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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between HPSC, Inc., a Delaware corporation (the
"Company"), and Xxxx X. Xxxxxxx (the "Executive"), dated as of July 19, 1999.
W I T N E S S E T H
WHEREAS, the Executive has served as Chairman and Chief Executive Officer
of the Company since July 19, 1993, most recently pursuant to an employment
agreement dated July 19, 1996;
WHEREAS, the Company wishes to provide for the continued employment by the
Company of the Executive, and the Executive wishes to continue to serve the
Company, on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive, and the
Executive shall be an employee of the Company, on the terms and conditions set
forth in this Agreement, for a period (the "Employment Period") commencing on
the date hereof (the "Effective Date") and ending on the third anniversary of
the Effective Date; provided, however, that, on the third anniversary of the
Effective Date and each subsequent anniversary thereof (each of such third and
subsequent anniversaries, an "Extension Date"), the Employment Period shall
automatically be extended for one additional year unless, at least six months
prior to the applicable Extension Date, the Company or the Executive shall have
given notice not to extend this Agreement. The Employment Period shall end upon
the termination of the Executive's employment hereunder, as of the Date of
Termination (as defined in Section 4(d)).
2. SCOPE OF EMPLOYMENT. (a) Position. During the Employment Period, the
Executive shall continue to serve as Chairman of the Board of the Directors and
Chief Executive Officer of the Company. The Executive shall adhere to policies
established by the Board of Directors of the Company (the "Board").
(b) DUTIES. During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive shall devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive under this Agreement,
use the Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
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(c) LOCATION. The Company's headquarters shall be located in
Boston, Massachusetts, and the Executive shall be based and reside in the
general area of Boston, except for reasonable travel obligations.
3. COMPENSATION. The Executive's compensation during the Employment
Period shall be determined by the Board upon the recommendation of the committee
of the Board having responsibility for approving the compensation of senior
executives (the "Compensation Committee"), subject to Sections 3(a) through
3(d).
(a) BASE SALARY. During the Employment Period, commencing on the
Effective Date, the Executive shall receive an annual base salary ("Base
Salary") as determined by the Compensation Committee from time to time.
Commencing January 1, 2000, the Executive's Base Salary shall be at a rate of
not less than $345,000. The Base Salary shall be payable in accordance with the
Company's regular payroll practice for its senior executives, as in effect from
time to time.
(b) INCENTIVE PLAN. The Compensation Committee has developed an
incentive compensation plan ("Incentive Plan") for key management employees. The
Incentive Plan is designed to pay the Executive up to One Hundred Percent (100%)
of his annual base salary for achieving the results established by the
Compensation Committee. The Executive shall be eligible to receive awards under
the Incentive Plan, as determined annually by the Compensation Committee.
(c) OTHER INCENTIVE COMPENSATION. During the Employment Period,
the Executive shall be eligible for additional awards under the Company's
Amended and Restated 1998 Stock Incentive Plan, as it may be amended from time
to time, or under any subsequent similar plans, as determined by the
Compensation Committee.
(d) OTHER BENEFITS. During the Employment Period, (i) the
Executive shall participate in all applicable savings and retirement plans,
practices, policies and programs of the Company that are from time to time
applicable to senior executives of the Company including the Company's Employee
Stock Ownership Plan and Supplemental Executive Retirement Plan; (ii) the
Executive and/or the Executive's eligible dependents, as the case may be, shall
be eligible for participation in, and shall receive all benefits under, all
applicable welfare benefit plans, practices, policies and programs provided by
the Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life insurance, group life insurance,
accidental death and travel accident insurance plans and programs on the same
basis and subject to the same terms, conditions, cost-sharing requirements and
the like as senior executives of the Company; and (iii) the Executive shall be
entitled to receive fringe benefits on a basis not less favorable than provided
to other senior executives of the Company. Specifically, the Executive shall be
entitled to four (4) weeks of vacation annually and an appropriate vehicle
provided by the Company.
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4. TERMINATION OF EMPLOYMENT. This Employment Agreement may be
terminated as provided in Sections 4(a) through 4(d). Termination pursuant to
any of Sections 4(a) through 4(d) is subject to the provisions of Section 5.
(a) DEATH OR DISABILITY. The Executive's employment shall
terminate automatically upon the Executive's death. The Company shall be
entitled to terminate the Executive's employment because of the Executive's
Disability (as defined in the Company's long-term disability insurance
policies). A termination of the Executive's employment by the Company for
Disability shall be communicated to the Executive by written notice, and shall
be effective on the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), unless the Executive returns to full-time
performance of the Executive's duties before the Disability Effective Date.
(b) TERMINATION BY THE COMPANY. (i) FOR CAUSE. The Company may
terminate the Executive's employment for Cause at any time during the Employment
Period as follows.
(A) "Cause" means the conviction of the Executive for the
commission of a crime involving moral turpitude, or willful gross
misconduct by the Executive in connection with his employment by the
Company that results in material and demonstrable financial harm to
the Company. No act or failure to act on the part of the Executive
shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of
the Company. Any act or failure to act that is based upon authority
given pursuant to a resolution duly adopted by the Board, or the
advice of counsel for the Company, shall be conclusively presumed to
be done, or omitted to be done, by the Executive in good faith and
in the best interests of the Company. In the event of a dispute
concerning the application of this provision, no claim by the
Company that Cause exists shall be given effect unless the Company
establishes to the Board by clear and convincing evidence that Cause
exists.
(B) A termination of the Executive's employment for Cause
shall not be effective unless it is accomplished in accordance with
the following procedures. The Company shall give the Executive
written notice ("Notice of Termination for Cause") of its intention
to terminate the Executive's employment for Cause, setting forth in
reasonable detail the specific conduct of the Executive that it
considers to constitute Cause and the specific provisions of this
Agreement on which it relies, and stating the date, time and place
of the Special Board Meeting for Cause. The "Special Board Meeting
for Cause" means a meeting of the Board called and held specifically
and exclusively for the purpose of considering the Executive's
termination for Cause, that takes place not less than twenty nor
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more than thirty business days after the Executive receives the
Notice of Termination for Cause. The Executive shall be given an
opportunity, together with counsel, to be heard at the Special Board
Meeting for Cause. The Executive's termination for Cause shall be
effective when and if a resolution is duly adopted at the Special
Board Meeting for Cause by the affirmative vote of three-quarters of
the entire membership of the Board stating that, in the good faith
opinion of the Board, the Executive is guilty of the conduct
described in the Notice of Termination for Cause and that such
conduct constitutes Cause under this Agreement.
(ii) Without Cause. The Company may terminate the Executive's
employment without cause at any time during the Employment Period.
(c) TERMINATION BY THE EXECUTIVE. (i) FOR GOOD REASON. The
Executive may terminate employment for Good Reason at any time during the
Employment Period as follows.
A. "Good Reason" means:
I. the assignment to the Executive of any duties or
responsibilities inconsistent in any respect with those customarily
associated with the position of Chairman of the Board and Chief
Executive Officer (including status, offices, titles and reporting
requirements) or any other action by the Company that results in a
diminution or other material adverse change in the Executive's
position, authority, duties or responsibilities, other than an
isolated, insubstantial and inadvertent action that is not taken in
bad faith and is remedied by the Company promptly after receipt of
notice thereof from the Executive;
II. any failure by the Company to comply with any
provision of Section 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure that is not taken in bad faith
and is remedied by the Company promptly after receipt of notice
thereof from the Executive;
III. any requirement by the Company that the Executive
be principally based at any office or location more than 25 miles
from the Company's current offices in Boston, Massachusetts; or
IV. any failure by the Company to comply with Section
11(c) of this Agreement;
(B) For purposes of this Section 4(c), any reasonable
determination of "Good Reason" made by the Executive shall be
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conclusive. A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice
("Notice of Termination for Good Reason") of the termination,
setting forth in reasonable detail the specific conduct of the
Company that constitutes Good Reason and the specific provision(s)
of this Agreement on which the Executive relies. A termination of
employment by the Executive for Good Reason shall be effective on
the fifth business day following the date when the Notice of
Termination for Good Reason is given, unless the notice sets forth a
later date (which date shall in no even be later than 30 days after
the notice is given).
(C) The failure to set forth any fact or circumstance in a
Notice of Termination for Good Reason shall not constitute a waiver
of the right to assert, and shall not preclude the Executive from
asserting, such fact or circumstance in an attempt to enforce any
right under or provision of this Agreement.
(ii) WITHOUT GOOD REASON. The Executive may terminate his
employment without Good Reason at any time during the Employment Period by
giving the Company written notice of the termination.
(d) DATE OF TERMINATION. The "Date of Termination" means the date
of the Executive's death, the Disability Effective Date, the date on which the
termination of the Executive's employment by the Company for Cause or without
Cause or by the Executive for Good Reason is effective, the date on which the
Executive gives the Company notice of a termination of his employment without
Good Reason, or the date of expiration of this Agreement, as the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) BY THE COMPANY
OTHER THAN FOR CAUSE; UPON NON-RENEWAL BY THE COMPANY OR THE EXECUTIVE; OR BY
THE EXECUTIVE FOR ANY REASON. Except as provided in Section 6 below, if, during
the Employment Period, the Company terminates the Executive's employment for any
reason, other than Cause or the Executive's death or Disability; the Company or
the Executive notifies the other pursuant to Section 1 of its or his intent not
to extend this Agreement; or the Executive terminates his employment for any
reason; the Company shall
(i) continue to pay the Executive his Base Salary for a
period of twelve months following the Date of Termination;
(ii) pay the Executive twelve monthly payments, each equal to
one-twelfth (1/12) of the maximum incentive compensation the Executive
could have earned during the twelve months following the Date of
Termination;
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(iii) continue benefits to the Executive and/or the
Executive's family for a period of twelve months following the Date of
Termination at least equal to those which would have been provided in
accordance with the applicable health, medical, life, disability and other
welfare benefit plans, programs, and practices described in Section 3(d)
as if the Executive's employment had not been terminated; and
(iv) except in the case of termination by the Executive
without Good Reason, cause all of the Executive's outstanding equity
awards, to the extent then unvested or forfeitable, to immediately and
fully vest and, to the extent then not exercisable, to become immediately
and fully exercisable.
(b) DEATH OR DISABILITY. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company shall
(i) continue to pay to the Executive or, in the case of the
Executive's death, to the Executive's designated beneficiaries (or,
if there is no such beneficiary, to the Executive's estate or legal
representative) the Executive's Base Salary for a period of six
months following the Date of Termination; and
(ii) continue benefits to the Executive and/or the
Executive's family for a period of six months following the Date of
Termination at least equal to those which would have been provided
in accordance with the applicable health, medical, life, disability
and other welfare benefit plans, programs, and practices described
in Section 3(d) as if the Executive's employment had not been
terminated.
(iii) cause all of the Executive's outstanding equity awards,
to the extent then unvested or forfeitable, to immediately and fully
vest and, to the extent then not exercisable, to become immediately
and fully exercisable.
(c) BY THE COMPANY FOR CAUSE. If the Executive's employment is
terminated by the Company for Cause, the Company's only obligation to the
Executive will be to pay any arrearages of salary or incentive compensation as
of the Date of Termination.
6. CHANGE OF CONTROL. Notwithstanding the provisions of Section 5 to
the contrary, in the event a Change in Control (as such term is defined in the
Company's 1998 Amended and Restated Stock Incentive Plan) occurs, the following
shall apply.
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(a) If, during the three (3) year period following a Change in
Control, the Executive's employment is terminated by the Company for any reason
other than for Cause, if the Executive's employment is terminated by reason of
the Executive's death or Disability, or if the Executive terminates his
employment for Good Reason:
(i) The Company shall pay the Executive in a lump sum
payable within 30 days after the Date of Termination an amount equal
to the average of his total compensation from the Company which was
includable in the Executive's 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 multiplied by 2.99; provided, however, that the Executive
may choose, in his discretion, to receive a lesser amount than he is
entitled to receive under this Section 6(a)(i) if after consultation
with the Compensation Committee he determines that it is in his best
interests to accept a lesser amount;
(ii) The Company shall cause all of the Executive's
outstanding equity awards, to the extent then unvested or
forfeitable, to immediately and fully vest and, to the extent then
not exercisable, to become immediately and fully exercisable; and
(iii) The Company shall continue benefits to the
Executive and/or the Executive's family for a period of twelve
months following the Date of Termination at least equal to those
which would have been provided in accordance with the applicable
health, medical, life, disability and other welfare benefit plans,
programs, and practices described in Section 3(d) as if the
Executive's employment had not been terminated.
(b) If, during the three (3) year period following a Change in
Control, the Executive terminates his employment for any reason other than for
Good Reason:
(i) the Company shall continue to pay the Executive
his Base Salary for the twelve (12) months following the Date of
Termination and the Company shall pay the Executive twelve monthly
payments, each equal to one-twelfth (1/12) of the maximum incentive
compensation the Executive could have earned during the twelve (12)
months following the Date of Termination; and
(ii) The Company shall continue benefits to the
Executive and/or the Executive's family for a period of twelve
months following the Date of Termination at least equal to those
which would have been provided in accordance with the applicable
health, medical, life, disability and other welfare benefit plans,
programs, and practices described in Section 3(d) as if the
Executive's employment had not been terminated.
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(c) If, during the three (3) year period following a Change in
Control, the Executive is terminated by the Company for Cause, the Company's
only obligation to the Executive will be to pay any arrearages of salary or
incentive compensation as of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify (including, but not limited to,
the Employee Stock Ownership Plan and the Supplemental Executive Retirement
Plan), nor shall anything in this Agreement limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Vested benefits and other amounts
that the Executive is otherwise entitled to receive under any plan, policy,
practice or program of, or any contract of agreement with, the Company or any of
its affiliated companies on or after the Date of Termination shall be payable in
accordance with the terms of each such plan, policy, practice, program, contract
or agreement, as the case may be, except as explicitly modified by this
Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in, and otherwise to perform its obligations under, this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action that the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced, regardless of whether the Executive obtains other employment.
9. CONFIDENTIAL INFORMATION; NON-COMPETITION. (a) The Executive shall
hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies and their respective businesses that the Executive
obtains during the Executive's employment by the Company or any of its
affiliated companies and that is not public knowledge (other than as a result of
the Executive's violation of this Section 9) ("Confidential Information"). The
Executive shall not communicate, divulge or disseminate Confidential Information
at any time during or after the Executive's employment with the Company, except
with the prior written consent of the Company or as otherwise required by law or
legal process.
(b) If the Executive has terminated his employment for any reason
other than Good Reason, the Executive agrees not to compete with the business of
the Company or be employed by a competitor of the Company while the Executive is
receiving termination payments under Section 5.
10. INDEMNIFICATION; ATTORNEYS' FEES. The Company shall pay or indemnify
the Executive to the full extent permitted by law and the by-laws of the
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Company for all expenses, costs, liabilities and legal fees which the Executive
may incur in the discharge of his duties hereunder. The Company also agrees to
pay, as incurred, to the fullest extent permitted by law, or indemnify Executive
if such payment is not legally permitted, for all legal fees and expenses that
the Executive may in good faith incur as a result of any contest by the Company,
the Executive or others of the validity or enforceability of or liability under,
or otherwise involving, any provision of this Agreement, upon receipt of the
Executive's undertaking to repay any such amount advanced if the Company
prevails upon the final disposition of such action.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "the Company" shall mean
both the Company as defined above and any such successor that assumes and agrees
to perform this Agreement, by operation of law or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts,
without reference to its principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Xxxx X. Xxxxxxx
00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
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If to the Company:
HPSC, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
or to such other address as either party furnishes to the other in writing in
accordance with this Section 12(b). Notices and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provisions of, or to assert any right under, this Agreement
(including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to paragraph (c) of Section 4) shall not be
deemed to be a waiver of such provision or right or of any other provision of or
right under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement
supersedes any other agreement between them concerning the subject matter
hereof.
(g) The rights and benefits of the Executive under this Agreement
may not be anticipated, assigned, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law. Any attempt by the Executive to anticipate, alienate, assign,
sell, transfer, pledge, encumber or charge the same shall be void. Payments
hereunder shall not be considered assets of the Executive in the event of
insolvency or bankruptcy.
(h) This Agreement may be executed in several counterparts, each
of which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
(i) The obligations of the Company and the Executive under
Sections 5, 6, 7, 8, 9, 10 and 11 shall survive the expiration or termination
for any reason of this Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.
HPSC, INC.
By: /s/ J. Xxxxxx Xxxxxxxxxx
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J. Xxxxxx Xxxxxxxxxx
Chairman of the Compensation Committee
of the Board of Directors
/s/ Xxxx X. Xxxxxxx
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EXECUTIVE
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