atvariable interest rates. Advances on a revolving loan generally do not exceed80% of a borrower’s eligible accounts receivable or 50% of the value of activeinventory.  ACFC loans, which typicallyhave terms of two to three years, are “fully followed”, which means ACFCreceives daily settlement statements of its borrower’s accounts receivable andreceives daily collections into ACFC controlled collection accounts. OnDecember 31, 2002, ACFC sold five revolving loans to a third party. At the timeof the sale, the loans had a net book value of $7,426,000. The progress paymentnotes receivable due to HPSC ($6,525,000 at December 31, 2002) relate toprogress payments made for construction or leasehold improvements in advance ofthe borrower’s executing a lease or finance agreement with the Company. Thesedemand notes are secured by a blanket lien on all the assets of the licensedhealthcare professional’s practice.

 

### **BUSINESS STRATEGY**

 

TheCompany’s strategy is to expand its business and enhance its profitability by(i) maintaining its strong position in the small-ticket dental equipment marketwhile increasing its share of other medical related small-ticket equipmentfinancing markets; (ii) diversifying the Company’s revenue stream by increasingits financing of acquisitions of healthcare practices; (iii) emphasizingsuperior service to vendors and customers; (iv) increasing its direct sales andother marketing efforts; (v) maintaining and increasing its access to low-costcapital while managing interest rate risks; (vi) continuing to manageeffectively its credit risks; and (vii) capitalizing on information technologyto increase productivity and enable the Company to manage a higher volume of financingtransactions.

 

### **INDUSTRY OVERVIEW**

 

Theequipment financing industry in the United States includes a wide variety ofsources for financing the purchase or lease of equipment, ranging fromspecialty financing companies, which concentrate on a particular industry orfinancing technique, to large 

 

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bankinginstitutions, which offer a full array of financial services.

 

Themedical equipment finance industry includes two distinct markets, generallydifferentiated based on equipment price and type of healthcare provider. Thefirst market, in which the Company currently does not compete, is financing ofequipment generally priced over $250,000, which is typically sold to hospitalsand other institutional purchasers. Because of the size of the purchase, longsales cycle, and number of financing alternatives available to these types ofcustomers, their choice among financing alternatives tends to be basedprimarily on cost of financing. The second market, in which the Company doescompete, is the financing of lower-priced or "small-ticket"equipment, where the price of the financed equipment is generally $250,000 orless. Much of this equipment is sold to individual healthcare practitioners orsmall group practices, including dentists, ophthalmologists, physicians,chiropractors, veterinarians and other healthcare providers. The Companyfocuses on the small-ticket market because it is able to respond in a promptand flexible manner to the needs of individual customers. Management believesthat purchasers in the small-ticket healthcare equipment market often seek thevalue-added sales support and ease of conducting business that the Companyoffers.

 

Although the Company primarily focuses its business on equipment financingto licensed professionals, it continues to expand its financing of healthcarepractice acquisitions. Practice finance is a specialized segment of the financeindustry, in which the Company’s primary competitors are banks. Practicefinance is a relatively new business opportunity for financing companies suchas HPSC. It has developed as the sale of healthcare professional practices hasincreased. HPSC typically finances between 70% and 100% of the cost of thepractice being purchased.

 

### **HEALTHCARE PROVIDER FINANCING**

 

###### *Terms and Conditions*

** **

TheCompany’s business consists primarily of the origination of equipment financingcontracts through which the Company finances healthcare providers’ acquisitionof equipment as well as leasehold improvements, working capital and supplies.The contracts are either finance agreements (notes) or leases, and arenon-cancelable. The contracts are full payout contracts and provide forscheduled payments sufficient, in the aggregate, to cover the Company’s costs,and to provide the Company with an appropriate return on its investment. During2002, approximately 80% of the contracts originated by the Company were financeagreements (77% for 2001) while the remaining 20% were leases (23% for 2001).The Company provides its leasing customers with an option to purchase theequipment at the end of the lease, generally for 10% of its original cost. Inthe past, the majority of lessees have exercised this option. The terms of theCompany’s leases and notes range from 12 to 84 months, with a weighted-averageoriginal term of 66 months for originations for the year ended December 31,2002.

 

Allof the Company’s equipment financing contracts require the customer to: (i)maintain, service and operate the equipment in accordance with themanufacturer’s and government-mandated procedures, and (ii) make all scheduledcontract payments regardless of the performance of the equipment, withoutsetoff. Substantially all of the Company’s financing contracts provide forpayments due monthly for the term of the contract. In the event of default by acustomer, the financing contract provides the Company with the rights affordedto creditors under law, including the right to repossess the underlyingequipment and in the case of a legal proceeding arising from a default, torecover damages and attorneys’ fees. The Company’s equipment financingcontracts provide for late fees and service charges to be applied on overduepayments.

 

Althoughthe customer has the full benefit of the equipment manufacturers’ warrantieswith respect to the equipment it finances, the Company makes no warranties toits customers regarding the equipment. In addition, the financing contract obligates the customer to continueto make contract payments regardless of any defects in the equipment. Under afinancing agreement (note), the customer holds title to the equipment and theCompany has a lien on the equipment to secure the loan; under a lease, theCompany retains title to the equipment. The Company has the right to pledge orsell any financing contract without the consent of the customer.

 

Since1994, the Company has originated a total of approximately 1,410 practicefinance loans aggregating approximately $241 million in financings. The term ofa practice finance loan generally ranges from 72 to 84 months, with an averageoriginal balance of approximately $235,000 for 2002. During 2002, approximately19% of HPSC’s total healthcare originations consisted of practice financeloans. Management believes that its practice finance business contributes tothe diversification of the Company’s revenue sources and earns HPSC substantialgoodwill among healthcare providers. All practice finance inquiries received bythe Company are referred to the Boston office for processing.

 

TheCompany solicits business for its practice finance services primarily byadvertising in trade magazines, attending healthcare conventions, working withpractice brokers, and by directly approaching potential purchasers ofhealthcare practices. The majority of 

 

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thehealthcare practices financed by the Company to date have been dentalpractices. The Company has also financed the purchase of professional practicesof chiropractors, ophthalmologists, general medical practitioners,optometrists, opticians, podiatrists, and veterinarians.

 

###### *Customers*

** **

Theprimary customers for the Company’s financing contracts are healthcareproviders, including dentists, ophthalmologists, other physicians,chiropractors and veterinarians. As of December 31, 2002, no single customer(or group of affiliated customers) accounted for more than 1% of the Company’shealthcare finance portfolio. The Company’s customers are located throughoutthe United States, with a higher concentration in heavily populated states suchas California, Florida, Texas, Illinois and New York.

 

###### *Realization of Residual Values on Equipment Leases*

 

Since1997, the Company has realized in excess of 97% of the residual value ofequipment covered by leases that run to maturity. The continued growth in theCompany’s equipment lease portfolio has resulted in increases in the aggregateamount of recorded residual values on the Company’s balance sheet. As ofDecember 31, 2002, substantially all of the Company’s leasing portfolio andassociated residual values are scheduled to expire by the year 2009.Realization of such residual values depends on factors not within the Company’scontrol, such as the condition of the equipment, the cost of comparable newequipment and the technological or economic obsolescence of the equipment.Although the Company has historically received a majority of its recordedresidual values, there can be no assurance that this realization rate willcontinue.

 

###### *Government Regulation and Healthcare Trends*

 

Themajority of the Company’s present customers are healthcare providers. Thehealthcare industry is subject to substantial federal, state and localregulation. In particular, federal and state governments have enacted laws andregulations designed to control healthcare costs, including mandated reductionsin fees for the use of certain medical equipment and fixed-price reimbursementsystems, where the rates of payment to healthcare providers for particulartypes of care are fixed in advance of actual treatment.

 

Majorchanges have occurred in the United States healthcare delivery system,including the formation of integrated patient care networks (often involvingjoint ventures between hospitals and physician groups), as well as the groupingof healthcare consumers into managed-care organizations sponsored by insurancecompanies and other third parties. Moreover, state healthcare initiatives havesignificantly affected the financing and structure of the healthcare deliverysystem. These changes have not had a material adverse effect on the Company’sbusiness, but the effect of any changes on the Company’s future business cannotbe predicted.

 

### **ASSET-BASED LENDING**

 

ACFCmakes asset-based loans, generally $4 million or less, to commercial andindustrial companies, primarily secured by accounts receivable, inventory andequipment. ACFC typically makes accounts receivable loans to borrowers that cannot obtain traditional bank financing. ACFC takes a security interest in all ofthe borrower’s assets and monitors collection of its receivables. Advances on arevolving loan generally do not exceed 80% of the borrower’s eligible accountsreceivable. ACFC also makes inventory loans, generally not exceeding 50% of thevalue of the customer’s active inventory, valued at the lower of cost or marketvalue.

 

During2002, ACFC ceased originating new loans. On December 31, 2002, ACFC sold fiverevolving loans to a third party.  Atthe time of the sale, the loans had a net book value of $7,426,000. The Companyreceived proceeds of $6,683,000, plus accrued and unpaid interest to the datethereon, and incurred a pre-tax loss of $743,000.

 

### **CREDIT AND ADMINISTRATIVE PROCEDURES**

 

TheCompany processes all credit applications, and monitors all existing contractsat its corporate headquarters in Boston, Massachusetts. HPSC ’hand” underwritesall transactions (i.e. no credit scoring programs) and designates review andcredit authority levels to individual underwriters, based upon their level ofexperience and history with the Company. The Company’s credit proceduresrequire the review, verification and approval of a potential customer’s creditfile, accurate and complete documentation, delivery of equipment andverification of installation by the customer, and correct invoicing by the vendor.When a sales representative receives a credit application from a potentialobligor, he or she enters the data into the Company’s computer system. TheCompany’s credit requirements include an acceptable personal payment historyand minimum credit rating scores based on

 

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severalcredit reporting agency models. The credit of the potential obligor is checkedwith one or more commercial credit reporting agencies, including Experian Inc.,Equifax Inc., and Trans Union Corporation. Appropriate professionalorganizations may be consulted regarding the obligor’s professional status. Inaddition to an obligor’s credit profile, information such as the equipment typeand vendor may be considered. The type and level of information and timerequired for a credit decision varies according to the nature, size andcomplexity of each transaction. In smaller, less complicated transactions, adecision can often be reached within one hour; more complicated transactionsmay require up to three or four days. Once the equipment is shipped andinstalled, the vendor invoices the Company. The Company verifies that thecustomer has received and accepted the equipment and obtains the customer’sauthorization to pay the vendor. Following this telephone verification, thefile is forwarded to the Company’s accounting department for audit, booking andfunding and to commence automated billing and transaction accountingprocedures.

 

The underwriting of commercial loan contracts for the financing ofleasehold improvements, working capital or the acquisition or operation ofprofessional practices requires more extensive information than equipmentfinancing, such as: the tax returns of both the buyer and the seller of apractice, a five page application, an application fee and a complete inventoryof all office and practice equipment. A financial analysis of the seller’spractice is done to determine the adjusted cash flow available to supportexisting debt of the buyers as well as new practice acquisition debt. Cash flowis generally discounted to account for reduced practice efficiency of the newbuyer and potential patient loss that often occurs following a sale. TheCompany customizes its advance rates and other terms based upon a variety of factorsincluding type of practice, buyer specialty, geographic location, etc.

 

With respect to lease transactions, the Company will generally requireguarantees from the owners of corporate lessees. With respect to loantransactions, the Company will generally require personal guarantees fromowners of the obligor.

 

Timelyand accurate vendor payments are essential to the Company’s business. In orderto maintain its relationships with existing vendors and attract new vendors,the Company generally makes payments to vendors for financing transactionswithin one day of authorization to pay from the customer.

 

AlthoughACFC ceased originating new loans in 2002, ACFC’s underwriting procedures forexisting loans include an evaluation of the collectibility of the borrower’sreceivables pledged to ACFC, including an evaluation of the validity of suchreceivables and the creditworthiness of the payors of such receivables. In someinstances, ACFC also requires its customers to pay for credit insurance withrespect to its loans. The loan administration officer of ACFC is responsiblefor maintaining lending standards and for monitoring loans and underlyingcollateral. Before approving a loan, ACFC examines the prospective customer’sbooks and records and during the term of the loans, ACFC monitors itscustomer’s operations as deemed necessary. Loan officers are required to ratethe risk of each loan made by ACFC and to update the rating upon receipt offinancial statements from the customer or when 90 days have elapsed since thedate of the last rating.

 

### **SERVICING**

 

TheCompany fully services its equipment lease and loan portfolio. It provides boththe personnel and system resources for set-up, billing, collections, cashposting, customer service, accounting, tax compliance and all asset managementand reporting functions. The Company also handles lien searches, UniformCommercial Code filings and preparation of sales, use and property tax returns.

 

Asof December 31, 2002, the Company employed eight people dedicated to servicingand collections, seven people dedicated to documentation, six customer servicerepresentatives and four people in quality assurance.

 

### **COLLECTION POLICIES**

 

Thecompany has a centralized servicing operation at its Boston, Massachusettsheadquarters office. Lockboxes are located at Fleet National Bank and areadministered pursuant to a multiparty escrow agreement. Customers are generallybilled by invoice on the 17th day of the month prior to the nextpayment due date (all due dates are on the first day of each month).

 

Acollection management report is generated each month that alphabetically sortsall 30, 60, and 90 day delinquencies. The Company begins collection on the 15thday after the due date for all large balance delinquencies. Large balance delinquenciesare handled by senior collectors. Ordinary accounts that are delinquent by 30days are assigned to junior collection representatives. Accounts that aredelinquent by 60 days are assigned to senior collection representatives. If theaccount is 30 days past due, a telephone call is made to the customer on the 31stday. If an account is 60 days past due, a default notice is sent to thecustomer. If the customer fails to respond to the default notice, arepossession notice is sent. This notice advises the customer that unlesspayment arrangements are made, the equipment will be repossessed and sold at aprivate sale. A senior collector handles all accounts that are ninety daydelinquent in a 

 

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finalattempt to make payment arrangements. All unresolved delinquencies are referredto the Company’s collection agency or attorneys. These delinquent accounts aremonitored by the Company’s assistant manager and legal cases are handled by theassistant manager and the collection manager. The Company will attempt toremove the asset from the obligor’s premises voluntarily or through replevinprior to litigation. The Company generally is able to obtain voluntarysurrender of equipment.

 

TheCompany utilizes Western Union Phone Pay to enhance it collection activities.This product allows the Company to generate a check from an obligor at theCompany’s premises after receiving the obligor’s bank account number and ABArouting number. These custom encoded checks are applied to an obligor’s accountthe day they are generated, eliminating both the time and expense associatedwith a personal check.

 

Inaddition, collectors utilize online contract information furnished by LeadTrac(the Company’s proprietary origination tracking system) and real-time paymentstatus furnished by the LeasePlus Collection System. The LeasePlus Systemincorporates electronic comment and follow-up screens and reporting.

 

TheCompany has also begun a campaign promoting direct debit of customer accounts.Such direct debits accelerate the collection process and have a presentationpriority over paper items (checks) when processed by the obligor’s bank.

 

TheCompany accepts major credit cards for obligor payments.

 

### **ALLOWANCE FOR LOSSES AND CHARGE-OFFS**

 

TheCompany maintains an allowance for losses in connection with its financingcontracts, which it deems sufficient to meet current and future, estimateduncollectible receivables held in the Company’s portfolio. Each quarter, theCompany performs a detailed analysis of delinquent accounts to evaluatespecific factors affecting the obligor’s ability to pay. As part of theanalysis, the Company looks at the delinquency status of the customer, the fairvalue of the collateral, the current credit rating of the obligor, and thefinancial strength of guarantors, among other factors. In addition, the Companytakes into consideration the Company’s historical loss experience and generaleconomic conditions. There can be no assurance that this allowance will proveto be adequate. Failure of the Company’s customers to make scheduled paymentsunder their financing contracts could require the Company to (i) make paymentsin connection with any recourse portion of its borrowings relating to suchcontract, (ii) lose its residual interest in any underlying equipment or (iii)forfeit cash collateral pledged as security for the Company’s assetsecuritizations. In addition, any significant increase in losses or in the rateof payment defaults under the Company’s financing contracts could adverselyaffect the Company’s ability to obtain additional funding, including itsability to complete additional asset securitizations.

 

Tomanage credit risk, the Company has adopted underwriting and collectionpolicies that are closely monitored by management. Additionally, the Companymay be subject to limited recourse from leases and notes receivable sold undercertain securitization agreements. Such risk of loss is generally limited tothe extent of the Company’s retained interest in the leases and notes sold andresidual values related to equipment financed under equipment leases sold.Accounts are normally charged-off when future payments are deemed unlikely.

 

Asummary of activity in the Company’s consolidated allowance for losses for eachof the years in the three-year period ended December 31, 2002 is as follows:

 

| **(in thousands)**         |   | **2002** |    | **2001** |   | **2000** |   |
|----------------------------|--------|----------|---------|----------|--------|----------|--------|
|                       |   |     |    |     |   |     |   |
| Balance, beginning of year |   | $        | (15,359 | )        | $      | (14,170  | )      | $ | (9,150 | ) |
| Provision for losses       |   | (11,448  | )       | (9,409   | )      | (9,218   | )      |
| Charge-offs                |   | 10,255   |    | 8,253    |   | 4,287    |   |
| Recoveries                 |   | (348     | )       | (33      | )      | (89      | )      |
|                       |   |     |    |     |   |     |   |
| Balance, end of year       |   | $        | (16,900 | )        | $      | (15,359  | )      | $ | (14,170 | ) |

 

Thetotal gross contractual balances of delinquent leases and notes, both owned andmanaged by the Company, which were over 90 days past due was $27,973,000 atDecember 31, 2002 compared to $24,945,000 at December 31, 2001. An account isconsidered delinquent when not paid within 30 days of the billing due date.

 

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### **FUNDING SOURCES**

 

###### *General*

 

TheCompany’s principal sources of funding for its financing transactions atDecember 31, 2002 were: (i) a revolving loan agreement with Foothill CapitalCorporation as Agent, providing borrowing availability of up to $60 million toHPSC (the "HPSC Foothill Revolver") and $20 million to ACFC (the“ACFC Foothill Revolver”); (ii) a securitized limited recourse revolving saleand loan credit facility with a wholly-owned, special-purpose subsidiary of theCompany, HPSC Bravo Funding, LLC ("Bravo"), with an aggregateavailability of $450 million (the “MBIA portion of the Bravo Facility”); (iii)a $20 million facility with ING Capital LLC, to provide additional liquidity ofup to  3.75% of financing contracts heldin the MBIA portion of the Bravo Facility; (iv) a $527 million sale and loanterm securitization with a remaining outstanding principal balance of $230million (“Equipment Receivables 2000-1”). Financing for the term securitizationis provided through two wholly-owned, special-purpose subsidiaries of theCompany, HPSC Equipment Receivables 2000-1 LLC I (“ER 2000-1 LLC I”) and HPSCEquipment Receivables 2000-1 LLC II (“ER 2000-1 LLC II”); (v) full recourse,fixed-term loans and sales of financing contracts with savings banks and otherpurchasers; (vi) the Company’s Senior Subordinated Notes issued in 1997; and(vii) the Company’s internally generated revenues.

 

 $50Million in availability under the HPSC Foothill Revolver expires in August2005, with the remaining $10 million expiring in April 2003.  The ACFC Foothill Revolver expired inFebruary 2003, was repaid and terminated. In November 2002, the HPSC FoothillRevolver was temporarily increased to $60,000,000 through January 24, 2003. OnJanuary 31, 2003, the HPSC Foothill Revolver was further amended to temporarilyincrease availability from $50,000,000 to $60,000,000 through April 24,2003.The January 31, 2003 amendment also permits the Company to borrow up to$750,000 in the HPSC Foothill Revolver to finance the operations of its ACFCsubsidiary. On February 5, 2003, the Company borrowed $276,000 under the HPSCFoothill Revolver for the purpose of paying off the remaining outstandingbalance of the ACFC Foothill Revolver. The Company intends to seek permanentavailability above $50,000,000 under the Foothill Revolver, but there can be noassurance it will be able to do so. If the Company can not obtain commitmentsabove $50,000,000, the Company’s ability to continue its historical growthrates may be constrained.

 

 On January 29, 2003, the MBIA portion of theBravo Facility was amended to temporarily increase availability to the Companyfrom $450,000,000 to $525,000,000. The increased liquidity expires upon theearlier to occur of either the completion by the Company of a new termsecuritization transaction or April 30, 2003. In addition, continuedavailability to the Company under the Bravo Facility is contingent upon theCompany’s obtaining an additional securitization conduit facility with a thirdparty (similar in nature to the Bravo Facility). The amendment requires thatthe new conduit facility must be arranged by June 23, 2003 and must provide theCompany with a line of availability of at least $150,000,000.

 

TheMBIA and ING portion of Bravo Facility expires in June 2003. The Company intendsto continue to utilize the Bravo Facility for a portion of its permanentfinancing requirements. The Company expects that it will be able to renew theBravo Facility. It is possible, however, that the Bravo Facility or the banksproviding liquidity under the facility will not extend their commitment. Inaddition, although the Company believes that it can arrange a new facility witha third party by June 2003, there can be no assurance it will be able to do so.If the Bravo Facility is not renewed, the Facility may then be limited to thethen existing outstandings and may not be available to the Company to providefuture liquidity. If the liquidity banks terminate or reduce their commitment,the Company will seek to replace the terminated or reduced amount, but therecan be no assurance that the Company will be able to do so. If the BravoFacility is unavailable, the Company may be unable to conduct its business ormay be unable to conduct its business at current levels.

 

Furtherinformation regarding the Company’s funding sources is incorporated byreference from Notes C, D, and O of the “Notes to Consolidated FinancialStatements” at page 10 through 13 and 24, and “Management’s Discussion andAnalysis of Financial Condition” at Pages 28 through 38 of the 2002 AnnualReport.

 

Inorder to finance future operations, the Company will seek to renew and/orobtain new liquidity facilities and may seek to raise additional equity orsubordinated debt, but there can be no assurance it will be able to do so.

 

### **INFORMATION TECHNOLOGY**

 

TheCompany uses automated information systems and telecommunications capabilitiesto support its business functions, including accounting, taxes, credit,collections, operations, sales, and marketing. The Company has developed andowns proprietary software designed to support several of these businessfunctions. The Company has invested a significant amount of time and capital incomputer hardware and proprietary software. The Company’s computerized systemsprovide management with accurate and up-to-date customer data which strengthensthe Company’s internal controls and assists in its forecasting. These systemsare used to 

 

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generatemonthly billing, portfolio earnings recognition, collection histories, vendoranalysis, customer reports and credit histories and other data useful inservicing customers and equipment suppliers. They are also used to providefinancial and tax reporting, internal controls and personnel training andmanagement. The Company recently introduced an interactive website offering itscustomers advanced functionality and services, and industry-specificinformation. The Company believes that its computer systems give it acompetitive advantage by providing rapid contract processing and control overcredit risk. These systems permit the Company to offer a high level of customerservice.

 

TheCompany contracts with an outside consulting firm to provide informationtechnology services. The Company’s Boston office is linked electronically withall of the Company’s other offices. Each salesperson’s laptop computer may alsobe linked to the computer systems in the Boston office, permitting asalesperson to respond to a customer’s financing request or a vendor’sinformation request on a timely basis. Management believes that its investment in technology has positioned theCompany to manage increased equipment financing volume.

 

### **COMPETITION**

 

Healthcareprovider financing is a highly competitive business. The Company competes forcustomers with a number of national, regional and local finance companies,including those, like the Company, which specialize in financing for healthcareproviders. In addition, the Company’s competitors include equipmentmanufacturers which finance the sale or lease of their own products, otherleasing companies and other types of financial services companies such ascommercial banks and savings and loan associations. Although the Companybelieves that it currently has a competitive advantage based on its excellentcustomer service, many of the Company’s competitors and potential competitorspossess substantially greater financial, marketing and operational resourcesthan HPSC. Moreover, the Company’s future profitability may be directly relatedto the Company’s ability to obtain capital funding at rates that are comparableto or better than the capital costs of its competitors. The Company’scompetitors and potential competitors include many larger companies that have alower cost of funds and access to capital markets and to other funding sourceswhich may not be available to the Company. The Company’s ability to competeeffectively for profitable equipment financing business will continue to dependupon its ability to procure funding on attractive terms, to develop andmaintain good relations with new and existing equipment suppliers, and toattract new customers.

 

### **EMPLOYEES**

 

At December 31, 2002, the Company had 132 full-time employees, 9 ofwhom work for ACFC.  None of theCompany’s employees is represented by a labor union. Management believes thatthe Company’s employee relations are good.

 

**AVAILABLE INFORMATION**

 

Copiesof Exhibits may be obtained for a nominal charge by writing to:

 

**INVESTOR RELATIONS**

**HPSC, INC.**

**60 STATE STREET**

**BOSTON,MASSACHUSETTS 02109**

 

TheCompany’s website is http://www.hpsc.com. Investors may access, free of charge,through the Investor Relations portion of the website, the Company’s annualreports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form8-K and amendments to such reports filed or furnished pursuant to Section 13(a)or 15(d) of the Securities Exchange Act of 1934, as amended, as soon asreasonably practical after such material is electronically filed with, orfurnished to, the Securities and Exchange Commission.

 

*Item 2.*  **PROPERTIES**

 

TheCompany leases approximately 13,800 square feet of office space at 60 StateStreet, Boston, Massachusetts for approximately $37,000 per month. The leaseexpires on June 30, 2004 with a five-year extension option. ACFC leasesapproximately****5,900 square feet at 433 South Main Street, West Hartford,Connecticut for approximately $10,000 per month. This lease expired on February28, 2003. Thereafter, ACFC has continued to lease its office space on amonth-to-month basis at a reduced rate of $5,900 per month. The Company alsorents space as required for its sales locations on a shorter-term basis. Totalconsolidated rent expense for the year 2002 under all operating leases was **$**916,000.The Company believes that its facilities are adequate for its currentoperations and for the 

 

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foreseeablefuture.

 

*Item 3.*  **LEGALPROCEEDINGS**

 

Although the Company is from time to time subject to actions or claimsfor damages in the ordinary course of its business and engages in collectionproceedings with respect to delinquent accounts, the Company is aware of nosuch actions, claims, or proceedings currently pending or threatened that areexpected to have a material adverse effect on the Company’s business, operatingresults or financial condition.

 

*Item 4.*  **SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

No matters were submitted to a vote of security holders during thefourth quarter of the fiscal year ended December 31, 2002.

 

#### **PART II**

 

*Item 5.*  **MARKET FORREGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

 

OnMay 17, 2000, the Company’s common stock began trading on the American StockExchange  (Symbol: “HDR”).  Prior to that date, the Company’s commonstock was traded on the NASDAQ Market (Symbol: “HPSC”). The high and lowclosing prices for shares of the common stock as reported by the American StockExchange for each quarter in the last two fiscal years, as well as theapproximate number of holders and information with respect to dividendrestrictions, are incorporated herein by reference to page 26 of the 2002Annual Report.

** **
| **Plan Category**                                      |   | **Number of Securities to be   issued upon exercise of  outstanding options, warrants  and rights** |   | **Weighted-average exercise   price of outstanding options,  warrants and rights** |   | **Number of securities  remaining available for  future issuance under  equity compensation plans   (excluding securities  reflected in column (a))** |    |
|--------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
| Equity compensation plans approved by shareholders     |   | 1,387,500                                                                                           |   | $                                                                                  | 5.90   |                                                                                                                                                  | 0       |   |
|                                                   |   |                                                                                                |   |                                                                               |   |                                                                                                                                                  |    |
| Equity compensation plans not approved by shareholders |   | 79,000                                                                                              |   | 8.53                                                                               |   | 142,500                                                                                                                                               |    |
|                                                   |   |                                                                                                |   |                                                                               |   |                                                                                                                                                  |    |
| Total                                                  |   | 1,466,500                                                                                           |   | $                                                                                  | 6.04   |                                                                                                                                                  | 142,500 |   |

 

Furtherinformation regarding the equity compensation plans not approved byshareholders is incorporated by reference to the description of the 2002 Planand the 1998 Outside Directors Stock Bonus Plan in Note I of the 2002 AnnualReport on pages 16 to****19.

 

TheCompany neither issued nor sold equity securities during the period covered bythis annual report on Form 10-K other than shares covered by employee anddirector compensation plans.

 

*Item 6.*  **SELECTEDFINANCIAL DATA**

 

Selectedfinancial data for each of the periods in the five-year period ended December31, 2002 is incorporated by reference to page 27 of the 2002 Annual Report.

 

*Item 7.*  **MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF  OPERATIONS**

** **

The information required by this item is incorporated by reference tothe section captioned “Management’s Discussion and Analysis of Financial Condition”on pages 28 through 38 of the 2002 Annual Report.

 

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### ***Item 7a.***QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Discussion regarding Quantitative and Qualitative Disclosures aboutMarket Risk is included in “Management’s Discussion and Analysis of FinancialCondition” on pages 37 and 38 of the 2002 Annual Report.

 

#### **FORWARD-LOOKING STATEMENTS**

 

Thisannual report on Form 10-K contains forward-looking statements within themeaning of Section 27A of the Securities Act. Discussions containing suchforward-looking statements may be found in the material set forth under"Management’s Discussion and Analysis of Financial Condition and Resultsof Operations" and "Business" sections of this Form 10-K, aswell as within the annual report generally. When used in this annual report,the words "believes," "anticipates," "expects,""plans," "intends," "estimates,""continue," "could," "may" or "will"(or the negative of such words) and similar expressions are intended toidentify forward-looking statements. Such statements are subject to a number ofrisks and uncertainties. Actual results in the future could differ materiallyfrom those described in the forward-looking statements as a result of the riskconsiderations set forth below under the heading "CertainConsiderations" and the matters set forth in this annual report generally.HPSC cautions the reader, however, that such list of considerations may not beexhaustive. HPSC undertakes no obligation to release publicly the result of anyrevisions to these forward-looking statements that may be made to reflect anyfuture events or circumstances.

 

 

#### **CERTAIN CONSIDERATIONS**

 

*Dependence on Funding Sources;Restrictive Covenants*.The Company’s financing activities are capital intensive. The Company’srevenues and profitability are related directly to the volume of financingcontracts it originates. To generate new financing contracts, the Companyrelies on access to the capital markets. At December 31, 2002, the Company’stwo principal sources of funding for its financing transactions were (i) a $60million revolving credit facility with Foothill Capital Corporation, as Agent,10 million of which expires in April 2003 and $50 million of which expires inAugust 2005 (the “Foothill Revolver”); (ii) a $450 million securitizationconduit facility through HPSC Bravo Funding, LLC and insured by MBIA (the“Bravo Facility”), which expires in June 2003. Other sources of fundinginclude: a $20 million credit facility with ING Capital LLC; a term assetsecuritization of $527 million completed in December 2000; fixed-rate, fullrecourse term loans from several savings banks; specific recourse sales offinancing contracts to savings banks and other purchasers; the issuance of SeniorSubordinated Notes in 1997; the Company’s internally generated revenues; and a$20 million revolving credit facility with Foothill Capital Corporation, asAgent, to ACFC (the “ACFC Foothill Revolver”). The ACFC Foothill Revolverexpired on February 5, 2003, was repaid and terminated. The HPSC FoothillRevolver expires in August 2005. There can be no assurance that the Companywill be able to renew or extend the HPSC Foothill Revolver or to completeadditional asset securitizations or to obtain other additional financing whenneeded and on acceptable terms. The Company would be adversely affected if itwere unable to continue to secure sufficient and timely funding on acceptableterms.  On January 29, 2003, the MBIAportion of the Bravo Facility was amended to temporarily increase availabilityto the Company from $450 million to $525 million.  The increased liquidity expires upon the earlier to occur ofeither the completion by the Company of a new term securitization transaction,or April 30, 2003.  Continuedavailability under the Bravo Facility is contingent on the Company obtaining anadditional securitization conduit facility by June 2003 with an availability ofat least $150 million. The Company expects that it will be able to renew theBravo Facility but there can be no assurance that it will be able to do so. Inaddition, there can be no assurance that the Company will be able to arrange anew facility meeting these requirements by June 2003. If the Bravo Facility isnot renewed, it may then be limited to the then existing outstandings and maynot be available to provide future liquidity for the Company. If this were tohappen, the Company may be unable to conduct its business at current levels orat all. The agreement governing the HPSC Foothill Revolver (the “RevolverAgreement”) contains numerous financial and operating covenants. There can beno assurance that the Company will be able to comply with these covenants, andfailure to meet such covenants or the failure of the lending banks to agree toamend or waive compliance with covenants that the Company does not meet wouldresult in a default under the Revolver Agreement. Moreover, the Company’sfinancing arrangements with Bravo and the savings banks described aboveincorporate the covenants and default provisions of the Revolver Agreement. Theterm asset securitization facility also contains covenants and defaultprovisions as does the Indenture governing the Company’s Senior SubordinatedNotes. Thus, any material default that is not amended or waived under any ofthese agreements will result in a default under most or all of the Company’sfinancing arrangements.  In addition,the Indenture for the Senior Subordinated Notes contains certain limits on theCompany’s ability to incur certain types and amounts of senior debt.

 

*Securitization Recourse; PaymentRestriction and Default Risk*. As part of its overall funding strategy, the Company utilizes assetsecuritization transactions provided through wholly-owned, bankruptcy-remotesubsidiaries to obtain fixed-rate, matched-term financing. The Companytransfers financing contracts to these subsidiaries which, in turn, eitherpledge or sell the contracts to third parties. The third parties’ recourse withregard to the pledge or sale is limited to the contracts sold to thesubsidiary. If the contract portfolio of these subsidiaries does not performwithin certain guidelines, the subsidiaries must retain or "trap" anymonthly cash distribution to which the Company might otherwise be entitled. Thisrestriction on cash distributions could continue until the portfolioperformance returns to acceptable levels (as defined in the relevantagreements), which restriction could have a negative impact on the cash flowavailable to the Company. In the event of a “payment trap”, there can be noassurance that the portfolio performance would return to acceptable levels orthat the payment restrictions would be removed. Recourse under securitizationagreements is limited to 

 

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thefinancing contracts contributed to the securitization and for any breach of theCompany’s representations and warranties regarding the validity andenforceability (but not the collectibility) of such contracts.

 

*Customer Credit Risks*. The Company maintains an allowance for doubtfulaccounts in connection with payments due under financing contracts originatedby the Company (whether or not such contracts have been securitized, held ascollateral for loans to the Company or sold) at a level which the Company deemssufficient to meet future estimated uncollectible receivables, based on ananalysis of delinquencies and overall risks and probable losses associated withsuch contracts, and a review of the Company’s historical credit lossexperience. There can be no assurance that this allowance will prove to beadequate. Failure of the Company’s customers to make scheduled payments undertheir financing contracts could require the Company to (i) make payments inconnection with its recourse savings bank loan and asset sale transactions,and/or (ii) lose its retained interest and residual interest in equipmentpledged as security for the Company’s limited recourse asset securitizations.In addition, any increase in losses or in the rate of payment defaults underthe financing contracts originated by the Company could adversely affect theCompany’s ability to obtain additional financing, including restricting itsability to borrow under its Foothill Revolver and its ability to completeadditional asset securitizations and secured asset sales or loans. There can beno assurance that the Company will be able to maintain or reduce its currentlevel of credit losses.

 

*Competition*. The Company operates in highly competitivemarkets. The Company competes for customers with a number of national, regionaland local finance companies, including those, like the Company, whichspecialize in financing for healthcare providers. In addition, the Company’scompetitors include those equipment manufacturers which finance the sale orlease of their products themselves, other leasing companies and other types offinancial services companies such as commercial banks and savings and loanassociations. Many of the Company’s competitors and potential competitorspossess substantially greater financial, marketing and operational resourcesthan the Company. Moreover, the Company’s future profitability will be directlyrelated to its ability to obtain capital funding at funding rates that arecomparable to or better than the capital costs of its competitors. TheCompany’s competitors and potential competitors include many larger companiesthat have a lower cost of funds than the Company and access to capital marketsand to other funding sources that may be unavailable to the Company. There canbe no assurance that the Company will be able to continue to competesuccessfully in its targeted markets.

 

*Changes in Healthcare Payment Policies*. The vast majority of the Company’s customersare healthcare providers. The increasing cost of medical care has brought aboutfederal and state regulatory changes designed to limit governmentalreimbursement of certain healthcare providers. These changes include theenactment of fixed-price reimbursement systems in which the rates of payment tohospitals, outpatient clinics and private individual and group practices forspecific categories of care are determined in advance of treatment. Risinghealthcare costs may also cause non-governmental medical insurers, such as BlueCross and Blue Shield associations and the growing number of self-insuredemployers, to revise their reimbursement systems and policies governing thepurchasing and leasing of medical and dental equipment. Alternative healthcaredelivery systems, such as health maintenance organizations, preferred providerorganizations and managed care programs, have adopted similar cost containmentmeasures. Other proposals to reform the United States healthcare system areconsidered from time to time. These proposals could lead to increasedgovernment involvement in healthcare and otherwise change the operatingenvironment for the Company’s customers. Healthcare providers may react tothese proposals and the uncertainty surrounding such proposals by curtailing ordeferring investment in medical and dental equipment. Future changes in thehealthcare industry, including governmental regulation thereof, and the effectof such changes on the Company’s business cannot be predicted. Changes inpayment or reimbursement programs could adversely affect the ability of theCompany’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.

 

*Interest Rate Risk*. The Company’s financing contracts generallyrequire the Company’s customers to make payments at fixed rates for a specifiedterm. Approximately $60 million of the Company’s borrowings are at variableinterest rates and are not hedged. Thus, any increase in interest rates wouldreduce the Company’s financing margins and could adversely affect the Company’sbusiness, operating results and financial condition. The Company’s ability tosecure additional long-term financing at favorable rates is limited by manyfactors, including competition, market and general economic conditions and theCompany’s financial condition.

 

*Residual Value Risk*. At the inception of its equipment leasingtransactions, the Company estimates what it believes will be the fair marketvalue of the financed equipment at the end of the lease term and records thatvalue (typically 10% of the initial purchase price) on its balance sheet. TheCompany’s results of operations depend, to some degree, upon its ability torealize these residual values (as of December 31, 2002, the estimated residualvalue of equipment at the end of the lease term was approximately $26****million,representing approximately 5% of the Company’s total assets). The Company’sability to realize these residual values depends on many factors, several ofwhich are not within the Company’s control, including, but not limited to,general economic conditions at the time of the lease expiration; any unusualwear and tear on the equipment; the cost of comparable new equipment; theextent, if any, to which the equipment has become obsolete during the leasecontract term; and the effects of any new government regulations.

 

12

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Althoughthe Company has in the past generally realized in excess of 97% of the residualvalue of its leased equipment, there can be no assurance that it will continueto do so. If, upon the expiration of a lease, the Company sells or refinancesthe leased equipment and the amount realized is less than the original recordedresidual value for such equipment, a loss reflecting the difference will berecorded on the Company’s books. Failure to realize aggregate recorded residualvalues could have an adverse effect on the Company’s business, operatingresults and financial condition.

 

*Dependence on Sales Representatives*. The Company is, and its growth and futurerevenues are, dependent in a large part upon (i) the ability of the Company’ssales representatives to establish new relationships, and maintain existingrelationships, with equipment vendors, distributors and manufacturers and withhealthcare providers and other customers and (ii) the extent to which suchrelationships lead equipment vendors, distributors and manufacturers to promotethe Company’s financing services to potential purchasers of their equipment.Although the Company is not materially dependent upon any one salesrepresentative, the loss of a group of sales representatives could, untilappropriate replacements were obtained, have a material adverse effect on theCompany’s business, operating results and financial condition.

 

*Dependence on Current Management*. The operations and future success of theCompany are dependent upon the continued efforts of the Company’s executiveofficers, two of whom are also directors of the Company. The loss of theservices of any of these key executives could have a material adverse effect onthe Company’s business, operating results and financial condition.

 

*Fluctuations in Quarterly OperatingResults*.  The Company has historically experiencedfluctuating quarterly revenues and earnings due to varying portfolioperformance and operating and interest costs. Given the possibility of suchfluctuations, the Company believes that quarterly comparisons of the results ofits operations during any fiscal year are not necessarily meaningful and thatresults for any one fiscal quarter should not be relied upon as an indicationof future performance.

 

*General Market Risk.*  Thedemand for the Company’s financing products is subject to overall market risks,such as inflation, recession and changes in technology needs of medicalprofessionals.

 

*Item 8.*   **FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA**

 

Theinformation required by this item together with the Independent Auditors’Report****isincorporated by reference to pages 1 through 27 of the 2002 Annual Report.

 

*Item 9.  ***CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

 

NotApplicable

 

**PART III**

 

*Item 10.*  **DIRECTORSAND EXECUTIVE OFFICERS OF THE REGISTRANT**

** **

Theinformation required by this item is incorporated by reference from thesections captioned "PROPOSAL ONE — ELECTION OF DIRECTORS - Nominees forClass I Directors," " - Members of the Board of Directors Continuingin Office" and " - Other Executive Officers" and "VOTINGSECURITIES - Section 16(a) Beneficial Ownership Reporting Compliance" inthe 2003 Proxy Statement to be filed on or about April 15, 2003.

 

*Item 11.*  **EXECUTIVECOMPENSATION**

 

Theinformation required by this item is incorporated by reference from thesections captioned "EXECUTIVE COMPENSATION - Summary CompensationTable," " - Stock Loan Program," " - Supplemental ExecutiveRetirement Plan," " - Option Grants in Last Fiscal Year," "- Aggregated Option Exercises and Year-End Option Values," " -Employment Agreements, Termination of Employment and Change in ControlArrangements" and " - Compensation of Directors" in the 2003Proxy Statement to be filed on or about April 15, 2003.

 

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* *

*Item 12.*  **SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

 

Theinformation required by this item is incorporated by reference from the sectioncaptioned "VOTING SECURITIES - Share Ownership of Certain BeneficialOwners and Management" in the 2003 Proxy Statement to be filed on or aboutApril 15, 2003.

 

*Item 13.*  **CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS**

 

Theinformation required by this item is incorporated by reference from the sectioncaptioned “VOTING SECURITIES – Certain Transactions” in the 2003 ProxyStatement to be filed on or about April 15, 2003.

 

*Item 14.*  **CONTROLS ANDPROCEDURES**

 

Disclosurecontrols and procedures: Within 90 days before filing this report, the Companyhas evaluated the effectiveness of the design and operation of its disclosurecontrols and procedures. Disclosure controls and procedures are the controlsand other procedures that we designed to ensure that the Company record,process, summarize and report in a timely manner the information it mustdisclose in reports filed with the SEC. John Everets, Chairman and ChiefExecutive Officer, and Rene Lefebvre, Senior Executive Vice President and ChiefFinancial Officer, reviewed and participated in this evaluation. Based on thisreview, Messrs. Everets and Lefebvre concluded that, as of the date of theevaluation, the Company’s disclosure controls were effective in timely alertingthem to material information relating to the Company required to be included inthis annual report on Form 10-K.

 

InternalControls: Since the date of the evaluation described above, there have not beenany significant changes in our internal accounting controls or in other factorsthat could significantly affect those controls.

 

**PART IV**

 

*Item 15.*  **EXHIBITS,FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K**

 
| (a)  1.  **FINANCIAL STATEMENTS**                                                                                        | **PAGE NUMBER IN**

**2002 ANNUAL REPORT**                                                                                                                   |
|-------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                          |                                                                                                                                                         |   |
| Incorporated  by reference from the Company’s Annual Report to Stockholders for the fiscal  year ended December 31, 2002 |                                                                                                                                                         |
|                                                                                                                          |                                                                                                                                                         |   |
|                                                                                                                          | Consolidated  Balance Sheets at December 31, 2002 and December 31, 2001                                                                                      | 1 |
|                                                                                                                          |                                                                                                                                                         |   |
|                                                                                                                          | Consolidated  Statements of Operations for each of the three years in the period ended  December 31, 2002                                                    | 2 |
|                                                                                                                          |                                                                                                                                                         |   |
|                                                                                                                          | Consolidated  Statements of Changes in Stockholders’ Equity and Comprehensive Income for  each of the three years in the period ended December 31, 2002 | 3 |
|                                                                                                                          |                                                                                                                                                         |   |
|                                                                                                                          | Consolidated  Statements of Cash Flows for each of the three years in the period ended  December 31, 2002                                                    | 4 |
|                                                                                                                          |                                                                                                                                                         |   |
|                                                                                                                          | Independent  Auditors’ Report                                                                                                                           |   25 |
|                                                                                                                               |                                                                                                                                                              |  |  |

 

(a)  2.  **FINANCIALSTATEMENT SCHEDULES**

 

FinancialStatement Schedules have been omitted because of the absence of conditionsunder which they are required or because the required information is given inthe consolidated financial statements or notes thereto.

 

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(a)          3.  **EXHIBITS**

 
| **Exhibit  No.** |   | **Title**                                                                                                                                              |   | **Method of Filing**                                                                                                               |
|------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------|
|             |   |                                                                                                                                                   |   |                                                                                                                               |
| 3.1              |   | Restated  Certificate of Incorporation of HPSC, Inc                                                                                                    |   | Incorporated  by reference to Exhibit 3.1 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1995   |
|             |   |                                                                                                                                                   |   |                                                                                                                               |
| 3.2              |   | Certificate  of Amendment to Restated Certificate of Incorporation of HPSC, Inc. filed in  Delaware on September 14, 1987                              |   | Incorporated  by reference to Exhibit 3.2 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1995   |
|             |   |                                                                                                                                                   |   |                                                                                                                               |
| 3.3              |   | Certificate  of Amendment to Restated Certificate of Incorporation of HPSC, Inc. filed in  Delaware on May 22, 1995                                    |   | Incorporated  by reference to Exhibit 3.3 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1995.  |
|             |   |                                                                                                                                                   |   |                                                                                                                               |
| 3.4              |   | Amended  and Restated By-Laws                                                                                                                          |   | Incorporated  by reference to Exhibit 3.1 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended September 30, 1999.  |
|             |   |                                                                                                                                                   |   |                                                                                                                               |
| 4.1              |   | Amended  and Restated Rights Agreement dated as of September 16, 1999 between the  Company and The First National Bank of Boston, N.A.                 |   | Incorporated  by reference to Exhibit 4.1 to HPSC’s Current Report on Form 8-K filed  November 5, 1999.                       |
|             |   |                                                                                                                                                   |   |                                                                                                                               |
| *10.1            |   | HPSC,  Inc. Stock Option Plan, dated March 5, 1986                                                                                                     |   | Incorporated  by reference to Exhibit 10.6 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 30, 1989  |
|             |   |                                                                                                                                                   |   |                                                                                                                               |
| *10.2            |   | Amendment  No. 1 to the HPSC, Inc. Stock Option Plan dated March 5, 1986                                                                               |   | Incorporated  by reference to Exhibit 10.2 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2001  |
|             |   |                                                                                                                                                   |   |                                                                                                                               |
| *10.3            |   | HPSC,  Inc. Employee Stock Ownership Plan Agreement dated December 22, 1993 between  HPSC, Inc. and John W. Everets and Raymond R Doherty, as trustees |   | Incorporated  by reference to Exhibit 10.9 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 25, 1993  |
|             |   |                                                                                                                                                   |   |                                                                                                                               |
| *10.4            |   | First  Amendment effective January 1, 1993 to HPSC, Inc. Employee Stock Ownership  Plan                                                                |   | Incorporated  by reference to Exhibit 10.2 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 25, 1994       |
|             |   |                                                                                                                                                   |   |                                                                                                                               |
| *10.5            |   | Second  Amendment effective January 1, 1994 to HPSC, Inc. Employee Stock Ownership  Plan                                                               |   | Incorporated  by reference to Exhibit 10.11 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1994 |
|             |   |                                                                                                                                                   |   |                                                                                                                               |
| *10.6            |   | Third  Amendment effective January 1, 1993 to HPSC, Inc. Employee Stock Ownership  Plan                                                                |   | Incorporated  by reference to Exhibit 10.12 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1994 |
|             |   |                                                                                                                                                   |   |                                                                                                                               |
| *10.7            |   | HPSC,  Inc. 1994 Stock Plan dated as of March 23, 1994 and related forms of Nonqualified  Option Grant and Option Exercise Form                        |   | Incorporated  by reference to Exhibit 10.4 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 25, 1994       |
|             |   |                                                                                                                                                   |   |                                                                                                                               |
| *10.8            |   | Amended  and Restated HPSC, Inc. 1995 Stock Incentive Plan                                                                                             |   | Incorporated  by reference to Exhibit 10.27 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1995 |

 

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| *10.9  |   | First  Amendment to HPSC, Inc. Amended and Restated 1995 Stock Incentive Plan                                           |   | Incorporated  by reference to Exhibit 10.2 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 1999             |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                    |   |                                                                                                                                     |
| *10.10 |   | HPSC,  Inc. Amended and Restated 1998 Stock Incentive Plan                                                              |   | Incorporated  by reference to Exhibit 10.1 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 1999             |
|   |   |                                                                                                                    |   |                                                                                                                                     |
| *10.11 |   | Amendment  No. 1 to the Amended and Restated 1998 Stock Option Plan                                                     |   | Incorporated  by reference to Exhibit 10.11 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2001       |
|   |   |                                                                                                                    |   |                                                                                                                                     |
| *10.12 |   | HPSC,  Inc. 2000 Stock Incentive Plan                                                                                   |   | Incorporated  by reference to Exhibit 10.1 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 2000             |
|   |   |                                                                                                                    |   |                                                                                                                                     |
| *10.13 |   | Amendment  No. 1 to the HPSC, Inc. 2000 Stock Option Plan                                                               |   | Incorporated  by reference to Exhibit 10.13 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2001       |
|   |   |                                                                                                                    |   |                                                                                                                                     |
| *10.14 |   | HPSC,  Inc. Amended Outside Directors Stock Bonus Plan                                                                  |   | Incorporated  by reference to Exhibit 10.11 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2000       |
|   |   |                                                                                                                    |   |                                                                                                                                     |
| *10.15 |   | Amended  and Restated Stock Loan Program                                                                                |   | Incorporated  by reference to Exhibit 10.1 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended September 30, 2001        |
|   |   |                                                                                                                    |   |                                                                                                                                     |
| *10.16 |   | Stock  Option grant to Lowell P. Weicker effective December 7, 1995                                                     |   | Incorporated  by reference to Exhibit 10.28 to HPSC’’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1995 |
|   |   |                                                                                                                    |   |                                                                                                                                     |
| *10.17 |   | HPSC,  Inc. Supplemental Executive Retirement Plan dated as of January 1, 1997                                          |   | Incorporated  by reference to Exhibit 10.12 to HPSC’s Annual Report on Form 10-K for the  fiscal year-ended December 31, 1997       |
|   |   |                                                                                                                    |   |                                                                                                                                     |
| *10.18 |   | First  Amendment dated March 15, 1999 to HPSC, Inc. Supplemental Executive  Retirement Plan dated as of January 1, 1997 |   | Incorporated  by reference to Exhibit 10.12 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1998       |
|   |   |                                                                                                                    |   |                                                                                                                                     |
| *10.19 |   | Second  Amendment to HPSC, Inc. Supplemental Executive Retirement Plan                                                  |   | Incorporated  by reference to Exhibit 10.3 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 1999             |
|   |   |                                                                                                                    |   |                                                                                                                                     |
| *10.20 |   | Third  Amendment to HPSC, Inc. Supplemental Executive Retirement Plan                                                   |   | Incorporated  by reference to Exhibit 10.15 HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1999          |
|   |   |                                                                                                                    |   |                                                                                                                                     |
| *10.21 |   | Fourth  Amendment to the HPSC, Inc. Supplemental Executive Retirement Plan, dated  August 10, 2000                      |   | Incorporated  by reference to Exhibit 10.6 to HPSC’s Quarterly Report Form 10-Q for the  quarter ended June 30, 2000                |

 

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| *10.22 |   | HPSC,  Inc. 1998 Executive Bonus Plan                                                                                                                                                                                                                                   |   | Incorporated  by reference to Exhibit 10.32 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1998 |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                    |   |                                                                                                                               |
| *10.23 |   | 2001  Supplemental Executive Bonus Plan                                                                                                                                                                                                                                 |   | Incorporated  by reference to Exhibit 10.2 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended September 30, 2001  |
|   |   |                                                                                                                                                                                                                                                                    |   |                                                                                                                               |
| *10.24 |   | HPSC,  Inc. 401(k) Plan dated February, 1993 between HPSC, Inc. and Metropolitan  Life Insurance Company                                                                                                                                                                |   | Incorporated  by reference to Exhibit 10.15 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 25, 1993 |
|   |   |                                                                                                                                                                                                                                                                    |   |                                                                                                                               |
| *10.25 |   | Amended  and Restated Employment Agreement between HPSC, Inc. and John W. Everets  dated August 4, 2000                                                                                                                                                                 |   | Incorporated  by reference to Exhibit 10.7 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 2000       |
|   |   |                                                                                                                                                                                                                                                                    |   |                                                                                                                               |
| *10.26 |   | Amended  and Restated Employment Agreement between HPSC, Inc. and Raymond R. Doherty  dated August 4, 2000                                                                                                                                                              |   | Incorporated  by reference to Exhibit 10.8 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 2000       |
|   |   |                                                                                                                                                                                                                                                                    |   |                                                                                                                               |
| *10.27 |   | Amended  and Restated Employment Agreement between HPSC, Inc. and Rene Lefebvre dated  August 4, 2000                                                                                                                                                                   |   | Incorporated  by reference to Exhibit 10.9 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 2000       |
|   |   |                                                                                                                                                                                                                                                                    |   |                                                                                                                               |
| 10.28  |   | Lease  dated as of March 8, 1994 between the Trustees of 60 State Street Trust and  HPSC, Inc., dated September 10, 1970 and relating to the principal executive  offices of HPSC, Inc. at 60 State Street, Boston, Massachusetts                                       |   | Incorporated  by reference to Exhibit 10.1 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1994  |
|   |   |                                                                                                                                                                                                                                                                    |   |                                                                                                                               |
| 10.29  |   | Second  Amendment, dated May 1998, to Lease dated as of March 8, 1994 between the  Trustees of 60 State Street Trust and HPSC, Inc., dated September 10, 1970  and relating to the principal executive offices of HPSC, Inc. at 60 State  Street, Boston, Massachusetts |   | Incorporated  by reference to Exhibit 10.2 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1999  |
|   |   |                                                                                                                                                                                                                                                                    |   |                                                                                                                               |
| 10.30  |   | Fourth  Amended and Restated Credit Agreement dated May 12, 2000 among HPSC, Inc. and  Fleet National Bank individually and as Agent, and the Banks named therein                                                                                                       |   | Incorporated  by reference to Exhibit 10.14 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 2000      |
|   |   |                                                                                                                                                                                                                                                                    |   |                                                                                                                               |
| 10.31  |   | First  Amendment dated as of December 1, 2000 to Fourth Amended and Restated Credit  Agreement dated May 12, 2000 among HPSC, Inc., American Commercial Finance  Corporation and Fleet National Bank individually and as Agent, and the Banks  named therein.           |   | Incorporated  by reference to Exhibit 10.27 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2000 |
|   |   |                                                                                                                                                                                                                                                                    |   |                                                                                                                               |
| 10.32  |   | Second  Amendment dated as of December 31, 2000 to Fourth Amended and Restated Credit  Agreement dated May 12, 2000 among HPSC, Inc., American Commercial Finance  Corporation and Fleet National Bank individually and as Agent, and the Banks  named therein.         |   | Incorporated  by reference to Exhibit 10.32 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2001 |
|   |   |                                                                                                                                                                                                                                                                    |   |                                                                                                                               |
| 10.33  |   | Third  Amendment dated as of May 8, 2001 to Fourth Amended and Restated Credit  Agreement dated May 12, 2000 among HPSC, Inc., American Commercial Finance  Corporation and Fleet National Bank individually and as Agent, and the Banks  named therein.                |   | Incorporated  by reference to Exhibit 10.1 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 2000.      |

 

17

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| 10.34  |   | Purchase  and Contribution Agreement dated as of January 31, 1995 between HPSC, Inc.  and HPSC Bravo Funding Corp.                                                                                                                            |   | Incorporated  by reference to Exhibit 10.31 to HPSC’s Annual Report on Form 10-K for the fiscal  year ended December 31, 1994 |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                          |   |                                                                                                                               |
| 10.35  |   | Amended  and Restated Purchase and Contribution Agreement, dated March 31, 2000,  between HPSC, Inc. and HPSC Bravo Funding Corp.                                                                                                             |   | Incorporated  by reference to Exhibit 10.1 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended March 31, 2000      |
|   |   |                                                                                                                                                                                                                                          |   |                                                                                                                               |
| 10.36  |   | Amendment  No. 1 to Amended and Restated Purchase and Contribution Agreement dated as of  June 16, 2000, between HPSC, Inc. and HPSC Bravo Funding Corp.                                                                                      |   | Incorporated  by reference to Exhibit 10.5 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 2000       |
|   |   |                                                                                                                                                                                                                                          |   |                                                                                                                               |
| 10.37  |   | Credit  Agreement dated as of January 31, 1995 among HPSC Bravo Funding Corp.,  Triple-A One Funding Corporation, as lender, and CapMAC, as Administrative  Agent and as Collateral Agent                                                     |   | Incorporated  by reference to Exhibit 10.32 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1994 |
|   |   |                                                                                                                                                                                                                                          |   |                                                                                                                               |
| 10.38  |   | Amended  and Restated Lease Receivable Purchase Agreement, dated March 31, 2000 by and  among HPSC Bravo Funding Inc., HPSC, Inc., Triple-A One Funding Corporation  and Capital Markets Assurance Corporation                                |   | Incorporated  by reference to Exhibit 10.2 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended March 31, 2000      |
|   |   |                                                                                                                                                                                                                                          |   |                                                                                                                               |
| 10.39  |   | Agreement  to furnish copies of Omitted Exhibits to Certain Agreements with HPSC Bravo  Funding Corp.                                                                                                                                         |   | Incorporated  by reference to Exhibit 10.33 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 1994 |
|   |   |                                                                                                                                                                                                                                          |   |                                                                                                                               |
| 10.40  |   | Amendment  No. 1 to Amended and Restated Lease Receivables Purchase Agreement dated as  of May 26, 2000, among HPSC Bravo Funding Corp., HPSC, Inc., Triple-A One  Funding Corp. and Capital Markets Assurance Corp.                          |   | Incorporated  by reference to Exhibit 10.4 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 2000       |
|   |   |                                                                                                                                                                                                                                          |   |                                                                                                                               |
| 10.41  |   | Consent  dated December 20, 2000 to Amended and Restated Lease Receivables Purchase  Agreement dated as of December 20, 2000, among HPSC Bravo Funding Corp., HPSC  Inc., Triple–A One Funding Corp. and Capital Markets Assurance Corp. |   | Incorporated  by reference to Exhibit 10.35 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2000 |
|   |   |                                                                                                                                                                                                                                          |   |                                                                                                                               |
| 10.42  |   | Amendment  documents, effective November 5, 1996 to Credit Agreement dated as of January  31, 1995 among HPSC Bravo Funding Corp., Triple-A Funding Corporation, as  Lender, and CapMAC, as Administrative Agent and as Collateral Agent      |   | Incorporated  by reference to Exhibit 10.26 to HPSC’s Registration Statement on Form S-1  filed January 30, 1997              |
|   |   |                                                                                                                                                                                                                                          |   |                                                                                                                               |
| 10.43  |   | Amendment  No. 3 dated June 29, 1998 to Credit Agreement dated January 31, 1995 by and  among HPSC Bravo Funding Corp., Triple-A One Funding Corporation and CapMac,  as Administrative Agent and Collateral Agent                            |   | Incorporated  by reference to Exhibit 10.6 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended March 30, 1998      |
|   |   |                                                                                                                                                                                                                                          |   |                                                                                                                               |
| 10.44  |   | Merger  Agreement dated May 14, 2001 between HPSC Bravo Funding, LLC and HPSC Bravo  Funding Corp.                                                                                                                                            |   | Incorporated  by reference to Exhibit 10.2 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 2001       |

 

18

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| 10.45  |   | Lease  Receivables Purchase Agreement dated as of June 27, 1997 among HPSC Capital  Funding, Inc., as Seller, HPSC, Inc. as Service and Custodian, EagleFunding  Capital Corporation as Purchaser and BankBoston Securities, Inc. as Deal  Agent                                                                                                                                            |   | Incorporated  by reference to Exhibit 10.1 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended September 30, 1997             |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                          |
| 10.46  |   | Appendix  A to EagleFunding Purchase Agreement (Definitions List Attached).                                                                                                                                                                                                                                                                                                                 |   | Incorporated  by reference to Exhibit 10.2 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended September 30, 1997             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                          |
| 10.47  |   | 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.                                                                                                                                                                                                                        |   | Incorporated  by reference to Exhibit 10.3 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended September 30, 1997             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                          |
| 10.48  |   | Undertaking  to Furnish Certain Copies of Omitted Exhibits to Exhibit 10.27 hereof.                                                                                                                                                                                                                                                                                                         |   | Incorporated  by reference to Exhibit 10.4 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended September 30, 1997             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                          |
| 10.49  |   | Amendment  No. 2, dated April 30, 1998 to Lease Receivable Purchase Agreement dated June  27, 1997, by and among HPSC Capital Funding, Inc. (Seller), EagleFunding  Capital Corporation (Purchaser), HPSC, Inc. (Servicer and Custodian), and  BankBoston Securities, Inc. (Deal Agent)                                                                                                     |   | Incorporated  by reference to Exhibit 10.4 to HPSC’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 1998                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                          |
| 10.50  |   | Amendment No. 3, dated April 4, 1999 to Lease  Receivable Purchase Agreement dated June 27, 1997, by and among HPSC Capital  Funding, Inc. (Seller), EagleFunding Capital Corporation (Purchaser), HPSC,  Inc. (Servicer and Custodian), and BankBoston Securities, Inc. (Deal Agent)                                                                                                       |   | Incorporated by reference to Exhibit 10.32 to HPSC’s  Annual Report on Form 10-K for the fiscal year ended December 31, 1999             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                          |
| 10.51  |   | Amendment  No. 3 and Consent dated December 1, 2000 to Lease Receivables Purchase  Agreement dated June 27, 1997 by and among HPSC Capital Funding Inc.  (Seller), Eagle Funding Capital Corporation (Purchaser), HPSC, Inc. (Services  and Custodian), Robertson Stephens Inc. (formerly known as BancBoston  Securities Inc. (Old Deal Agent) and Fleet Securities Inc. (New Deal Agent). |   | Incorporated  by reference to Exhibit 10.44 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2000            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                          |
| 10.52  |   | Indenture  dated as of March 20, 1997 between HPSC, Inc. and State Street Bank and Trust  Company, as Trustee                                                                                                                                                                                                                                                                               |   | Incorporated  by reference to HPSC’s Exhibit 10.28 to HPSC’s Annual Report on Form 10K for  the fiscal year ended December 31, 1997 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                          |
| 10.53  |   | Limited  Liability Company Agreement of HPSC Equipment Receivables 2000-1 LLC I                                                                                                                                                                                                                                                                                                             |   | Incorporated  by reference to Exhibit 10.46 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2000            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                          |
| 10.54  |   | Limited  Liability Company Agreement of HPSC Equipment Receivables 2000-1 LLC II                                                                                                                                                                                                                                                                                                            |   | Incorporated  by reference to Exhibit 10.47 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2000            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                          |
| 10.55  |   | Custody  Agreement among HPSC Equipment Receivables 2000-1 LLC I, HPSC Equipment Receivables  2000-1 LLC II, BNY Midwest Trust Company, Iron Mountain Records Management,  Inc., and HPSC, Inc. dated as of December 1, 2000                                                                                                                                                                |   | Incorporated  by reference to Exhibit 10.48 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2000            |

 

19

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| 10.56  |   | Servicing  Agreement by and among HPSC Equipment Receivables 2000-1 LLC I, HPSC  Equipment Receivables 2000-1 LLC II, HPSC, Inc., American Commercial Finance  Corporation, BNY Midwest Trust Company and BNY Asset Solutions, LLC dated as  of December 1, 2000          |   | Incorporated  by reference to Exhibit 10.49 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2000 |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                      |   |                                                                                                                               |
| 10.57  |   | Purchase  Agreement for Equipment Contract-Backed Notes, Series 2000-1 of Class A-F  between HPSC Equipment Receivables 2000-1 LLC I, HPSC Equipment Receivables  2000-1 LLC II and Credit Suisse First Boston Corporation dated December 14,  2000                       |   | Incorporated  by reference to Exhibit 10.50 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2000 |
|   |   |                                                                                                                                                                                                                                                                      |   |                                                                                                                               |
| 10.58  |   | Purchase  Agreement for Floating Rate Equipment Contract-Backed Variable Funding Notes,  Series 2000-1 between HPSC Equipment Receivables 2000-1 LLC I, HPSC Equipment  Receivables 2000-1 LLC II and Credit Suisse First Boston Corporation dated  December 14, 2000     |   | Incorporated  by reference to Exhibit 10.51 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2000 |
|   |   |                                                                                                                                                                                                                                                                      |   |                                                                                                                               |
| 10.59  |   | Receivables  Transfer Agreement by and among HPSC Equipment Receivables 2000-1 LLC I, HPSC  Equipment Receivables 2000-1 LLC II, HPSC, Inc., American Commercial Finance  Corporation, HPSC Bravo Funding Corp. and HPSC Capital Funding, Inc. dated as  December 1, 2000 |   | Incorporated  by reference to Exhibit 10.52 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2000 |
|   |   |                                                                                                                                                                                                                                                                      |   |                                                                                                                               |
| 10.60  |   | Indenture  Agreement by and among HPSC Equipment Receivables 2000-1 LLC I, HPSC  Equipment Receivables 2000-1 LLC II, HPSC, Inc., American Commercial Finance  Corporation, and BNY Midwest Trust Company dated as of December 1, 2000                                    |   | Incorporated  by reference to Exhibit 10.53 to HPSC’s Annual Report on Form 10-K for the  fiscal year ended December 31, 2000 |
|   |   |                                                                                                                                                                                                                                                                      |   |                                                                                                                               |
| 10.61  |   | Third Amendment to the Fourth Amended and Restated  Credit Agreement, dated as of May 8, 2001, by and among HPSC, Inc., Fleet  National Bank individually and as Agent, and the banks named therein                                                                       |   | Incorporated by reference to Exhibit 10.1 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2001        |
|   |   |                                                                                                                                                                                                                                                                      |   |                                                                                                                               |
| 10.62  |   | Merger Agreement, dated May 14, 2001, between HPSC  Bravo Funding, LLC and HPSC Bravo Funding Corporation                                                                                                                                                                 |   | Incorporated by reference to Exhibit 10.2 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2001        |
|   |   |                                                                                                                                                                                                                                                                      |   |                                                                                                                               |
| *10.63 |   | Description of HPSC, Inc. Stock Loan Program for  eligible employees of HPSC, Inc. adopted January 5, 1995, as amended as of  July 28, 1997, as further amended as of December 14, 2000 and September 14,  2001                                                           |   | Incorporated by reference to Exhibit 10.1 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended September 30, 2001   |
|   |   |                                                                                                                                                                                                                                                                      |   |                                                                                                                               |
| *10.64 |   | HPSC, Inc. 2001 Supplemental Executive Bonus Plan  for executive officers of HPSC, Inc. effective as of September 13, 2001                                                                                                                                                |   | Incorporated by reference to Exhibit 10.2 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended September 30, 2001   |
|   |   |                                                                                                                                                                                                                                                                      |   |                                                                                                                               |
| 10.65  |   | Fourth Amendment to Fourth Amended and Restated  Credit Agreement, dated as of May 6, 2002, by and among HPSC, Inc., American  Commercial Finance Corporation, Fleet National Bank, individually and as  Agent, and the banks named therein                               |   | Incorporated by reference to Exhibit 10.1 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended March 31, 2002       |

 

20

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| 10.66  |   | Fifth Amendment to Fourth Amended and Restated  Credit Agreement, dated June 6, 2002, by and among HPSC, Inc., American  Commercial Finance Corporation, Fleet National Bank, individually and as  Agent, and the Banks names therein                              |   | Incorporated by reference to Exhibit 10.6 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2002      |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                               |   |                                                                                                                             |
| *10.67 |   | HPSC, Inc. 2002 Supplemental Stock Incentive Plan,  dated May 14, 2002                                                                                                                                                                                             |   | Incorporated by reference to Exhibit 10.1 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2002      |
|   |   |                                                                                                                                                                                                                                                               |   |                                                                                                                             |
| 10.68  |   | Custody Agreement, dated June 25, 2002, by and among  HPSC Bravo Funding, LLC, Triple-A Funding Corporation, Capital Markets  Assurance Corporation and Iron Mountain Information Management, Inc.                                                                 |   | Incorporated by reference to Exhibit 10.2 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2002      |
|   |   |                                                                                                                                                                                                                                                               |   |                                                                                                                             |
| 10.69  |   | Master Amendment and Waiver, dated August 5, 2002,  by and among HPSC Bravo Funding, LLC, HPSC, Inc., Triple-A Funding  Corporation and Capital Markets Assurance Corporation                                                                                      |   | Incorporated by reference to Exhibit 10.3 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2002      |
|   |   |                                                                                                                                                                                                                                                               |   |                                                                                                                             |
| 10.70  |   | Second Amended and Restated Lease Receivable  Purchase Agreement, dated August 5, 2002, by and among HPSC Bravo Funding,  LLC, HPSC, Inc., Triple-A Funding Corporation and Capital Markets Assurance  Corporation                                                 |   | Incorporated by reference to Exhibit 10.4 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2002      |
|   |   |                                                                                                                                                                                                                                                               |   |                                                                                                                             |
| 10.71  |   | Receivables Interest Purchase Agreement, dated  August 5, 2002, by and among HPSC Bravo Funding, LLC, HPSC, Inc., Triple-A  Funding Corporation, BNY Asset Solutions LLC, ING Capital LLC and Capital  Markets Assurance Corporation                               |   | Incorporated by reference to Exhibit 10.5 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2002      |
|   |   |                                                                                                                                                                                                                                                               |   |                                                                                                                             |
| 10.72  |   | Fifth Amended and Restated Loan and Security  Agreement, dated August 5, 2002, by and among HPSC, Inc., the Banks named  therein and Foothill Capital Corporation                                                                                                  |   | Incorporated by reference to Exhibit 10.7 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2002      |
|   |   |                                                                                                                                                                                                                                                               |   |                                                                                                                             |
| 10.73  |   | Purchase and Sale Agreement, dated August 5, 2002,  by and among Fleet National Bank, individually and as Agent, Keybank National  Association, Banknorth, N.A., PNC Bank, National Association, Citizens Bank  of Massachusetts and Foothill Capital Corporation. |   | Incorporated by reference to Exhibit 10.8 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2002      |
|   |   |                                                                                                                                                                                                                                                               |   |                                                                                                                             |
| 10.74  |   | Fifth Amended and Restated Loan and Security  Agreement, dated August 5, 2002, by and among American Commercial Finance  Corporation, the Lenders named therein and Foothill Capital Corporation                                                                   |   | Incorporated by reference to Exhibit 10.9 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2002      |
|   |   |                                                                                                                                                                                                                                                               |   |                                                                                                                             |
| 10.75  |   | Amendment No. 1 to Second Amended and Restated Lease  Receivable Purchase Agreement, dated as of September 20, 2002, by and among  HPSC Bravo Funding, LLC, HPSC, Inc., Triple-A Funding Corporation and Capital  Markets Assurance Corporation                    |   | Incorporated by reference to Exhibit 10.1 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 |
|   |   |                                                                                                                                                                                                                                                               |   |                                                                                                                             |
| *10.76 |   | John Everets Employment Agreement, dated July 19,  2002                                                                                                                                                                                                            |   | Incorporated by reference to Exhibit 10.2 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 |
|   |   |                                                                                                                                                                                                                                                               |   |                                                                                                                             |
| *10.77 |   | Raymond Doherty Employment Agreement, dated July 19,  2002                                                                                                                                                                                                         |   | Incorporated by reference to Exhibit 10.3 to HPSC’s  Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 |

 

21

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| 10.78  |   | Amendment Number 1, dated as of November 8, 2002 to  Fifth Amended and Restated Loan and Security Agreement dated as of August 5,  2002, by and among HPSC, Inc., each of the lenders that is a signatory  thereto and Foothill Capital Corporation                                  |   | Filed herewith |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|
|   |   |                                                                                                                                                                                                                                                                                 |   |           |
| 10.79  |   | Amendment No. 2, dated as of January 29, 2003,  to Second Amended and Restated Lease  Receivables Purchase Agreement dated as of August 5, 2002,by and among HPSC  Bravo Funding, LLC, HPSC, Inc., Triple-A One Funding Corporation, and Capital  Markets Assurance Corporation |   | Filed herewith |
|   |   |                                                                                                                                                                                                                                                                                 |   |           |
| 10.80  |   | Amendment Number 2, dated as of January 31, 2003 to  Fifth Amended and Restated Loan and Security Agreement dated as of August 5,  2002, by and among HPSC, Inc., each of the lenders that is a signatory  thereto and Foothill Capital Corporation                                  |   | Filed herewith |
|   |   |                                                                                                                                                                                                                                                                                 |   |           |
| 10.81  |   | Amendment No. 2, dated as of March 19, 2003, to the  Amended and Restated Purchase and Contribution Agreement dated as of March  31, 2000, by and between HPSC Bravo Funding, LLC and HPSC, Inc.                                                                                     |   | Filed herewith |
|   |   |                                                                                                                                                                                                                                                                                 |   |           |
| 10.82  |   | Amendment No. 3, dated as of March 19, 2003, to the  Second Amended and Restated Lease Receivables Purchase Agreement dated as of  August 5, 2002, by and among HPSC Bravo Funding, LLC, HPSC, Inc., Triple-A  One Funding Corporation and Capital Markets Assurance Corporation     |   | Filed herewith |
|   |   |                                                                                                                                                                                                                                                                                 |   |           |
| 13.1   |   | HPSC, Inc. 2002 Annual Report to Shareholders                                                                                                                                                                                                                                        |   | Filed herewith |
|   |   |                                                                                                                                                                                                                                                                                 |   |           |
| 21.1   |   | Subsidiaries of HPSC, Inc.                                                                                                                                                                                                                                                           |   | Filed herewith |
|   |   |                                                                                                                                                                                                                                                                                 |   |           |
| 23.1   |   | Consent of Deloitte & Touche LLP                                                                                                                                                                                                                                                 |   | Filed herewith |
|   |   |                                                                                                                                                                                                                                                                                 |   |           |
| 99.1   |   | Chief Executive Officer Certification                                                                                                                                                                                                                                                |   | Filed herewith |
|   |   |                                                                                                                                                                                                                                                                                 |   |           |
| 99.1   |   | Chief Financial Officer Certification                                                                                                                                                                                                                                                |   | Filed herewith |

 

----

*Management contracts or compensatory plans or arrangements required to be filedas exhibits are identified by an asterisk.

 

(b) Reports on Form 8-K

 

None

 

22

----

 

#### **SIGNATURES**

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Act of1934, HPSC, Inc. has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
|                   | *HPSC, Inc.*             |
|------------------------|--------------------------|
|                   |                     |
| Dated:  March 31, 2003 | By:  /s/ John W. Everets |   |
|                   |                     | *John W. Everets* |
|                   |                     | *Chairman, Chief Executive* |
|                   |                     | *Officer and Director* |
|                   |                     |
|                        |                          |  |  |

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of HPSC, Inc. and in thecapacities and on the dates indicated.

 
| **NAME** |                       | **TITLE** |                                                                    | **DATED**           |
|----------|----------------------------|-----------|-------------------------------------------------------------------------|---------------------|
|     |                       |      |                                                                    |                |
| By:      | /s/ John W. Everets        |      | Chairman,  Chief Executive Officer and Director                         | **March  31, 2003** |
|     | John W. Everets            |      | (Principal  Executive Officer)                                          |                |
|     |                       |      |                                                                    |                |
| By:      | /s/ Raymond R. Doherty     |      | President  and Director                                                 | **March  31, 2003** |
|     | Raymond R. Doherty         |      |                                                                    |                |
|     |                       |      |                                                                    |                |
| By:      | /s/ Rene Lefebvre          |      | Senior  Executive Vice President, Chief Financial Officer and Treasurer | **March  31, 2003** |
|     | Rene Lefebvre              |      | (Principal  Financial Officer)                                          |                |
|     |                       |      |                                                                    |                |
| By:      | /s/ William S. Hoft        |      | Vice  President- Finance                                                | **March  31, 2003** |
|     | William S. Hoft            |      | (Principal  Accounting Officer)                                         |                |
|     |                       |      |                                                                    |                |
| By:      | /s/ Dollie A. Cole         |      | Director                                                                | **March  31, 2003** |
|     | Dollie A. Cole             |      |                                                                    |                |
|     |                       |      |                                                                    |                |
| By:      | /s/ Thomas M. McDougal     |      | Director                                                                | **March  31, 2003** |
|     | Thomas M. McDougal         |      |                                                                    |                |
|     |                       |      |                                                                    |                |
| By:      | /s/ Samuel P. Cooley       |      | Director                                                                | **March  31, 2003** |
|     | Samuel P. Cooley           |      |                                                                    |                |
|     |                       |      |                                                                    |                |
| By:      | /s/ J. Kermit Birchfield   |      | Director                                                                | **March  31, 2003** |
|     | J. Kermit Birchfield       |      |                                                                    |                |
|     |                       |      |                                                                    |                |
| By:      | /s/ Richard D. Field       |      | Director                                                                | **March  31, 2003** |
|     | Richard D. Field           |      |                                                                    |                |
|     |                       |      |                                                                    |                |
| By:      | /s/ Lowell P. Weicker, Jr. |      | Director                                                                | **March  31, 2003** |
|     | Lowell P. Weicker, Jr.     |      |                                                                    |                |

 

23

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CERTIFICATION

 

I, John W. Everets, certify that:

 

1.                                       I have reviewed this annual report**onForm 10-K of HPSC, Inc.;

 

2.                                       Based on my knowledge, this annual reportdoes not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this annual report;

 

3.                                       Based on my knowledge, the financialstatements, and other financial information included in this annual report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this annual report;

 

4.                                       The registrant’s other certifyingofficers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and15d-14) for the registrant and we have:

 

a)                                      Designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this annual report**isbeing prepared;

 

b)                                     Evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within90 days prior to the filing date of this annual report (the “EvaluationDate”); and

 

c)                                      Presented in this annual report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

 

5.                                       The registrant’s other certifyingofficers and I have disclosed, based on our most recent evaluation, to theregistrant’s auditors and the audit committee of registrant’s board ofdirectors (or persons performing the equivalent function):

 

a)                                      All significant deficiencies in thedesign or operation of internal controls which could adversely affect theregistrant’s ability to record, process, summarize and report financial dataand have identified for the registrant’s auditors any material weaknesses ininternal controls; and

 

b)                                     Any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6.                                       The registrant’s other certifyingofficers and I have indicated in this annual report whether or not there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

Date:                    March 31, 2003
| /s/ John W. Everets     |
|-------------------------|
| John W. Everets         |
| Chief Executive Officer |

 

24

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CERTIFICATION

I, Rene Lefebvre, certify that:

 

1.                                       I have reviewed this annual report**onForm 10-K of HPSC, Inc.;

 

2.                                       Based on my knowledge, this annual reportdoes not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this annual report;

 

3.                                       Based on my knowledge, the financialstatements, and other financial information included in this annual report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this annual report;

 

4.                                       The registrant’s other certifyingofficers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and15d-14) for the registrant and we have:

 

a)                                      Designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this annual report**isbeing prepared;

 

b)                                     Evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within90 days prior to the filing date of this annual report (the “EvaluationDate”); and

 

c)                                      Presented in this annual report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

 

5.                                       The registrant’s other certifyingofficers and I have disclosed, based on our most recent evaluation, to theregistrant’s auditors and the audit committee of registrant’s board ofdirectors (or persons performing the equivalent function):

 

a)                                      All significant deficiencies in thedesign or operation of internal controls which could adversely affect theregistrant’s ability to record, process, summarize and report financial dataand have identified for the registrant’s auditors any material weaknesses ininternal controls; and

 

b)                                     Any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6.                                       The registrant’s other certifyingofficers and I have indicated in this annual report whether or not there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

Date:                    March 31, 2003
| /s/ Rene Lefebvre       |
|-------------------------|
| Rene Lefebvre           |
| Chief Financial Officer |

 

25

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