Document:

Exhibit

10.3

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT by and between HPSC, Inc., a Delaware

corporation (the “Company”), and Raymond R. Doherty (the “Executive”), is made

as of July 19, 2002.

 

W I T N E S S E T H

 

WHEREAS, the Executive has served as President and

Chief Operating Officer of the Company since August 2, 1993, most recently

pursuant to an employment agreement dated July 19, 1999 (as amended and

restated August 4, 2000);

 

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 August 4, 2000 (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 President and Chief Operating Officer of

the Company, reporting to the Chairman and Chief Executive Officer.  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.

 

 

(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, 2001,

the Executive’s Base Salary shall be at a rate of not less than $270,000.  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

 

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termination for Cause, that takes place not less than

twenty nor 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 President

and Chief Operating 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;

 

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(B)                                For

purposes of this Section 4(c), any reasonable determination of “Good Reason”

made by the Executive shall be 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.  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; 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; BY THE EXECUTIVE WITHOUT GOOD REASON.  If the Executive’s employment is terminated

by the Company for Cause, or by the Executive without Good Reason, 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:

 

Raymond R. Doherty

242 Cross Street

Belmont, Massachusetts 02178

 

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If to the Company:

 

HPSC, Inc.

60 State Street

Boston, Massachusetts 02109

 

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, 11 and 13 shall survive the

expiration or termination for any reason of this Agreement.

 

13.                                 GROSS-UP

PAYMENT

 

(a)                                  DEFINITIONS.

 

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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)                                 AMOUNT.

 

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

 

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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 bemade, 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.

 

(c)                                  PAYMENT.

 

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)                                 ADJUSTMENT.

 

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.

 

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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. Kermit Birchfield

  
	

   

  	

  J. Kermit

  Birchfield

  
	

   

  	

  Chairman of the

  Compensation

  
	

   

  	

  Committee of the

  Board of Directors

  
	

   

  
	

   

  	

  /s/ Raymond R.

  Doherty

  
	

   

  	

  EXECUTIVE

  

 

13EXHIBIT 10.17

 

ABINGTON BANCORP, INC.

 

FORMER DIRECTOR ADVISORY BOARD SERVICE PLAN

 

It is the purpose of this

Plan to encourage Directors who have made significant contributions to Abington

Bancorp, Inc. (the “Holding Company”) and to Abington Savings Bank (the “Bank”)

to consider voluntarily transitioning off the Boards of Directors in order to

provide opportunities for increased diversity on the Boards and generally to

permit others to serve on the Boards, while at the same time preserving for the

benefit of the Holding Company and the Bank the benefit of the knowledge,

business judgment and business contacts that the former Directors can continue

to provide to each of the Bank and the Holding Company.

 

Part 1.    DEFINITIONS

 

The following terms are used

in this Plan with the meanings set forth below:

 

1.1. Advisory Board Service Period shall mean

the period of time during which the Director remains an active member of the

Former Director Advisory Board (as provided in Section 3.2) and shall terminate

on the earliest to occur of (a) the date on which the Director shall have

received Plan Compensation under this Plan for an aggregate of eight (8) years,

if the Director is receiving Plan Compensation pursuant to Section 2.2 (or four

(4) years, if the Director is receiving Plan Compensation pursuant to Section

2.3); (b) the date on which the Director ceases to serve as an active member of

the Former Director Advisory Board (as provided in Section 3.2); (c) any date

on which the Director ceases to be in compliance with the provisions of Section

3.3 or Section 3.4; and (d) as provided in Section 2.6.

 

1.2. Annual Plan Compensation shall be

calculated as follows:

 

(a) Except as provided in

Section 1.2(b), if the Director terminates his or her service as a Director after

attaining the age of seventy (70), the Annual Plan Compensation shall be an

amount equal to the Director’s Fee Income for the calendar year prior to the

Director’s attaining the age of seventy (70);

 

(b) If (x) the Director

terminates service as a Director prior to age seventy (70) or (y) if a

Grandfathered Director terminates service as a Director before December 30,

2003, the Annual Plan Compensation shall be an amount equal to the Director’s

Fee Income for the calendar year prior to the calendar year in which the

Director’s Termination of Service as a Director occurred.

 

1.3. Bank shall mean Abington Savings Bank, a

savings bank in stock form organized and existing under the laws of The

Commonwealth of Massachusetts.

 

1.4. Change in Control.  A “Change in Control” shall be deemed to

have occurred in any of the following events:

 

 

(a) if there has occurred a

change in control which the Holding Company would be required to report in

response to Item 1 of Form 8-K promulgated under the Securities Exchange Act of

1934, as amended (the “1934 Act”), or, if such Form 8-K is no longer in effect

in its present form, any form or regulation promulgated by the Securities and

Exchange Commission pursuant to the 1934 Act which is intended to serve similar

purposes; or

 

(b) when any “person” (as

such term is used in Sections 13(d) and 14(d)(2) of the 1934 Act) becomes a

“beneficial owner” (as such term is defined in Rule 13d-3 promulgated under the

1934 Act), directly or indirectly, of securities of the Holding Company or the

Bank representing twenty-five percent (25%) or more of the total number of

votes that may be cast for the election of Directors of the Holding Company or

the Bank; or

 

(c) if during any period of

two consecutive years (not including any period prior to the adoption of this

Plan), individuals who are Continuing Directors (as herein defined) cease for

any reason to constitute at least a majority of the Board of Directors of the

Holding Company.  For this purpose, a

“Continuing Director” shall mean (i) an individual who was a Director of the

Holding Company at the beginning of such period or (ii) any new Director (other

than a director designated by a person who has entered into any agreement with

the Holding Company to effect a transaction described in Section 1.4(a) or

Section 1.4(b) whose election by the Board or nomination for election by the

Holding Company’s stockholders was approved by a vote of at least two-thirds

(2/3) of the Directors then still in office who either were Directors at the beginning

of such period or whose election or nomination for election was previously so

approved; or

 

(d) the stockholders of the

Holding Company approve a merger or consolidation of the Holding Company with

any other bank or corporation, other than (i) a merger or consolidation which

would result in the voting securities of the Holding Company outstanding

immediately prior thereto continuing to represent (either by remaining

outstanding or by being converted into voting securities of the surviving

entity) more than fifty-five percent (55%) of the combined voting power of the

voting securities of the Holding Company or such surviving entity outstanding

immediately after such merger or consolidation, or (ii) a merger or

consolidation effected to implement a recapitalization of the Holding Company

(or similar transaction) in which no “person” (as defined above in Section

1.4(b)) acquires more than thirty percent (30%) of the combined voting power of

the Holding Company’s then outstanding securities; or

 

(e) the stockholders of the

Holding Company approve a plan of complete liquidation of the Holding Company

or an agreement for the sale or disposition by the Holding Company of all or

substantially all of its assets.

 

1.5. Effective Date of the Plan shall mean November

1, 2002.

 

1.6. Fee Income shall mean the average

per-person compensation paid to (or deferred for) all Directors in a calendar

year for fulfilling their duties as a Director.  Fee Income does not include amounts paid in reimbursement of expenses

or the value of any benefits provided to Directors.

 

2

 

 

1.7. Grandfathered Director shall mean a

Director who was serving as a Director as of the Effective Date and who was

over seventy (70) years of age as of the Effective Date.

 

1.8. Holding Company shall mean Abington

Bancorp, Inc., a bank holding company organized and existing under the laws of

The Commonwealth of Massachusetts.  The

Holding Company is the parent company of the Bank.

 

1.9. Payment Commencement Date shall mean the

January 1 next following a Director’s Plan Eligibility Date (except as may be

otherwise determined pursuant to Section 2.4).

 

1.10. Plan shall mean the terms, conditions and

benefits provided by this document and any amendment or restatement of this

document.

 

1.11. Plan Compensation shall mean the benefit to

which a Director would be entitled under Section 2.2 or Section 2.3 of this

Plan.

 

1.12. Plan Eligibility Date shall mean the later

to occur of (a) the date on which the Director has accumulated fifteen (15)

Years of Service as a Director and (b) the date on which the Director ceases to

serve as a Director.

 

1.13. Specially-Defined Cause shall mean the

Director’s deliberate dishonesty with respect to the Bank, the Holding Company

or any subsidiary or affiliate thereof, or conviction of a crime related to

banking activity.

 

1.14. Termination of Service as a Director shall

mean termination of services as a Director for any reason other than death,

disability or Specially-Defined Cause.

 

1.15. Years of Service shall mean the number of

years a Director has served as a Director of the Bank or the Holding Company

(or of both), whether before or after the Effective Date of the Plan.  A person who is serving as a Director shall

not receive additional service credit by reason of his or her serving

simultaneously as a Director of both the Bank and the Holding Company.  No credit shall be awarded for service as a

director of an entity acquired by the Bank or the Holding Company.

 

Part 2.                           ELIGIBILITY AND BENEFITS

 

2.1. Eligibility.  Any person who is a Director as of the Effective Date of the Plan

shall be eligible to participate in the Plan immediately.  Any person elected as a Director subsequent

to the Effective Date of the Plan shall be eligible to participate in the Plan

as of the first day of the calendar month next following the date of his or her

election as a Director.  No Director

shall be eligible to receive any benefits under this Plan until the Director

shall have signed a form of Acceptance of Plan Terms as provided in Section

4.4.  A person who is compensated as an

employee of the Bank or the Holding Company shall not, for such period of time

as he or she receives such compensation, be considered to be a “Director”

hereunder and shall not earn or receive any benefits under this Plan.

 

3

 

2.2. Full Plan Compensation.  Upon Termination of Service as a Director, a

Director who has completed twenty (20) Years of Service as of the date of Termination

of Service as a Director (and has not been terminated for Specially-Defined

Cause) shall be entitled to receive an amount equal to the Annual Plan

Compensation, payable annually during the Advisory Board Service Period.  As provided in each of Sections 1.1 and 3.2,

payment of the Annual Plan Compensation is explicitly conditioned upon

continued active participation by the Director in the Former Director Advisory

Board.  Subject to the provisions of

Section 2.4, payment of this benefit shall commence on the then-applicable

Payment Commencement Date.

 

2.3. Plan Compensation — Less Than Twenty (20) Years of

Service.  Upon Termination of

Service as a Director, a Director who has completed at least fifteen (15) but

less than twenty (20) Years of Service as of the date of Termination of Service

as a Director (and has not been terminated for Specially-Defined Cause) shall

receive an amount equal to the Annual Plan Compensation, payable annually

during the Advisory Board Service Period. 

As provided in each of Sections 1.1 and 3.2, payment of the Annual Plan

Compensation is explicitly conditioned upon continued active participation by

the Director in the Former Director Advisory Board.  Subject to the provisions of Section 2.4, payment of this benefit

shall commence on the then-applicable Payment Commencement Date.

 

2.4. Limitation on Number of Persons Commencing to Receive

Plan Compensation in any Calendar Year.  This Plan is not intended to permit more than two Directors to

commence receiving Plan Compensation in any calendar year.  In the event that more than two Directors

become eligible to receive Plan Compensation on any Payment Commencement Date,

payment shall be made to the two Directors with the greatest number of Years of

Service.  A Director whose Plan

Compensation is deferred pursuant to the provisions of this Section 2.4 shall

become eligible to commence receiving his or her Plan Compensation on the

January 1 next following the original Payment Commencement Date, subject to the

same rules of priority based upon Years of Service in the event that on such

subsequent Payment Commencement Date more than two Directors would be eligible

to commence receiving Plan Compensation.

 

2.5. No Plan Compensation with Less than 15 Years of

Service.  Notwithstanding any

other provision hereof, a Director who has not completed fifteen (15) Years of

Service as of the date of Termination of Service as a Director shall not

receive any Plan Compensation under this Plan.

 

2.6. Termination of Plan and Benefits.

 

(a) Termination of Plan Compensation at Age 78.  Notwithstanding any other

provision hereof, all payments of the Plan Compensation shall terminate

immediately when the Director attains the age of seventy-eight (78).  However, Grandfathered Directors who retire

not later than December 30, 2003 shall be exempt from this Section (a).

 

(b) Termination of Plan Compensation Upon Death.  Notwithstanding any other

provision hereof, all payments of the Plan Compensation shall terminate

immediately upon the death of the Director.

 

4

 

(c) Termination of Plan Compensation Upon Failure to

Continue to Serve as Active Participant in Former Director Advisory Board.  Notwithstanding any other

provision hereof, all payments of the Plan Compensation shall terminate

immediately upon the failure of the Director to be an active participant in the

Former Director Advisory Board, as provided in each of Sections 1.1 and 3.2.

 

(d) Termination for Specially-Defined Cause.  Notwithstanding any other provision hereof,

in the event a Director’s service as a Director is terminated for

Specially-Defined Cause, the Director shall not be entitled to become a member

of the Former Director Advisory board or earn any Plan Compensation under this

Plan.

 

(e) Termination of Plan and Plan Compensation Upon Change

in Control.  Notwithstanding

any other provision hereof, from and after the occurrence of a Change in

Control, this Plan and all payments of the Plan Compensation shall terminate

immediately.

 

2.7. Non-Transferability of Plan Compensation.  The payment or right to payment

of any Plan Compensation (and any interest therein) is a personal benefit to

the Director and cannot be sold, assigned, pledged or otherwise transferred to

a third party at any time or under any circumstances.  Notwithstanding any other provision hereof, in the event a

Director attempts to sell, assign, pledge or otherwise transfer his or her Plan

Compensation under the Plan (and any interest therein), such Plan Compensation

shall terminate immediately.

 

2.8. Increase in Number of Plan Compensation to Commence in

any Calendar Year.  If at any

time more than two Directors would be scheduled to receive Plan Compensation on

any Payment Commencement Date, a Director whose Plan Compensation was scheduled

to be deferred pursuant to the provisions of Section 2.4 may request that the

Board of Directors of the Holding Company increase the number of Directors

permitted to commence receiving Plan Compensation in any calendar year to

permit commencement of payment of his or her Plan Compensation on the Payment

Commencement Date.  If the Board of

Directors of the Holding Company, acting by the unanimous affirmative vote of

all Continuing Directors then in office, approves such a request, the payment

of the Plan Compensation shall commence on the Payment Commencement Date.  The Board of Directors shall have no

obligation to approve any such request.

 

Part 3.                           FORMER DIRECTOR ADVISORY BOARD

 

3.1. Creation of Former Director Advisory Board.  The Bank and the Holding Company have

established a Former Director Advisory Board. 

The purpose of the Former Director Advisory Board shall be to provide a

forum for former Directors and others to give feedback to the Bank and the

Holding Company as to market conditions, marketing opportunities, community

input and business judgment.

 

3.2. Participation in Former Director Advisory Board

Activities.  Former Directors

will be required to perform the following duties:

 

5

 

•                  Assist the SVP/Business

Banking in the development of new business by making joint calls with loan

officers at least one day per month and by providing customer referrals

regularly;

 

•                  Assist the CEO and Senior

Management by providing support and local community feedback  at least quarterly;

 

•                  Assist the CEO and Senior

Management by participating in quarterly customer focus group meetings with key

customers and prospects; and

 

•                  Assist the CEO as needed to

provide advice, counsel and support regarding governance matters, new Board

member prospects and other issues as they arise.

 

3.3. Non-Competition.  During the Advisory Board Service Period, no Director shall

compete with the Bank or the Holding Company. 

The Director will not, directly or indirectly, (i) become a director,

officer, employee, principal, agent, consultant or independent contractor of

any insured depository institution, trust company or parent holding company of

any such institution or company which has an office in Massachusetts (a “Competing

Business”), provided, however, that this provision shall not prohibit the

Director from (x) owning bonds, non-voting preferred stock or up to five

percent (5%) of the outstanding common stock of any such entity if such common

stock is publicly traded and (y) being employed outside of Massachusetts as

long as he or she is in compliance with the provisions of clauses (ii) and

(iii) below; (ii) solicit or induce, or cause others to solicit or induce, any

employee of the Holding Company or any of its subsidiaries to leave the

employment of such entities; or (iii) solicit any customer of the Holding

Company or any of its subsidiaries to transact business with any other entity,

whether or not a Competing Business, or to reduce or refrain from doing any

business with the Holding Company or its subsidiaries.

 

3.4. Confidentiality.  Except as required by law or regulation, the Director shall keep

secret and confidential and shall not disclose to any third party (other than

the Holding Company or its subsidiaries) in any fashion or for any purpose

whatsoever any information regarding the Holding Company or any of its

subsidiaries which is not available to the general public to which he or she

has had or will have access at any time during the course of his or her relationship

with the Holding Company or its subsidiaries. 

This restriction shall not apply to information made available to the

public by the Holding Company and information which is already in the public

domain through no breach of this Plan by the Director.

 

Part 4.                           ADDITIONAL PROVISIONS

 

4.1. Plan Amendment or Termination.  This Plan may be amended or terminated by a

two-thirds (2/3) vote of all Directors of the Holding Company.

 

4.2. Applicable Law.  This Plan shall be governed and construed in accordance with the

laws of The Commonwealth of Massachusetts.

 

4.3. Effect on Other Plans and Agreements.  This Plan constitutes the entire agreement

of the parties relating to the subject matter hereof, and shall supersede in

its entirety any and all prior agreements or understandings, whether written or

oral, between or among the parties relating to the subject matter hereof,

including without limitation the Board of Directors Transition and Retirement

Plan dated June 22, 2000.  No party has

relied upon any representation or promise except those set forth herein.

 

6

 

 

4.4. Acceptance of Terms of Plan.  To become eligible for the benefits to be

provided under this Plan, a Director must have signed a form of Acceptance of

Plan Terms in substantially the form set forth at the end hereof.

 

IN WITNESS THEREOF, the

Holding Company has caused this Plan to be executed by its duly authorized

officer effective as of the day and year first written (the Effective Date).

 

	

   

  	

  ABINGTON BANCORP, INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  President and Chief Executive Officer

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Date:

  	

   

  
				

 

7

 

Acceptance of Plan Terms

 

The undersigned hereby

accepts and agrees to the terms and conditions of the foregoing Former Director

Advisory Board Service Plan.

 

	

   

  	

   

  
	

  Print Name:

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  Date:

  	

   

  	

   

  
			

 

8

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