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EXHIBIT 10.9
Amended
August 4, 2000
HPSC, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
April 23, 1998
(as amended on
August 4, 2000)
Xxxx Xxxxxxxx
HPSC, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Dear Xxxx:
On behalf of the Board of Directors, I am pleased that you have accepted
our offer to continue to serve as Chief Financial Officer of HPSC, Inc. (the
"Company"). This agreement will formally record the arrangements to which we
agreed. I would appreciate your noting your acceptance of these terms and
returning a copy to me as soon as possible.
1. You have served as the Company's Chief Financial Officer since May 19,
1994, reporting to the Chairman and Chief Executive Officer. You will adhere to
policies established by the Chairman and Chief Executive Officer and by the
Board of Directors.
2. Your annual base salary will be established by the Compensation
Committee of the Board of Directors ( the "Compensation Committee") on an annual
basis but it shall not be less than $170,000 paid in accordance with our normal
payroll practices. The Compensation Committee has developed a performance-based
incentive compensation plan ("Incentive Plan") for key management based on
earnings, working capital management and achieving strategic objectives. The
Incentive Plan is designed to reward members of key management for achieving
superior results. You shall be eligible to receive awards under the Incentive
Plan, as determined annually by the Compensation Committee.
3. You will be eligible for the fringe benefit plans applicable to the
Company's key employees, including the Company's Employee Stock Ownership Plan.
The Company will provide you with an appropriate automobile. You will be
entitled to take four (4) weeks' vacation annually.
4. You will be eligible for awards under the Company's 2000 Stock
Incentive Plan, as it may be amended from time to time, and under any subsequent
similar plans, as determined by the Compensation Committee.
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5. While you are an employee of the Company you will devote your full
working time and your best efforts to its business. After your employment ends,
you will not in any manner compete with the Company's business or be employed by
a competitor of the Company while you are receiving severance payments. At all
times during your employment and thereafter you will maintain the confidence of
the trade secrets and other confidential and proprietary information of the
Company and you will not use any such information for any purpose other than the
business of the Company. For a period of one year after the end of your
employment, you will not make any offers of employment to any employees of the
Company.
6. This agreement will continue until April 23, 2001. Thereafter, it will
automatically renew from year to year unless you or the Company give notice of
an intention not to renew sixty (60) days in advance of any expiration date. You
or the Company may terminate your employment and this agreement at any time for
any reason on thirty (30) days' notice, except that the Company may terminate
you for cause (as defined in Exhibit A) without notice. Except as provided in
Paragraph 7, you will receive monthly severance payments, equal to your monthly
salary on the date your employment ends, as follows:
i. None, if you are terminated for cause, if you give notice of your
intention not to renew your employment agreement, or if you terminate
your employment at any other time;
ii. Six months, if the Company gives notice of its intention not to renew
your employment agreement; and
iii. Twelve months, if the Company otherwise terminates your employment.
You will also be entitled to your normal employee benefits during such time
period.
7. A. In the event a "Change of Control" (as defined in Exhibit A)
occurs and during the three (3) year period thereafter:
(x) your employment is terminated by the Company for any reason other
than "for cause" (as defined in Exhibit A); or
(y) you terminate your employment due to a Change in Your Employment
(as defined in Exhibit A) made by the Company,
the following will apply as of the date that the termination described in either
(x) or (y) above occurs:
(i) you will receive an amount equal to the average of your total
compensation from the Company which was includable in your gross
income for federal income tax purposes (as reported on IRS Form
W-2) for each of the preceding five (5) calendar years ending
before the date of the Change of Control (or if you have not been
employed for five (5) years for such lesser period as you have
been employed, with your compensation to be annualized for any
portion of a calendar year of your employment that is shorter
than
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twelve months) multiplied by 2.99, provided, however, that you
may choose, in your discretion, to receive a lesser amount than
you are entitled to receive under this Section 7A(i) if after
consultation with the Compensation Committee you determine that
it is in your best interests to accept a lesser amount;
(ii) the non-compete provisions of paragraph 5 will no longer apply
to you;
(iii) your stock options and restricted stock awards, to the extent
not already vested, will entirely vest; and
(iv) your normal employee benefits will be payable for the next
twelve (12) months.
B. In the event a "Change of Control" (as defined in Exhibit A)
occurs and during the three (3) year period thereafter you terminate your
employment for any reason other than a "Change in Your Employment" (as defined
in Exhibit A) by the Company, the following will apply as of the date of
termination:
(i) you will receive your base monthly pay for the next twelve (12)
months plus an additional monthly payment equal to the maximum
incentive compensation you would have earned for the next twelve
(12) months; and
(ii) your normal employee benefits will be payable for the next twelve
(12) months.
C. In the event a "Change of Control" (as defined in Exhibit A)
occurs and during the three (3) year period thereafter your employment is
terminated by the Company "for cause" (as defined in Exhibit A), the Company's
only liability to you will be to pay any arrearages of salary or bonus as of the
date of termination.
8. This Agreement may not be changed orally but only a written agreement
signed by you and an authorized representative of the Company. If any provision
of this agreement is found by a court to be unenforceable, the remaining
provisions shall continue in effect. This agreement will be governed by
Massachusetts law.
9. The Company shall (a) indemnify you for fees and expenses incurred in
successfully enforcing against the Company your rights under this Agreement, and
(b) pay your expenses incurred in enforcing your rights under this Agreement, in
advance of a final disposition of the action relating to such enforcement, upon
receipt of your undertaking to repay the amount advanced if the Company prevails
upon the final disposition of such action.
10.
A. The following definitions are used in this paragraph 10.
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"Code" means the Internal Revenue Code of 1986, as amended, and
regulations and proposed regulations thereunder.
"Excise Tax" means the excise tax imposed by Code Section 4999.
"Gross-Up Payment" means the additional amount to be paid by the
Company under this Agreement, as determined by paragraph (b) of this section.
"Payment" means any payment or benefit received or to be received by
or on behalf of the Executive pursuant to the terms of this Agreement or
received or to be received by or on behalf of the Executive pursuant to any plan
or arrangement or other agreement with the Company (or any affiliate of the
Company pursuant to the provisions of Code Section 280G(d)(5)).
"Tax Counsel" means the tax counsel selected by the Company and
reasonably acceptable to the Executive.
B. In the event that any Payment is (or is determined by Tax Counsel to
be) subject to the Excise Tax, the Company shall pay to or on behalf of the
Executive at the time specified in paragraph (c) of this section, a Gross-Up
Payment determined such that the net amount retained by the Executive, after
deduction of (i) the Excise Tax on all Payments, and (ii) any federal, state and
local income tax and Excise Tax upon the Gross-Up Payments provided for by this
paragraph (b), and (iii) any interest, penalties or additions to tax payable by
the Executive with respect thereto, shall be equal to the total present value
(determined at a discount rate of 7% compounded annually) of all of the Payments
at the time such Payments are to be made. For purposes of determining whether
any of the Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) (I) the total amount of the Payments shall be treated as
"Parachute Payments" within the meaning of Code Section 280G(b)(2), and (II) all
"Excess Parachute Payments" within the meaning of Code Section 280G(b)(1) shall
be treated as subject to the Excise Tax, except to the extent that, in the
opinion of Tax Counsel, a Payment (in whole or in part) does not constitute a
"Parachute Payment" within the meaning of Code Section 280G(b)(2), or such
"Excess Parachute Payments" (in whole or in part) are not subject to the Excise
Tax, (ii) the amount of the Payments that shall be treated as subject to the
Excise Tax shall be equal to the lesser of (I) the total amount of the Payments
or (II) the amount of "Excess Parachute Payments" within the meaning of Code
Section 280G(b)(1) (after applying clause (i) hereof), and (iii) the value of
any non-cash benefits or any deferred payment or benefit shall be determined by
Tax Counsel in accordance with the principles of Code Sections 280G(d)(3) and
(4). For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax at the highest marginal rate
of federal income taxation applicable to individuals in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rates of taxation applicable to individuals as are in effect in
the state and locality of his or her residence in the calendar year in which the
Gross-Up Payment is to be made, net of the maximum reduction in federal income
taxes that can be obtained from deduction of such state and local taxes, taking
into account any limitations applicable to individuals subject to federal income
tax at the highest marginal rate.
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C. The Gross-Up Payments provided for in paragraph (b) of this section
shall be made upon the earlier of (i) the payment to the Executive of any
Payment or (ii) the imposition upon or payment by the Executive of any Excise
Tax. Notwithstanding the foregoing, to the extent that the Company or Tax
Counsel determines that the Excise Tax or any portion of any Gross-Up Payment is
required to be withheld from the compensation of the Executive and to be
deposited with the applicable federal, state and local tax authorities, the
Company shall increase the amount of the Executive's compensation by the
required amount of such withholding, and then shall withhold and pay all such
required withholding taxes to the appropriate tax authorities, and upon doing so
shall be deemed to have met the payment requirements of this paragraph. For
purposes of this section, if anyone other than the Executive is subjected to the
Excise Tax with respect to any Payments, such person shall be entitled to the
same Gross-Up Payments with respect to such Payment that the Executive would
have been entitled to under this section.
D. If it is established pursuant to a final determination of a court or
an Internal Revenue Service proceeding or the opinion of Tax Counsel that the
Excise Tax is less than the amount taken into account under paragraph (b) of
this section, the Executive (or other payee, as the case may be) shall repay to
the Company within five days of his or her receipt of notice of such final
determination or opinion the portion of the Gross-Up Payment attributable to
such reduction (plus the portion of the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the Gross-Up
Payment being repaid by him or her if such repayment results in a reduction in
Excise Tax or a federal, state and local income tax deduction) plus any interest
received by him or her on the amount of such repayment. If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding or the opinion of Tax Counsel that the Excise Tax exceeds the amount
taken into account under paragraph (b) of this section (including by reason of
any payment the existence or amount of which cannot be determined at the time of
the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess within five days of the Company's receipt of notice of
such final determination or opinion.
Sincerely,
HPSC, Inc.
By: /s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
Chairman and Chief Executive
Officer
ACCEPTED:
/s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx
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EXHIBIT A
DEFINITIONS
1. DEFINITION OF "CHANGE IN CONTROL"
A "Change in Control" has the meaning set forth in the Company's 1998
Stock Incentive Plan, as amended to the date hereof.
2. DEFINITION OF "CHANGE IN YOUR EMPLOYMENT"
A "Change in Your Employment" by the Company which would entitle you to
terminate and receive benefits in accordance with Section 7 hereof would be:
(i) Diminution in your duties and responsibilities so that you are
no longer Chief Financial Officer of the Company; or
(ii) reduction in pay or benefits; or
(iii) forced relocation outside of the greater Boston area.
3. DEFINITION OF "CAUSE"
"Cause" which would entitle the Company to terminate you would be:
(i) Your conviction of a crime involving moral turpitude; or
(ii) Any act of dishonesty which is material to the business of the
Company.
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