<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
HPSC, Inc.
(Name of Registrant as Specified In Its Charter)
HPSC, Inc.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
HPSC, INC.
60 STATE STREET
BOSTON, MA 02109-1803
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 1995
The Annual Meeting of Stockholders of HPSC, Inc., a Delaware corporation
(the "Company" or "HPSC"), will be held on May 11, 1995, at nine o'clock in the
morning, Eastern Daylight Time, in the Martin Luther King, Jr. Room, The Omni
Parker House, 60 School Street, Boston, Massachusetts, for the following
purposes:
1. To determine the number of directors and elect a Board of
Directors for the ensuing year.
2. To amend the Company's Restated Certificate of Incorporation to
provide for a classified Board of Directors.
3. To amend the Company's Restated Certificate of Incorporation to
prohibit stockholder action by written consent in lieu of meeting.
4. To approve the 1995 Stock Incentive Plan.
5. To ratify the appointment of Coopers & Lybrand LLP as the
independent accountants for the Company for the year ending December 31,
1995.
6. To consider and act upon such other business and matters or
proposals as may properly come before the meeting or any adjournment
thereof.
The Board of Directors has fixed the close of business on March 21, 1995 as
the record date for determining the stockholders having the right to receive
notice of and to vote at this meeting or any adjournments thereof.
By Order of the Board of Directors
DENNIS W. TOWNLEY
Secretary
Boston, Massachusetts
March 28, 1995
IF YOU DO NOT EXPECT TO BE PRESENT AT THIS MEETING AND YOU WISH YOUR SHARES OF
COMMON STOCK TO BE VOTED, YOU ARE REQUESTED TO SIGN AND MAIL PROMPTLY THE
ENCLOSED PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. A
RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES IS
ENCLOSED FOR THAT PURPOSE.
<PAGE> 3
HPSC, INC.
60 STATE STREET
BOSTON, MA 02109-1803
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 11, 1995
This proxy statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors of HPSC, Inc., a Delaware corporation
(the "Company" or "HPSC"), of proxies for use at the Annual Meeting of
Stockholders of the Company to be held, pursuant to the accompanying Notice, on
Thursday, May 11, 1995 at nine o'clock in the morning, Eastern Daylight Time, in
the Martin Luther King, Jr. Room, The Omni Parker House, 60 School Street,
Boston, Massachusetts and at any adjournment thereof (the "Annual Meeting").
If a stockholder specifies in the proxy how it is to be voted, it will be
voted in accordance with such specification. Any stockholder giving a proxy in
the accompanying form retains the power to revoke it at any time before the
exercise of the powers conferred thereby, by notice in writing to the Secretary
of the Company. Any stockholder who attends the Annual Meeting in person will
not be deemed thereby to revoke the proxy unless such stockholder affirmatively
indicates at the Annual Meeting his intention to vote the shares covered thereby
in person.
It is expected that copies of the Notice of Meeting, this Proxy Statement
and related form of proxy will be mailed on or about March 28, 1995 to the
holders of record of shares of Common Stock of the Company at the close of
business on March 21, 1995. HPSC's Annual Report to Stockholders for the fiscal
year ended December 31, 1994 accompanies this Proxy Statement.
PROPOSAL ONE -- NUMBER AND ELECTION OF DIRECTORS
It is the intention of the persons named as proxies in the accompanying
form of proxy to fix the number of directors for the ensuing year at EIGHT and
to vote FOR the election as directors (unless authority to vote is specifically
withheld) of the persons listed below under "Nominees for Directorships" to
serve until the next Annual Meeting of Stockholders and until their successors
are chosen and qualified.
If the stockholders approve the proposed amendment to the Company's
Restated Certificate of Incorporation regarding classification of the Board of
Directors (the "Board"), the Company's Restated Certificate of Incorporation
will provide for three classes of directors. See "Proposals Two and Three --
Amendments to the Restated Certificate of Incorporation of the Company --
Classification Proposal." In such event and if the nominees are elected, Drs.
Calisti and McDougal will be elected for an initial term expiring at the 1996
Annual Meeting of Stockholders; Messrs. Biernat, Cooley and Doherty will be
elected for an initial term expiring at the 1997 Annual Meeting of Stockholders;
and Messrs. Birchfield and Everets and Ms. Cole will be elected for an initial
term expiring at the 1998 Annual Meeting of Stockholders (in all cases until
their respective successors are duly elected and qualified or until their death,
resignation, or removal). If the proposal regarding classification of the Board
is not so approved, all of those so elected will serve as
<PAGE> 4
directors of the Company until the next Annual Meeting of Stockholders following
their election and until their successors are duly elected and qualified or
until their death, resignation or removal.
If any of the nominees becomes unavailable (which is not now anticipated by
the Company), the persons named as proxies have discretionary authority either
to vote for a substitute or to fix the number of directors at less than eight.
The Board of Directors has no reason to believe that any of such persons will be
unwilling or unable to serve if elected. THE BOARD OF DIRECTORS RECOMMENDS THAT
ALL STOCKHOLDERS VOTE FOR THE ELECTION OF THE NOMINEES NAMED BELOW.
NOMINEES FOR DIRECTORSHIPS
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
------------------------------------------------------- ---- --------
<S> <C> <C>
Joseph A. Biernat(1)................................... 67 1993
J. Kermit Birchfield(2)................................ 55 1993
Louis J. P. Calisti.................................... 69 1988
Dollie A. Cole(1)(2)................................... 64 1991
Samuel P. Cooley(1)(2)................................. 63 1993
Raymond R. Doherty..................................... 49 1991
John W. Everets........................................ 48 1983
Thomas M. McDougal(1).................................. 55 1991
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
EXECUTIVE OFFICERS
Executive officers are elected by the Board of Directors to hold office
until their successors are elected and qualified. The names, ages, and positions
of the executive officers of HPSC are listed below.
<TABLE>
<CAPTION>
POSITIONS AND
NAME AGE OFFICES HELD
- --------------------------------- ---- -----------------------------------
<S> <C> <C>
John W. Everets.................. 48 Chairman of the Board and Chief
Executive Officer
Raymond R. Doherty............... 49 President and Chief Operating
Officer
Rene Lefebvre.................... 48 Vice President of Finance, Chief
Financial Officer, Treasurer and
Assistant Secretary
</TABLE>
PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
Information regarding each nominee for director and each executive officer
of HPSC is presented below.
Joseph A. Biernat became a director of HPSC in December 1993. Since his
retirement in 1987, Mr. Biernat has served as a consultant for several
investment management firms. From 1965 until 1987, he was employed with United
Technologies Corporation, most recently as Senior Vice President -- Treasurer,
and prior thereto as President, Treasurer and Chief Financial Officer of
Philco-Ford Finance Corporation. He is also a director of The Hartford Insurance
Company Mutual Funds and previously has been a director of several financial and
civic organizations.
J. Kermit Birchfield became a director of HPSC in December 1993. He
currently serves as a consultant for various businesses. From 1990 until 1994,
Mr. Birchfield served as Senior Vice President, Secretary, and
2
<PAGE> 5
General Counsel with M/A-COM, Inc., a publicly-held manufacturer of
semiconductors and communications equipment based in Wakefield, Massachusetts.
Before joining M/A-COM, he was Senior Vice President for Legal and Governmental
Affairs and General Counsel for the Georgia Pacific Corporation. Mr. Birchfield
is also a Managing Director of Century Partners, Incorporated, a privately-held
investment and operating company, of Darien, Connecticut. He is also a director
of Intermountain Industries Inc. and its wholly-owned subsidiary, Intermountain
Gas Company, a public utility.
Louis J. P. Calisti, D.D.S., M.P.H., has been a director of HPSC since
1988. For a brief period during 1991, Dr. Calisti served as Chairman and Chief
Executive Officer of the Company, and he presently serves as Senior Vice
President. From 1984 until May 1991 he was Head of Development and Assistant
Director of the Forsyth Dental Center, one of the world's leading dental
research centers. Dr. Calisti is also a consultant to underdeveloped countries
in establishing national dental care delivery systems, and a lecturer in Dental
Care Administration at Harvard University. Dr. Calisti served for eight years as
the Dean of Tufts University School of Dental Medicine and for two years as
President of the University of Southern Maine.
Dollie A. Cole, a director of HPSC since 1991, has been involved for many
years in the leadership of several business, charitable and civic organizations.
She serves as Chairman of the Dollie Cole Corporation, a venture capital and
industrial consulting firm. For seven years Ms. Cole was an owner and board
member of Checker Motors and Checker Taxi until selling her interest in 1988.
Ms. Cole was also Senior Editor of Curtis Publishing until 1977, and was
director of Public Relations for Magnetic Video and Twentieth Century Fox Video
until 1985. She serves as a consultant to the Solar and Electric 500 Company
based in Phoenix, Arizona, and to Separation Dynamics, an international company
involved in the energy and manufacturing industries. In addition to these
business activities, Ms. Cole serves on the boards of Project Hope -- the World
Health Organization, the National Captioning Institute for the Hearing Impaired,
the Smithsonian Institution and on the National Academy of Science --
President's Circle Board.
Samuel P. Cooley became a director of HPSC in December 1993. From 1955
until his retirement at the end of 1993, Mr. Cooley was employed with Shawmut
Bank Connecticut, N.A., and its predecessors and affiliates, including Hartford
National Bank and Connecticut National Bank. His most recent position was
Executive Vice President and Senior Credit Approval Officer. Mr. Cooley is also
a director of Lydall, Inc. and the Connecticut Health and Education Facilities
Authority and serves as a director or trustee of numerous nonprofit
organizations in Connecticut.
John W. Everets has been Chairman of the Board and Chief Executive Officer
of HPSC since July 1993 and has been a director of HPSC since 1983. He was
Chairman of the Board and Chief Executive Officer of T.O. Richardson Co., Inc.,
a financial services company, from January 1, 1990 until July 1993. Previously
he was Executive Vice President of Advest, Inc., an investment banking firm,
from 1977 to January 1, 1990. Mr. Everets also served as Chairman of the Board
of Billings and Co., Inc., a real estate investment banking firm, and Chairman
of Advest Credit Corp., both subsidiaries of Advest Group, Inc. Mr. Everets
formerly was Vice Chairman of the Connecticut Development Authority and Chairman
of the Loan Committee of the Connecticut Development Authority. Mr. Everets is
also a director of Dairy Mart Convenience Stores, Inc., Crown/Northcorp, and the
Eastern Company.
Raymond R. Doherty has been President of HPSC since December 1989 and Chief
Operating Officer of HPSC since August 1993. He was Treasurer of HPSC from
December 1988 until May 1994. He was elected a director of HPSC in June 1991.
Mr. Doherty previously served as Chairman and Chief Executive Officer of HPSC
from October 1992 until July 1993, Chief Operating Officer of HPSC from December
1989 to October 1992, and Chief Financial Officer of HPSC from December 1988 to
October 1992. He was Assistant Treasurer of HPSC from June 1986 to December
1988. He was Vice President and Chief Operating Officer of
3
<PAGE> 6
Healthco International, Inc. from October 1992 until August 1993. He was the
Senior Vice President of Finance and Operational Controls of Healthco
International, Inc. from January 1986 to October 1992.
Thomas M. McDougal, D.D.S. was elected a director of HPSC in 1991. He has
been a practicing dentist for approximately 29 years. He is active in national,
state and local dental organizations and has lectured extensively throughout the
United States. He is a past President of the Dallas County Dental Society and is
past Chairman of its Continuing Education Committee and its Banking, Nominating
and Patient Relations Committee.
Rene Lefebvre has been Chief Financial Officer and Vice President of
Finance of HPSC since May 1994. From June 1993 until May 1994, he was Chief
Financial Officer of NETTS, Inc., a vocational training institution. He was an
independent financial services consultant from February 1992 through May 1993.
He served as interim Chief Financial Officer of the Business Funding Group from
June through November of 1991. From September 1982 until March 1991, Mr.
Lefebvre was Chief Financial Officer of Eaton Financial Corporation.
COMMITTEES OF THE BOARD
The Board of Directors has an Audit Committee and a Compensation Committee.
It does not have a Nominating Committee.
The current members of the Audit Committee are Dollie A. Cole, Samuel P.
Cooley, Thomas M. McDougal, and Joseph A. Biernat. The functions of the Audit
Committee are to review the Company's external and internal auditing procedures,
to evaluate the Company's objectives and performance and to study and make
recommendations periodically to the Board on these and such other matters as the
Committee deems to be in the best interests of the Company. The Committee
reviews with the Company's independent auditors the scope and results of their
audit for the year and any problems encountered during it. The Committee also
reviews with the Company's management the plan, scope and results of the
Company's operations and discusses any recommendations or matters considered to
be of significance. During fiscal year 1994, the Committee held one meeting.
The current members of the Compensation Committee are Dollie A. Cole, J.
Kermit Birchfield, and Samuel P. Cooley. The functions of the Compensation
Committee are to be available for consultation with the Chairman of the Board,
to review the salaries and other forms of compensation of officers and to make
recommendations to the Board of Directors with respect to the granting of stock
options and restricted stock to officers, key employees and consultants and with
respect to stock option and restricted stock matters generally. During fiscal
year 1994, the Committee held two meetings.
During fiscal year 1994, the Board of Directors held six meetings. Each
nominee for reelection as a director attended at least 75% of the meetings of
the Board of Directors held during the time he or she was a director and the
meetings of all Committees of the Board on which he or she served.
VOTING SECURITIES
Each share of common stock, $0.01 par value, (the "Common Stock") is
entitled to one vote on each of the matters listed in the Notice of the Annual
Meeting. The holders of record of shares of Common Stock of the Company at the
close of business on March 21, 1995 may vote at the Annual Meeting. At that
date, there were outstanding 4,349,530 shares of Common Stock, excluding
1,225,182 shares of Common Stock repurchased by the Company in December 1994 (as
further described in "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS --
Relationship with Healthco International, Inc. and Repurchase of Shares Formerly
Held by Healthco").
4
<PAGE> 7
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of the record date,
with respect to the beneficial ownership of the Company's Common Stock by those
persons known by the Company to own beneficially more than five percent (5%) of
the Company's outstanding shares of Common Stock as of the record date and by
each of the Company's directors and its executive officers individually, and by
all of the Company's directors and executive officers as a group. The
information in the table and in the related notes has been furnished by or on
behalf of the indicated owners. Unless otherwise noted, HPSC believes the
persons referred to in this table have sole voting and investment power with
respect to the shares listed in this table. The percentage owned is calculated
with respect to each person by treating shares issuable to such person within 60
days of the record date as outstanding, in accordance with rules of the
Securities and Exchange Commission.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP OF HPSC % OF
NAME (AND ADDRESS OF OWNER OF MORE THAN 5%) COMMON STOCK(1)(2) CLASS
- -------------------------------------------------------- ------------------ ------
<S> <C> <C>
Dimensional Fund Advisors, Inc.......................... 351,400(3) 8.08%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Fidelity Management and Research Corporation............ 229,500(4) 5.28%
82 Devonshire Street
Boston, MA 02109-3605
Tweedy, Browne Company, L.P.,
TBK Partners, L.P. and
Vanderbilt Partners, L.P.............................. 482,905(5) 11.10%
52 Vanderbilt Avenue
New York, NY 10017
John W. Everets and Raymond R. Doherty.................. 300,000(6) 6.90%
as Trustees of the HPSC, Inc.
Employee Stock Ownership Plan
60 State Street
35th Floor
Boston, MA 02109-1803
John W. Everets and Raymond R. Doherty.................. 350,000(7) 8.05%
as Trustees of the HPSC, Inc.
Supplemental Employee Stock
Ownership Plan and Trust
60 State Street
35th Floor
Boston, MA 02109-1803
Joseph A. Biernat....................................... 4,000 *
J. Kermit Birchfield.................................... 34,667(8) *
Louis J. P. Calisti..................................... 23,464 *
Dollie A. Cole.......................................... 30,500 *
Samuel P. Cooley........................................ 5,000 *
John W. Everets......................................... 213,057(9)(10)(11) 4.77%
Raymond R. Doherty...................................... 103,503(10)(11) 2.33%
Rene Lefebvre........................................... 27,000(11) *
Thomas M. McDougal...................................... 15,000 *
All Directors and Executive Officers as a group (9
persons).............................................. 456,191 9.87%
</TABLE>
5
<PAGE> 8
- ---------------
* Percent of class less than 1%.
(1) Includes shares of the Company's Common Stock which the named security
holder has the right to acquire within 60 days of the record date through
the exercise of options granted by the Company to the named individuals or
group as follows: Messrs. Biernat, Birchfield and Cooley, 4,000 shares
each; Dr. Calisti, 20,000 shares; Ms. Cole and Dr. McDougal, 15,000 shares
each; Mr. Everets, 115,000 shares; Mr. Doherty, 84,000 shares; Mr.
Lefebvre, 12,000 shares; and such group, 273,000 shares.
(2) Includes allocated shares under the HPSC, Inc. Employee Stock Ownership
Plan (the "ESOP") of 2,257 for Mr. Everets, 4,253 for Mr. Doherty and 9,974
for all executive officers and directors as a group. Fiscal 1994
allocations were for services performed during fiscal 1993. Mr. Everets'
employment with the Company commenced in July 1993.
(3) Dimensional Fund Advisors, Inc. ("Dimensional") has filed an Amendment No.
4 to Schedule 13G with the Securities and Exchange Commission reporting
that it is a registered investment adviser and is deemed to have beneficial
ownership of 351,400 shares of HPSC Common Stock as of December 31, 1994,
all of which shares are held in portfolios of DFA Investment Dimensions
Group Inc., a registered open-end investment company, or in series of the
DFA Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans, all of which Dimensional serves as investment
manager. Dimensional disclaims beneficial ownership of all such shares.
(4) Fidelity Management and Research Corporation ("Fidelity") filed a Form
13F-E with the Securities and Exchange Commission for the calendar year
ended December 30, 1994 reporting that it has investment discretion with
respect to 229,500 shares of Common Stock of the Company. Fidelity has no
voting authority with respect to such shares.
(5) Tweedy, Browne Company L.P. ("TBC") filed a Form 13F with the Securities
and Exchange Commission for the calendar year ended December 31, 1994
reporting that it has investment discretion with respect to 482,905 shares
of Common Stock of the Company. TBC has sole investment discretion with
respect to 446,825 of such shares and shared investment discretion with
respect to 36,080 of such shares. TBC has sole voting authority with
respect to 36,080 of such shares.
(6) 28,280 of these shares have been allocated to the accounts of ESOP
participants and 271,720 shares are unallocated. Messrs. Doherty and
Everets disclaim beneficial ownership of all such shares, other than the
shares allocated to their ESOP accounts listed in note 2 above.
(7) None of the 350,000 shares have been allocated to the accounts of
participants in the HPSC, Inc. Supplemental Employee Stock Ownership Plan
and Trust (the "SESOP"). Messrs. Doherty and Everets disclaim beneficial
ownership of all such shares.
(8) Includes 3,000 shares held by Mr. Birchfield's spouse. Mr. Birchfield
disclaims beneficial ownership of such shares.
(9) Includes 100 shares held by Mr. Everets' son, A. Hale W. Everets. Mr.
Everets disclaims beneficial ownership of such shares.
(10) Excludes the 300,000 shares held in the ESOP for the benefit of the
employee participants (other than the shares allocated to the respective
ESOP accounts of Messrs. Doherty and Everets listed in note (2) above) and
the 350,000 shares held in the SESOP for the benefit of the employee
participants. Although Messrs. Doherty and Everets are the trustees of both
the ESOP and SESOP and accordingly share voting power with respect to all
unallocated shares and share dispositive power with respect to all shares
in the ESOP and the SESOP, they disclaim beneficial ownership of all such
shares, other than the shares allocated to their respective ESOP accounts
listed in note (2) above.
(11) Includes 26,133 shares, 10,000 shares and 10,000 shares, respectively, for
Messrs. Everets, Doherty and Lefebvre, purchased under the Stock Loan
Program described in "EXECUTIVE COMPENSATION -- Stock Loan Program." All
such shares are pledged to the Company pursuant to such Program.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows all compensation paid to the Chief
Executive Officer and the other current executive officers for services rendered
in all capacities during the past three years. HPSC has three current executive
officers.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION --------------------
------------------------------ ALL
OTHER OTHER
ANNUAL SECURITIES COMPEN-
COMPEN- UNDERLYING SATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION OPTIONS (1)
--------------------------------- ---- -------- -------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
John W. Everets (2).............. 1994 $210,000 $125,000 $96,636(3) -0- $15,904
Chief Executive Officer and 1993 110,719 -0- 11,054(4) 175,000 1,135
Chairman of the Board
Raymond R. Doherty (5)........... 1994 190,000 75,000 -0- -0- 22,885
President, Chief Operating 1993 112,856 -0- 5,095(6) 90,000 2,404
Officer and Director 1992 51,770 60,000 -0- 35,000 -0-
Rene Lefebvre (7)................ 1994 78,731 15,000 -0- 30,000 1,790
Chief Financial Officer,
Vice President of Finance
and Treasurer
<FN>
- ---------------
(1) Includes term life insurance premiums paid by the Company and Company
contributions to the individual's 401(k) retirement plan account,
respectively, in the following amounts for the fiscal year ended December
31, 1994: Mr. Everets, $3,240 and $4,200; Mr. Doherty, $3,240 and $3,696;
and Mr. Lefebvre, $540 and $1,250. Also includes the value of shares of
Common Stock in the Company's ESOP allocated to participants in the fiscal
year ended December 31, 1994 in the following amounts: Mr. Everets, $8,464;
Mr. Doherty, $15,949; and Mr. Lefebvre, $0. The value of the shares in the
ESOP was calculated by using the year-end closing price of $3.75 per share
for fiscal 1994. The Company has not allocated shares of Common Stock to
participants in its ESOP for the fiscal year ended December 31, 1994 as of
the date of this Proxy Statement.
(2) Mr. Everets' employment with the Company commenced in July 1993. His
compensation is governed by an employment agreement dated July 19, 1993.
(3) Includes relocation and temporary living expenses of $81,806 paid in fiscal
1994 in connection with Mr. Everets' relocation to the Boston area.
(4) Includes relocation and temporary living expenses of $9,794 paid in fiscal
1993 in connection with Mr. Everets' relocation to the Boston area.
(5) Mr. Doherty's compensation is governed by an employment agreement dated
August 2, 1993.
(6) Includes $3,835 paid by the Company for an automobile for Mr. Doherty.
(7) Mr. Lefebvre's employment with the Company commenced in May 1994. His
compensation is governed by an employment agreement dated April 6, 1994.
</TABLE>
STOCK LOAN PROGRAM
On January 5, 1995 the Compensation Committee approved a Stock Loan Program
whereby executive officers and other senior personnel of the Company earning
more than $80,000 per year may borrow from the
7
<PAGE> 10
Company an amount equal to the cost of purchasing two shares of Common Stock,
solely for the purpose of acquiring such stock, for each share of Common Stock
purchased by the employee from sources other than Company funds, but in no event
exceeding $200,000 in any fiscal quarter of the Company, $200,000 per employee
or $400,000 during the term of the loan program for all employees. All shares
purchased with such loans are pledged to the Company as collateral for repayment
of the loans. The loans are recourse, bear interest at a variable rate which is
one-half of one percent above the Company's cost of funds, payable monthly in
arrears, and are payable as to principal no later than five (5) years after the
date of the loan. As of the date of this proxy statement, the Company has loans
outstanding to executive officers in the following amounts secured by the number
of shares listed: for Mr. Everets, $98,000, secured by 26,133 shares; for Mr.
Doherty, $37,500, secured by 10,000 shares; and for Mr. Lefebvre, $37,500,
secured by 10,000 shares.
STOCK OPTIONS
If the proposal to approve the 1995 Stock Incentive Plan is approved by
stockholders at the Annual Meeting, the 1995 Stock Incentive Plan will supersede
the Company's two current stock option plans, the 1986 Stock Option Plan (the
"1986 Plan") and the 1994 Stock Option Plan (the "1994 Plan"); the 1986 and the
1994 Plans and the Company's stock purchase plan will be cancelled; and the
201,855 shares of Common Stock reserved under the 1986 and the 1994 Plans and
the stock purchase plan will no longer be available for option grants or
purchase thereunder. SEE "PROPOSAL FOUR -- APPROVAL OF 1995 STOCK INCENTIVE
PLAN." An aggregate of 700,000 shares of the Company's Common Stock have been
reserved for issuance under the 1986 Plan and the 1994 Plan and, as of March 21,
1995, an aggregate of 155,000 shares of Common Stock remained available for
issuance under such plans. Both plans provide that the option price, the option
term and the terms and conditions upon which the options may be exercised,
including the dates on which they may be exercised, will be determined by the
Company's Board of Directors at the time the options are granted. Officers and
directors of the Company and any subsidiary companies are eligible to
participate under the 1986 Plan. Key employees, including executive officers, as
well as directors, are eligible to participate under the 1994 Plan.
OPTION GRANT TABLE
The following table shows the stock options granted to the Company's
executive officers during fiscal 1994 and the potential realizable value of
those grants (on a pre-tax basis) determined in accordance with SEC rules. The
information in this table shows how much the executive officers may eventually
realize in future dollars under two hypothetical situations: if the price of
HPSC Common Stock gains 5% or 10% in value per year, compounded over the life of
the options. These amounts represent assumed rates of appreciation and are not
intended to forecast future appreciation of the Company's Common Stock. The
options described in this table have exercise prices equal to the fair market
value of a share of Common Stock on the date they were granted.
OPTION GRANTS IN LAST YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS EXERCISE STOCK PRICE
SECURITIES GRANTED TO OR BASE APPRECIATION FOR
UNDERLYING EMPLOYEES PRICE OPTION TERM
OPTIONS IN FISCAL PER SHARE EXPIRATION -------------------
NAME GRANTED YEAR ($/SH.) DATE 5% 10%
- --------------------------- ----------- ----------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Rene Lefebvre.............. 30,000(1) 15% $3.5625 03/23/99 $29,528 $65,248
</TABLE>
- ---------------
8
<PAGE> 11
(1) Options are exercisable over a four-year period with 20% exercisable
immediately and an additional 20% exercisable on each of the first through
fourth anniversaries of the date of the grant. Options become exercisable in
their entirety upon the occurrence of a change of control of the Company.
Options terminate shortly after the individual ceases to be an employee of
the Company for any reason, and expire on the fifth anniversary of their
date of grant.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
The following table provides information regarding the exercise of stock
options by the Company's executive officers during fiscal 1994 and the value of
unexercised "in-the-money" options at year-end. The columns showing the number
of options exercised during fiscal 1994 and the value realized thereby have been
omitted because none of the executive officers exercised any options during
fiscal 1994.
<TABLE>
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT 1994 IN-THE-MONEY OPTIONS
FISCAL YEAR-END AT 1994 FISCAL YEAR-END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ------------------------- ----------------------------
<S> <C> <C>
John W. Everets........................... 115,000/60,000 $176,250/$61,250
Raymond R. Doherty........................ 84,000/66,000 64,500/66,750
Rene Lefebvre............................. 12,000/18,000 2,250/ 3,375
<FN>
- ---------------
(1) An "in-the-money" option is an option for which the option price of the
underlying stock is less than the December 30, 1994 market price; the value
shown reflects stock price appreciation since the date of grant of the
option.
</TABLE>
EMPLOYMENT AGREEMENTS
John W. Everets and Raymond R. Doherty
In 1993, the Company entered into an employment agreement with each of John
W. Everets and Raymond Doherty. The Company agreed to pay a base annual salary
of $210,000 to Mr. Everets and $190,000 to Mr. Doherty as well as a bonus of up
to 100% of base salary to each individual under an incentive plan which was
developed by the Company's Compensation Committee in consultation with
management, subject to approval by the Board of Directors. The Company also
granted options for 150,000 shares of Common Stock to Mr. Everets and 90,000
shares of Common Stock to Mr. Doherty, each at a price of $2.625 per share,
which was the fair market value of a share of HPSC Common Stock on the date of
grant. The Company also agreed to pay Mr. Everets' reasonable expenses incurred
in his relocation to Boston, up to $50,000 on an after-tax basis.
Each employment agreement has a three-year term and thereafter will
automatically renew from year to year unless either party to such agreement
gives notice of intention to terminate the agreement six months in advance of
any anniversary. Either party to each employment agreement may terminate it at
any time for any reason. In the event of decision not to renew by either party
or a termination by the Company which is not "for cause" with respect to either
Mr. Everets or Mr. Doherty, or, in the case of Mr. Everets, in the event of
termination by Mr. Everets, the Company will pay Mr. Everets or Mr. Doherty his
base monthly pay plus his maximum monthly bonus for the next 12 months. Upon a
termination by the Company which is not "for cause," all of Mr. Everets' stock
options will fully vest. Each employee agrees not to compete with the business
of the Company while receiving termination payments and to maintain in
confidence all of the Company's confidential information.
9
<PAGE> 12
If, within three years after a "change of control" of the Company (as
defined in each agreement), either the Company terminates Mr. Everets or Mr.
Doherty other than "for cause" or the employee terminates his employment due to
a "change in employment" (as defined in each agreement): the Company will pay
the employee his base monthly pay plus the maximum monthly bonus for 24 months;
the non-compete provisions will no longer apply; the employee's stock options
will fully vest; and normal employee benefits will continue for 12 months. If,
within three years after a "change of control", the employee terminates his
employment for any reason other than a "change in employment," the Company will
pay the employee his base monthly pay plus the maximum monthly bonus and normal
employee benefits for 12 months.
Rene Lefebvre
During 1994, the Company entered into an employment agreement with Rene
Lefebvre. The Company agreed to pay Mr. Lefebvre a base annual salary of
$125,000 as well as a bonus of up to 50% of base salary at the discretion of the
Chief Executive Officer and subject to approval of the Compensation Committee of
the Board. The Company also granted to Mr. Lefebvre options for 30,000 shares of
Common Stock at a price of $3.5625 per share, which was the fair market value of
a share of HPSC Common Stock on the date of grant.
The employment agreement has a three-year term and thereafter will
automatically renew from year to year unless either party to such agreement
gives notice of intention to terminate the agreement 60 days in advance of any
anniversary. Either party to Mr. Lefebvre's employment agreement may terminate
it at any time for any reason. The Company is obligated to pay Mr. Lefebvre's
salary for three months after termination, if it does not renew the agreement,
and for six months after termination, if it otherwise terminates his employment
without cause. If the Company otherwise terminates Mr. Lefebvre's employment, it
will pay his salary for six months. Mr. Lefebvre has agreed not to compete with
the business of the Company while receiving severance payments and to maintain
in confidence all of the Company's confidential information.
In the event of a "change of control" of the Company (as defined in his
agreement) Mr. Lefebvre's stock options will fully vest.
COMPENSATION OF DIRECTORS
Each non-employee director of the Company is entitled to be paid a
director's fee of $5,000 per annum plus $2,500 per annum for each committee of
the Board on which he or she serves and $500 for each meeting attended. In
addition, the Company reimburses directors for their travel expenses incurred in
attending meetings of the Board of Directors or its committees. If the 1995
Stock Incentive Plan is approved by the stockholders, each non-employee director
will be granted 1,000 non-qualified stock options on the 30th day following the
Annual Meeting of Stockholders during the term of such plan. SEE "PROPOSAL FOUR
- -- APPROVAL OF 1995 STOCK INCENTIVE PLAN."
REPORT OF COMPENSATION COMMITTEE
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee") currently
consisting of Dollie A. Cole, J. Kermit Birchfield, and Samuel P. Cooley, all of
whom are independent, non-employee directors.
The Compensation Committee of the Board of Directors has primary
responsibility for analyzing the compensation of executive officers of the
Company, establishing performance goals for executive officers, making
recommendations to the full Board of Directors with respect to such
compensation, and administering the Company's Stock Option Plans.
Each of the Chairman of the Board and Chief Executive Officer (the
"Chairman") and the other two executive officers has an employment agreement
which provides for base cash compensation, an annual performance-based bonus and
an award of stock options. (See the section entitled "Employment Agreements"
10
<PAGE> 13
for a description of the terms of such agreements). In determining the terms of
the employment agreements which it has offered to the Company's executive
officers, the Committee has sought to balance the base cash compensation with a
performance bonus and options, the value of which are tied to the performance of
the Company. The employment agreements for the Chairman and the President do not
provide for any increase in base cash compensation during the term of such
agreements.
The base cash compensation levels for the Chairman and other executive
officers were established by the Compensation Committee based upon a number of
factors including the prior experience of the executive officer and the
obstacles to attracting experienced managers to the Company because of its
weakened financial status of the Company at the time each employment agreement
was executed. The Compensation Committee established base cash compensation
levels for the Chairman at a level which was within 3% of the mean base salary
for chief executive officers of multiple business line leasing companies with a
gross leasing portfolio of $100 million to $500 million, based on information
contained in the then most recent (1992) Wage & Compensation Survey of the
Equipment Leasing Association of America.
In recommending bonuses for the Chairman and other executive officers for
the fiscal year ended December 31, 1994, the Compensation Committee reviewed the
incentive plan goals which it had established, including financial and overall
performance criteria. Among the factors which the Committee considered in
establishing bonuses were the following: (i) the overall financial performance
of the Company, particularly in terms of its achieving the revenue goals that
were established in the Business Plan of the Company prepared in 1993; (ii) the
Company's transition from a captive finance company to a diversified open market
finance company; (iii) the Company's success in obtaining bank and asset
securitization financing on favorable terms; (iv) the Company's repurchase of a
large block of its shares from the secured creditors of Healthco International,
Inc.; (v) the Company's success in hiring and retaining sales personnel and (vi)
other positive developments in the Company's business. The Committee also
considered the contribution of each executive officer to the performance of the
Company, the responsibilities of each executive officer in connection with this
performance, the importance of the individual to the future growth and
profitability of the Company, cash compensation levels of competitors in the
industry (these competitors are included in the equipment leasing industry
survey referred to above) and the success of the management team in achieving
the Company's short-term and long-term goals. Although all of these factors were
considered by the Committee in exercising its judgment as to compensation levels
for the Chairman and other executive officers, no precise formula was used to
weigh the relative importance of such factors.
No options were granted to executive officers of the Company in 1994,
except to Mr. Lefebvre pursuant to the terms of his employment agreement
described in the section entitled "Employment Agreements".
Based on information contained in the 1994 Leasing Industry Wage &
Compensation Survey of the Equipment Leasing Association, the Committee believes
that cash compensation of the Chairman and the other executive officers for
fiscal year 1994 was at or near the median of the range of cash compensation
paid by the Company's competitors in the industry.
None of the compensation paid to any executive officer in fiscal year 1994
is subject to Section 162(m) of the Internal Revenue Code of 1986, as amended,
which precludes a public corporation from taking a deduction in 1994 or
subsequent years for compensation of certain executive officers in excess of $1
million.
Compensation and Stock Option
Committee
Dollie A. Cole, Chair
J. Kermit Birchfield
Samuel P. Cooley
11
<PAGE> 14
PERFORMANCE GRAPH
SEC rules require that the Company present a line graph comparing
cumulative total shareholder return for HPSC over a period of five years,
assuming reinvestment of dividends, with a broad equity market index and either
a published industry index or an index made up of peer companies selected by the
Company. The broad equity market index selected by the Company for inclusion in
the graph is the Russell 2000 Index, an index of 2,000 public companies with
relatively small market capitalization, as compared with the companies included
in other available broad equity market indices. For its second comparative
index, the Company was unable during 1993 to locate a published industry index
of companies that management regarded as comparable to HPSC, so the Company
prepared its own index (the "Old Custom Index") of five publicly-owned state
commercial banks that were of similar market capitalization to the Company,
ranging in size from approximately $7 million to approximately $18 million
market capitalization. During the last year, information on one company in the
equipment leasing field became publicly available, and one of the peer issuers
in the Old Custom Index ceased reporting its stock price as a result of its
November 1993 bankruptcy filing. The Company has accordingly modified the Old
Custom Index to include both the newly reporting equipment leasing company and
one other corporation in the equipment leasing business and to exclude the bank
which is in bankruptcy proceedings. The Company believes that the modified index
(the "New Custom Index") provides a more meaningful comparison because it
includes two companies in similar lines of business to the Company in addition
to several financial services institutions with roughly similar market
capitalizations to that of the Company.
12
<PAGE> 15
Set forth below is a graph comparing, over a five-year period beginning
December 31, 1989, the cumulative total return for the Company, the Russell 2000
Index and both the Old and New Custom Index. Management does not believe the
comparison accurately portrays current management's performance because the
Company was required to focus its efforts in 1994 as part of its long-term
business plan upon recovering from the effects of the bankruptcy of Healthco
International, Inc. (see "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS") and
making the transition to an open-market finance company, rather than upon
short-term profitability.
[SPACE LEFT FOR GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD OLD CUSTOM NEW CUSTOM
(FISCAL YEAR COVERED) HPSC INC. RUSSELL 2000 INDEX INDEX
<S> <C> <C> <C> <C>
DEC-89 $100 $100 $100 $100
DEC-90 $37 $80 $70 $65
DEC-91 $38 $118 $59 $67
DEC-92 $48 $139 $51 $75
DEC-93 $45 $166 $53 $71
DEC-94 $50 $163 $28 $60
</TABLE>
THE OLD CUSTOM INDEX INCLUDES: BSD BANCORP (THROUGH 12/31/93), FIRST CITY
BANCORP, PROFESSIONAL BANCORP, REDWOOD EMPIRE BANCORP (ADDED 4Q91, BEGAN TRADING
9/26/91), AND SAN FRANCISCO COMPANY -- CLASS A (FORMERLY BANK OF SAN FRANCISCO
COMPANY). BSD BANCORP DECLARED BANKRUPTCY ON NOVEMBER 4, 1993; THERE WAS NO
TRADING VOLUME IN BSD BANCORP DURING 1994.
THE NEW CUSTOM INDEX INCLUDES: AT&T CAPITAL CORP. (ADDED 4Q93, BEGAN TRADING
7/28/93), FIRST CITY BANCORP, PROFESSIONAL BANCORP, REDWOOD EMPIRE BANCORP
(ADDED 4Q91, BEGAN TRADING 9/26/91), SAN FRANCISCO COMPANY -- CLASS A AND TRANS
LEASING INTERNATIONAL INC.
13
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH HEALTHCO INTERNATIONAL, INC. AND REPURCHASE OF SHARES FORMERLY
HELD BY HEALTHCO
Until Healthco International, Inc. ("Healthco") filed for bankruptcy on
June 9, 1993, Healthco referred to the Company substantially all of the
Company's financing business. Healthco was a leading distributor of merchandise,
equipment and services to dentists and institutional providers of dental care,
including dental schools and dental laboratories. Healthco also provided certain
sales and related services to the Company as well as certain management, data
processing, and administrative services to the Company.
Healthco also owned 1,949,182 shares of the Company's Common Stock, which
it had pledged to certain of its secured creditors (the "Secured Creditors")
and, as a result of the bankruptcy of Healthco, the Secured Creditors and the
Company made certain claims against each other for monies due.
During 1994, HPSC replaced substantially all of the business that was
previously referred to it by Healthco with business from other vendors and now
provides for itself the sales, management, data processing and administrative
services previously provided by Healthco.
Also, on November 1, 1994, the Company entered into a Purchase and Sale
Agreement with the Secured Creditors pursuant to which the Company and certain
individual investors agreed to acquire the shares of the Company's Common Stock
pledged to the Secured Creditors and to resolve all claims between the Company
and the Secured Creditors. The total consideration to be paid under the Purchase
and Sale Agreement was $9 million, $4.5 million to be paid at closing and $4.5
million to be paid in the form of a six-month promissory note, secured by the
shares of HPSC Common Stock purchased by the Company. On December 30, 1994, the
Company and the Secured Creditors closed the transactions provided for in the
Purchase and Sale Agreement. The Company acquired 1,225,182 shares of its Common
Stock, subject to the pledge of those shares to the Secured Creditors.
Individual investors acquired the remaining 724,000 shares. Mutual releases of
claims were exchanged at the closing; however, the release of the Secured
Creditors' claims against HPSC, if any, is contingent upon the Company's
repayment in full of the promissory note.
14
<PAGE> 17
PROPOSALS TWO AND THREE -- AMENDMENTS TO THE
RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY
GENERAL
On March 8, 1995, the Board of Directors (the "Board" or "Board of
Directors") unanimously approved proposed amendments to the Restated Certificate
of Incorporation of the Company (the "Certificate") to classify the Board of
Directors (the "Classification Proposal") and to prohibit action by written
consent of stockholders (the "Consent Proposal") and voted to recommend that the
stockholders of the Company approve such amendments (collectively, the "Proposed
Amendments"). The Classification Proposal would: (1) classify the Board of
Directors into three approximately equal classes, with one class being elected
each year; (2) provide that the Directors may be removed only for cause and only
with the approval of the holders of at least 75% of the shares entitled to vote
for the election of Directors and that any vacancy or newly created directorship
on the Board of Directors shall be filled exclusively by vote of the remaining
director(s) then in office, even if such remaining director(s) constitute(s)
less than a quorum, and such vacancy or newly created directorship shall not be
filled by the stockholders; and (3) increase the stockholder vote required to
amend or repeal, or to adopt any provision inconsistent with, the foregoing
amendments from a majority to 75% of the voting power of the Company. The
Consent Proposal would: (1) prohibit action by written consent of stockholders
and (2) increase the stockholder vote required to amend or repeal, or adopt any
provision inconsistent with, the foregoing amendment from a majority to 75% of
the voting power of the Company. The forms of Proposed Amendments are set forth
as Exhibits A-1 and A-2.
The Classification Proposal and the Consent Proposal are being presented
individually to stockholders of the Company for their approval. As more fully
discussed below, the Board of Directors believes that approval of the Proposed
Amendments is in the best interest of the Company and its stockholders.
The Board believes that companies can be and are acquired and changes in
control of companies can and do occur at prices below realistically achievable
levels when boards do not have measures in place to require an acquiror to
negotiate with the Board or to pay the highest price. With stockholder approval,
many companies have established classified boards as just such a measure.
Although it is possible for such measures to be misused to resist reasonable
takeover actions, there are fiduciary conduct standards to prevent such misuse.
The Proposed Amendments are not in response to any efforts of which the Company
is aware to accumulate the Company's stock or to obtain control of the Company.
As discussed under "Potential Effects of the Classification Proposal," the Board
is proposing the Classification Proposal based on its belief that, if adopted,
the Classification Proposal may discourage a potential acquiror from
accumulating stock of the Company or attempting a takeover or other transaction
posing an actual or threatened change in control of the Company without
negotiating with the incumbent Board, by making it more difficult and
time-consuming to change majority control of the Board. In addition, the
Classification Proposal may provide greater assurance of continuity of the
Board's composition and policies and better enable the Board to protect the
interests of the remaining stockholders in the event that an acquiror shall
acquire a substantial amount of the Company's stock through a takeover bid or in
some other manner which, in the opinion of the Board, is undesirable. The Board
is proposing the Consent Proposal because it believes that all stockholders of
the Company will benefit if a single stockholder or small group of stockholders
are prohibited from acting by written consent without providing all stockholders
notice of, and an opportunity to participate in, the particular matter in
question. The Board of Directors does not presently contemplate recommending to
the stockholders any further measures which would affect a potential acquiror's
ability to change control of the Company. Descriptions of possible anti-takeover
effects of certain other provisions of Delaware law applicable to the Company as
well as provisions currently in the Certificate, by-laws and certain agreements
to which the Company is a party are set forth below under the heading "Current
Anti-Takeover Mechanisms Available to HPSC."
15
<PAGE> 18
The following summary descriptions of the Proposed Amendments are not
intended to be complete and are qualified in their entirety by reference to the
complete texts of the amendments, which appear as Exhibits A-1 and A-2.
Stockholders are urged to read carefully the following sections of this Proxy
Statement, which describe the Proposed Amendments and their potential effects,
and Exhibits A-1 and A-2 hereto, which set forth the full text of the Proposed
Amendments, before voting on the Proposed Amendments.
The Board of Directors has approved conforming and implementing amendments
to its by-laws (the "By-Laws") and each By-Law amendment will become effective
only upon the effectiveness of the corresponding amendment to the Certificate
contained in the Proposed Amendments. These By-Law amendments are set forth in
Exhibits B-1 and B-2 to this Proxy Statement.
The Board of Directors of the Company by unanimous vote has approved and
urges you to vote FOR approval of the Classification Proposal and the Consent
Proposal.
CLASSIFICATION PROPOSAL
Description of the Classification Proposal.
Size of the Board of Directors. The By-Laws currently provide that the
Board of Directors shall consist of between three and fifteen persons and that
the number of directors will be fixed at each annual meeting of stockholders
and may be increased or decreased at any time by the Board of Directors or the
stockholders. Pursuant to the Classification Proposal, the Certificate would
provide that the Board of Directors shall consist of not fewer than three nor
more than twelve members, with the exact number of directors to be fixed,
within those limitations, by the vote of a majority of the entire Board of
Directors. By providing that the Board fixes the size of the Board, together
with the provisions discussed below regarding the filling of vacancies on the
Board, it may be more difficult for a potential acquiror, or even a majority
stockholder, to obtain control of the Board by enlarging the number of
authorized directors and filling the newly created directorships. Consequently,
this provision, together with other provisions of the Classification Proposal,
may have the effect of making a change of control of the Company more
difficult.
Classification of the Board. At present, the By-Laws provide that all of
the Company's directors are elected at each annual meeting to serve until the
next annual meeting. Under the laws of the State of Delaware, where the Company
is incorporated, a corporation may provide in its Certificate of Incorporation
(or By-Laws, if adopted by a vote of the stockholders) that its directors be
divided into classes, with each class to be elected for periods of from one to
three years. The Classification Proposal provides that the Board of Directors be
divided into three classes, Class I, Class II and Class III, with the number of
directors in each class to be as nearly equal as possible, and with each class
to be elected for a three-year term (after an initial transition period for
Class I and Class II).
If the Classification Proposal is adopted, two (2) of the directors elected
at the 1995 Annual Meeting of Stockholders will be elected to Class I for one
(1) year, three (3) will be elected to Class II for two (2) years, and three (3)
will be elected to Class III for three (3) years, as set forth under "Proposal
One -- Number and Election of Directors." The members of each class would hold
office until their successors have been duly elected and qualified or until such
member's death, resignation or removal. At each Annual Meeting following this
initial classification and election, the successors to the class of directors
whose terms expire at that meeting would be elected for a term of office to
expire at the third succeeding Annual Meeting after their election and until
their successors have been duly elected and qualified or until such director's
death, resignation or removal.
Directors of the Company are now elected by a plurality of the votes cast
in an election of directors at any annual or special meeting of the Company's
stockholders. Approval of the Classification Proposal will have the effect of
making it more difficult for the entire Board of Directors to be changed
abruptly without the approval
16
<PAGE> 19
or cooperation of incumbent directors. Although adoption of a classified board
would also make it more difficult for stockholders to change a majority of
directors if they are dissatisfied with the performance of incumbent directors,
the stockholders would retain the power to remove the directors for cause,
subject to the vote of the holders of at least 75% of the shares entitled to
vote. Although there has been no problem in the past with the continuity or
stability of the Board, the Board believes that the longer time period required
to elect a majority of a classified board will help to assure the future
continuity and stability of the Company's affairs and policies.
Vacancies and Removal of Directors. Currently the By-Laws provide that
vacancies and newly created directorships resulting from an increase in the
authorized number of directors may be filled by the stockholders at any meeting
or by written consent or by a majority of the directors then in office. The
Classification Proposal specifies that vacancies and newly created directorships
shall be filled exclusively by a majority of the directors then in office, and
not by the stockholders. In addition, the Classification Proposal would provide,
as required by Delaware law, that any director so appointed would hold office
for a term expiring at the Annual Meeting at which the term of the class to
which such director had been appointed expires (rather than at the next annual
meeting, as is currently the case). The Classification Proposal also provides
that no reduction in the size of the board will shorten the term of an incumbent
director.
Currently, the By-Laws provide that directors may be removed, with or
without cause, by the holders of a majority of shares entitled to vote at an
election of directors. However, Delaware law stipulates that unless the
certificate of incorporation provides otherwise, directors serving on a
classified board of directors may be removed only for cause. The Classification
Proposal would specify that directors may be removed only for cause and only
upon the affirmative vote of the holders of at least 75% of the voting power of
the Company's stock.
The provisions of the Classification Proposal relating to the removal of
directors and the filling of vacancies would preclude the holders of less than
75% of the voting power of the Company's stock from removing incumbent directors
even with cause, and would entirely preclude the stockholders from removing
incumbent directors without cause and from changing control of the Board by
filling the vacancies created by the removal of directors. Moreover, the
provision that newly created directorships shall be filled exclusively by the
Board would prevent any stockholder seeking majority representation on the Board
from obtaining such representation simply by enlarging the Board and filling the
new directorships created thereby.
Amendment and Repeal. Under Delaware law, amendments to a certificate of
incorporation require the approval of both the board of directors and the
holders of stock representing a majority of the voting power entitled to vote
thereon. Delaware law also permits provisions in a certificate of incorporation
that require a greater vote than the vote otherwise required by law for any
corporate action. With respect to such supermajority provisions, Delaware law
requires that any amendment, alteration or repeal of such provisions be approved
by an equally large supermajority vote. In addition, Delaware law permits a
certificate of incorporation to require a supermajority vote to amend or repeal
provisions which themselves do not require a supermajority vote. As permitted by
these provisions of Delaware law, the Classification Proposal, if adopted, would
require the affirmative vote of holders of at least 75% of the voting power of
the Company's stock for the amendment or repeal, or the adoption of any
provision inconsistent with, the amendments to the Certificate which form a part
of the Classification Proposal. Accordingly, if the Classification Proposal is
approved, stockholders having the same percentage of voting power as that
required to adopt the amendment would not have sufficient voting power to amend
or repeal the amendment at a later date. The requirement of an increased
stockholder vote would prevent a stockholder or stockholders with less than 75%
of the voting power of the Company from avoiding the requirements of these
provisions simply by repealing them.
17
<PAGE> 20
Potential Effects of the Classification Proposal
If adopted, the Classification Proposal may discourage certain types of
transactions, described below, which involve an actual or threatened change in
control of the Company. The Classification Proposal may make it more difficult
and time-consuming to change majority control of the Board of Directors, thereby
reducing the vulnerability of the Company to an offer to take control of the
Company that is not negotiated with and approved by the incumbent Board. The
Classification Proposal may also enable the Board to protect the interests of
the other stockholders in the event that an acquiror obtains a substantial
amount of the Company's stock through a takeover bid or in some other manner
which the Board believes is undesirable.
Often third parties accumulate substantial stock positions in public
companies as a prelude to proposing a takeover or restructuring or sale of all
or part of the target company or other similar extraordinary corporate action.
Such actions are often undertaken by the third party without advance notice to
or consultation with management of the target company. In many cases, the
potential acquiror seeks representation on a company's board of directors in
order to increase the likelihood that its proposal will be implemented by the
target company. If the company resists such efforts to obtain representation on
its board, the potential acquiror may commence a proxy contest or a consent
solicitation to have its nominees elected to the board in place of certain
directors or to replace the entire board. In some cases, the potential acquiror
may not truly be interested in taking over the target company, but instead may
use the threat of a proxy fight, consent solicitation and/or a takeover bid as a
means of obtaining for itself a special benefit which might not be available to
all of the target company's stockholders, such as forcing the company to
repurchase the potential acquiror's equity position at a substantial premium
over market price. The Company's shareholders' rights plan, described below
under "Current Anti-Takeover Mechanisms Available to HPSC," may deter an
acquiror from acquiring more than 15% of the Company's stock, but is largely
ineffective against a proxy contest or a consent solicitation, which is often an
alternative to a takeover bid for an acquiror intent upon gaining control of a
target company. For example, no plan mechanism exists to prevent a bidder from
purchasing a number of shares just under 15% and then commencing a proxy fight
or a consent solicitation to unseat the target company's board, although the
plan would prohibit directors affiliated with or designated by the acquiror from
voting to redeem the rights granted under the plan.
The Board of Directors believes that in the situations described above, the
imminent threat of its removal curtails its ability to negotiate effectively
with a purchaser by depriving the Board of Directors of the time and information
necessary to evaluate the takeover proposal, to study alternative proposals and
to help ensure that the best transaction is obtained.
However, takeovers or changes in the composition of the Board of Directors
or management of the Company which are proposed and effected without prior
consultation and negotiation with the Board of Directors are not necessarily
detrimental to the Company and its stockholders. Adoption of the Classification
Proposal may impair the ability of stockholders to change the composition of the
Board of Directors and to benefit from a transaction which the incumbent Board
opposes, even if a majority of the stockholders deem such transaction to be in
their best interests. The Classification Proposal could also have the effect of
discouraging a third party from making a tender offer at a price representing a
control premium over then prevailing trading prices. The Board of Directors,
however, believes that the benefits of seeking to protect its ability to
negotiate with the proponent of a takeover proposal outweigh the disadvantages
of discouraging such proposals.
The adoption of the Classification Proposal would make more difficult or
discourage a proxy contest, the assumption of control by a holder of a
substantial equity interest in the Company or the removal of the incumbent Board
of Directors, even if the only reasons for the removal or change were the
performance or nonperformance of the director(s) and, therefore, could have the
effect of entrenching incumbent
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management. At the same time, the Classification Proposal would help ensure that
the Board of Directors, if confronted by a proposal from a third party who has
recently acquired a significant equity interest in the Company, will have
sufficient time to review the proposal, to consider appropriate alternatives to
the proposal, to seek a premium price for the stockholders and to reject and
defend against the proposal if the Board should determine that such action is in
the best interest of the Company and the stockholders.
The adoption of a classified Board will also benefit the Company by
encouraging continuity of management and stability of leadership and policies.
New directors will be given an opportunity to become familiar with corporate
affairs and will be able to benefit from the experience of co-members of the
Board who have served for longer than one-year terms. Although no problems have
been experienced by the Company in the past with respect to the continuity and
stability of leadership and policy, the adoption of a classified Board of
Directors would decrease the likelihood of such problems arising in the future.
Once the classified Board becomes fully operative, in the absence of a
director's death, resignation or removal, approximately two-thirds of the
directors at any time will have had prior experience on the Board and it would
require at least two annual meetings of stockholders instead of one, as at
present, to effect a change in the majority control of the Board.
The Classification Proposal is consistent with the rules of the National
Association of Securities Dealers, under whose NASDAQ system the Company's
Common Stock is traded and is permitted under Delaware law.
CONSENT PROPOSAL
Description of the Consent Proposal.
The Board of Directors proposes to amend the Certificate to add a new
provision to require that stockholder action may be taken only at an annual or
special meeting and to prohibit stockholder action by written consent. Unless
otherwise provided in the Certificate, Delaware law permits any action required
or permitted to be taken by stockholders to be taken without a meeting, without
prior notice and without stockholder vote if a written consent setting forth the
action to be taken is signed by the holders of shares of outstanding stock
having the number of votes necessary to authorize such action at a meeting of
stockholders. Currently, the Certificate does not contain any provisions
regarding stockholder consent actions and the By-Laws provide that action may be
taken by written consent. Consequently, unless the Consent Proposal is approved,
persons holding a majority interest in the Company could take significant
corporate action without giving other stockholders notice or the opportunity to
vote.
As discussed above under the heading "Description of Classification
Proposal -- Amendment and Repeal," Delaware law permits a certificate of
incorporation to require a supermajority vote to amend or repeal provisions
which themselves do not require a supermajority vote. As permitted by these
provisions of Delaware law, the proposed amendments relating to actions by
written consent would require the affirmative vote of holders of at least 75% of
the voting power of the Corporation's stock for the amendment or repeal of, or
the adoption of any provision inconsistent with, such proposed amendments.
Accordingly, if this proposal is approved, stockholders having the same
percentage of voting power as that required to adopt it would not have
sufficient voting power to amend or repeal the amendment at a later date. The
requirement of an increased stockholder vote is designed to prevent a
stockholder or stockholders controlling less than 75% of the voting power of the
Corporation from avoiding the requirements of these provisions simply by
repealing them.
Potential Effects of the Consent Proposal.
The provision of the Consent Proposal prohibiting stockholder action by
written consent would give all stockholders of the Company entitled to vote on a
particular matter notice of and the opportunity to participate in the
determination of any proposed action on such matter and the chance to take
judicial or other action to protect their interests.
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In addition, the change to eliminate stockholder action by written consent
may serve to avoid untimely action in a context that might not permit
stockholders to have the full benefit of the knowledge, advice and participation
of the Company's management and the Board of Directors. In the event of a
proposed acquisition of the Company, for example, the interests of stockholders
may best be served by a transaction that results from negotiations based on
careful consideration of the proposed terms. Although there can be no certainty
as to the result of any particular negotiations, adoption of the Consent
Proposal may tend to promote negotiations concerning any proposed acquisition of
the Company, by placing greater bargaining power in the Board of Directors.
However, any provision in the Company's Certificate which effectively
requires a potential acquiror to negotiate with the Company's management and
Board of Directors could be characterized as increasing management's and the
Board's ability to retain their positions with the Company and to resist a
transaction which may be deemed advantageous by certain stockholders.
The elimination of action by written consent may deter acquisitions of the
Company's stock and may delay, deter or impede stockholder action not approved
by the Board of Directors. Such actions may include stockholder attempts to
obtain control of the Board, unsolicited tender offers or other efforts to
acquire control of the Company. The Consent Proposal may impede or delay, at
least until the next regularly scheduled annual meeting (and, if the
Classification Proposal is approved, beyond such meeting), the initiation or
consummation of business transactions, such as reorganizations, mergers, or
recapitalizations, which are opposed by the Board of Directors even though
sought by a majority of the stockholders.
CURRENT ANTI-TAKEOVER MECHANISM AVAILABLE TO HPSC
Authorized but Unissued Stock. HPSC currently has 5,000,000 shares of
authorized but unissued shares of preferred stock, $1.00 par value ("Preferred
Stock"). Subject to certain restrictions in the Certificate with respect to the
issuance of additional shares of Preferred Stock of the Company, the Board of
Directors may issue one or more series of Preferred Stock with such rights,
preferences and limitations as are not inconsistent with certain general terms
of the Preferred Stock contained in Article 4 of the Certificate. The
availability for issuance of shares of Preferred Stock could enable the Board of
Directors to make more difficult a change in control of the Company, including
by issuing warrants or rights to acquire preferred stock to discourage or defeat
unsolicited stock accumulation programs and acquisition proposals.
Stockholders' Rights Plan. The Company adopted a preferred stock purchase
rights plan in August 1993, pursuant to which the Board of Directors declared a
dividend of one preferred stock purchase right ("Right") for each share of the
Company's Common Stock outstanding on or after August 13, 1993. The Right
entitles the holder to purchase one one-hundredth of a share of Series A
Preferred Stock, which fractional share is substantially equivalent to one share
of Common Stock, at an exercise price of $20.00. The Rights will not be
exercisable or transferable apart from the Common Stock until the earlier to
occur of (i) 10 days following a public announcement that a person or affiliated
group has acquired 15 percent or more of the outstanding Common Stock (such
person or group, an "Acquiring Person"), or (ii) 10 business days after an
announcement or commencement of a tender offer which would result in a person or
group's becoming an Acquiring Person, subject to certain exceptions. The Rights
beneficially owned by the Acquiring Person and its affiliates become null and
void upon the Rights becoming exercisable.
If a person becomes an Acquiring Person or certain other events occur, each
Right entitles the holder, other than the Acquiring Person, to purchase Common
Stock (or one one-hundredths of a share of Series A Preferred Stock, in the
discretion of the Board of Directors) having a market value of two times the
exercise price of the Right. If the Company is acquired in a merger or other
business combination, each exercisable
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Right entitles the holder, other than the Acquiring Person, to purchase Common
Stock of the acquiring company having a market value of two times the exercise
price of the Right.
At any time after a person becomes an Acquiring Person and prior to the
acquisition by such person of 50% or more of the outstanding Common Stock, the
Board of Directors may direct the Company to exchange the Rights held by any
person other than an Acquiring Person at an exchange ratio of one share of
Common Stock per Right. The Rights may be redeemed by the Company, subject to
approval of the Board of Directors excluding directors designated by or
affiliated with the acquiror under certain circumstances, for one cent per Right
in accordance with the provisions of the Rights Plan. The Rights have no voting
or dividend privileges.
The Rights Plan may have certain anti-takeover effects, including (i)
increasing the cost of a takeover through the potential exercise of Rights in
the Company; (ii) deterring substantial accumulations of stock by any one party
or group by triggering the exercise of Rights upon the mere accumulation of 15%
or more of the Company's Common Stock; (iii) creating substantial uncertainty in
the pricing of a tender offer and/or nonnegotiated business combination since it
cannot be determined how many shares will initially be tendered and how many
will remain with exercisable Rights following an offer; (iv) providing
bargaining power to the Board of Directors by making a nonnegotiated acquisition
extremely difficult and/or expensive; and (v) delaying a potential bid by
inducing a suitor first to make a proposal to the Company, thereby affording
time for the Board of Directors (a) to negotiate a better deal, (b) to seek out
possible other acquirors, (c) to put together a higher bid or (d) to otherwise
respond to the proposal.
ESOP and SESOP. The Company established an employee stock ownership plan
("ESOP") in December 1993 as a retirement vehicle for the benefit of all
eligible employees. It also established a supplemental employee stock ownership
plan ("SESOP") in July 1994 for the benefit of all ESOP participants, including
highly compensated employees of the Company who would otherwise not be entitled
to have the same percentage contribution made to the ESOP on their behalf as the
other employees of the Company due to contribution limits under the Internal
Revenue Code of 1986, as amended. The ESOP and the SESOP hold 300,000 and
350,000 shares of Common Stock, respectively. The Company has made contributions
to the ESOP with respect to 1993 in the amount of $114,293.15 and 28,280 shares
have been allocated to the accounts of HPSC employees. No contributions have yet
been made to the ESOP with respect to fiscal 1994. No contributions have been
made to date under the SESOP. Messrs. Everets and Doherty are the trustees of
the ESOP and the SESOP and are entitled under the terms of each plan to vote
shares which have not been allocated to employee accounts. These shares could be
voted to defeat proposals made by stockholders which are adverse to the
interests of management. On the other hand, the ERISA fiduciary standards
governing the ESOP require that the plan be maintained for the exclusive benefit
of the employee participants and not of the company sponsor. State law fiduciary
standards impose comparable restrictions on the trustees of the SESOP.
Accordingly, the trustees' voting decisions would be scrutinized to determine if
they were in the best interest of the participants and not merely an attempt to
entrench management.
Change of Control Provisions. Under the terms of the Company's 1994 Option
Plan and certain options granted to directors and officers under the terminated
1983 Stock Option Plan and the 1986 Stock Option Plan, holders of options may
exercise those instruments immediately upon the occurrence of certain events,
such as the transfer, during any two-year period, of a majority of the issued
and outstanding shares of the Common Stock to a person who did not own 10% of
such stock at the beginning of the two-year period, a change in composition of a
majority of the Board of Directors in any one-year period, or a liquidation,
sale of assets, or merger of the Company in which the Company does not survive.
Additionally, the ESOP provides for immediate vesting of all of the shares of
Common Stock allocated to the accounts of plan participants and the SESOP
provides for immediate allocation of all unallocated shares, full vesting and
distribution of such shares to plan participants upon the occurrence of certain
events described in the preceding sentence. The
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employment agreements of each of Messrs. Everets and Doherty also provide for
certain continuing payment obligations of the Company upon a change of control,
as discussed above under "Executive Compensation -- Employment Agreements." The
proposed 1995 Stock Incentive Plan also contains certain change of control
provisions discussed below under "Approval of the 1995 Stock Incentive Plan --
Change in Control". Such payment obligations in each of these benefit plans and
agreements described above would make it more expensive for a potential acquiror
to acquire the Company or to change control of the Board of Directors, and might
discourage efforts to do so.
Other Provisions. The By-Laws sets forth certain procedures and time
limitations for nominations for election to the Board of Directors. Neither the
Certificate nor the By-Laws contain any other provisions which management
believes have an anti-takeover effect. Under Delaware law, the certificate of
incorporation of any corporation may provide for cumulative voting by
stockholders in all elections of directors. Neither the Certificate nor the
By-Laws provide for cumulative voting.
Section 203 of the Delaware General Corporation Law. Under Section 203, as
applicable to the Company, certain "business combinations" (defined generally to
include (i) mergers or consolidations between a Delaware corporation and an
interested stockholder (as defined below) and (ii) transactions between a
Delaware corporation and an interested stockholder involving the assets or stock
of such corporation or its majority-owned subsidiaries, including transactions
which increase the interested stockholder's percentage ownership of stock)
between a Delaware corporation, whose stock generally is publicly traded or held
of record by more than 2,000 stockholders, and an interested stockholder
(defined generally as a stockholder, who becomes a beneficial owner of 15
percent or more of a Delaware corporation's voting stock) are prohibited for a
three-year period following the date that such stockholder became an interested
stockholder, unless (i) prior to the date such stockholder became an interested
stockholder, the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (ii) upon consummation of the transaction
that made such stockholder an interested stockholder, the interested stockholder
owned at least 85 percent of the voting stock of the corporation outstanding at
the time the transaction commenced (excluding voting stock owned by officers who
are also directors and voting stock held in employee benefit plans in which the
employees have a confidential right to tender or vote stock held by the plan),
or (iii) the business combination was approved by the board of directors of the
corporation and ratified by two-thirds of the voting stock which the interested
stockholder did not own. The three-year prohibition also does not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of certain extraordinary transactions involving
the corporation and a person who had been an interested stockholder during the
previous three years or who became an interested stockholder with the approval
of a majority of the corporation's directors. By imposing a three-year
moratorium on mergers and certain other business combinations between the
interested stockholder and the Company in certain circumstances, Section 203 may
discourage an acquiror wishing to acquire a target company through a business
combination from targeting the Company. On the other hand, Section 203 contains
numerous exceptions in which the three-year moratorium will not apply and is
accordingly unlikely to provide complete protection to the Company against an
unwanted acquisition.
VOTE REQUIRED FOR APPROVAL
The Classification Proposal and the Consent Proposal are being presented
separately to the Stockholders. Adoption of each of the Classification Proposal
and the Consent Proposal requires the affirmative vote by the holders of a
majority of the outstanding shares of the Company's Common Stock. The Board of
Directors recommends a vote 'FOR' both the Classification Proposal and the
Consent Proposal. Proxies received in response to this solicitation will be
voted in favor of both proposals, and may be voted in favor of adjournment
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of the meeting in order to permit further solicitation of proxies with respect
to the proposals if sufficient votes in favor of the proposals have not been
received, unless the stockholder instructs otherwise.
PROPOSAL FOUR -- APPROVAL OF THE 1995 STOCK INCENTIVE PLAN
The Board of Directors adopted the 1995 Stock Incentive Plan (the "1995
Plan") on March 8, 1995, subject to stockholder approval, to provide for grants
of stock options and other stock based awards. The 1995 Plan is intended to
provide an opportunity for certain key employees as well as non-employee
directors of the Company and its subsidiaries to acquire an ownership interest
in the Company, thereby aligning their interests with those of the Company's
stockholders. Adoption of the 1995 Plan will also enhance and maintain the
Company's ability to attract, retain and motivate key employees, including
salespersons, whose efforts will be important to the Company's future success
and prosperity.
The Company presently has only 155,000 shares available for option grants
under its two existing stock option plans, the 1986 Stock Option Plan and the
1994 Stock Option Plan, as well as 46,855 shares available for purchase under
its Stock Purchase Plan (the "Prior Plans"). The Company believes that
additional shares should be made available to give the Company maximum
flexibility in providing appropriate incentives to key personnel. Upon
stockholder approval of the 1995 Plan, the Prior Plans will be terminated and
none of the 201,855 shares reserved under the Prior Plans will be available for
option grants or purchases thereunder, although previous grants and purchases
will be unaffected.
The text of the 1995 Plan is attached to this Proxy Statement as Exhibit C.
The following summary does not purport to be complete and is qualified by
reference to the 1995 Plan.
General
The 1995 Plan permits the Company to grant (i) performance-based restricted
stock and (ii) stock options (both non-qualified stock options ("NSOs") and
incentive stock options ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code")).
Administration. The 1995 Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee"), whose members are
"outside directors" under proposed regulations promulgated under Section 162(m)
of the Code and are "disinterested persons" under Section 16 of the Securities
Exchange Act of 1934, as amended. The Committee determines which key employees
of the Company and its subsidiaries are eligible to participate in the 1995 Plan
and the amounts, times, forms, terms and conditions of grants under the 1995
Plan within the limitations established by the 1995 Plan. With respect to
executive officers, the Committee intends to specifically approve any grant of
stock options or restricted stock. With respect to others, the Committee intends
to administer the 1995 Plan (i) by establishing guidelines for the grant of
stock options or restricted stock for those who are not executive officers, so
that the chief executive officer of the Company can determine which key
employees of the Company and its subsidiaries are eligible to participate in the
Plan and grant options or restricted stock to those employees consistent with
those guidelines and (ii) by specifically approving any grants of stock options
or restricted stock which are outside of the guidelines.
Eligible Participants. Under the proposed 1995 Plan, all executive
officers (currently 3), all non-employee directors (currently 5) and other key
employees (currently approximately 47) would be eligible to participate and to
receive stock options and, for all persons other than non-employee directors,
restricted stock awards, based on their performance and that of the Company.
Number of Shares. Subject to adjustment in the event of any change in the
capital structure of the Company, the maximum number of shares that may be
issued in the aggregate under the 1995 Plan is 550,000
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shares. No more than 200,000 shares of restricted Common Stock or options to
purchase Common Stock may be awarded to an individual participant in any one
year. For any participant, the aggregate fair market value of stock subject to
ISOs that are first exercisable in any calendar year may not exceed the limits
established therefor from time to time under Section 422 of the Code.
Any shares subject to an option or restricted stock award which for any
reason expires or is terminated unexercised as to such shares and any shares
withheld or reacquired by the Company pursuant to withholding, payment,
forfeiture or repurchase rights will be available again for distribution under
the 1995 Plan.
The closing price of the Company's Common Stock as reported by the NASDAQ
National Market System on March , 1995 was $ .
Restricted Stock
Within the limitations described below, the Committee will determine when
restricted stock will be granted and all of the other terms and conditions of a
grant (or delegate such determination, as described under "Administration"
above). The Committee may determine whether, and to what extent, any
consideration other than the services of the participant must be paid for the
restricted stock. Shares of restricted stock will be held in escrow by the
Company in certificate or book-entry form. The participant will receive all of
the benefits of ownership with respect to such shares including the rights to
vote the shares and to receive dividends; provided, however, that so long as the
restrictions are in effect, (a) the shares may not be sold, hypothecated or
otherwise disposed of, (b) if the participant's employment is terminated without
cause by the Company or by reason of death or disability, and if the First
Installment Multiple described below is not met within four months after the
termination date, the Company shall repurchase all such shares (or, if the First
Installment Multiple is met, but the Second Installment Multiple is not met, the
Company shall repurchase 50% of such shares) at the price, if any, paid for such
stock by the employee and (c) if the participant voluntarily terminates his
employment or is terminated with cause, the Company shall repurchase all such
shares (or, if only the First Installment Multiple has been met at such time,
50% of such shares) as of the termination date at the price, if any, paid for
such stock by the employee.
All restricted stock granted under the 1995 Plan will remain subject to the
restrictions on transfer and right of the Company to repurchase described in the
previous paragraph unless, during the five-year period after such grant (the
"Five-Year Period"), the Common Stock achieves specified multiples of its value
on the date of grant. At such time as the closing price of the Common Stock as
reported on the NASDAQ National Market System (the "Market Price") for a
consecutive 10-day period equals or exceeds 134.175% (the "First Installment
Multiple") of the Market Price on the date of grant of the restricted stock
award, the restrictions described above will lapse as to one-half of the
restricted shares awarded. At such time as the Market Price for a consecutive
10-day period equals or exceeds 168.35% (the "Second Installment Multiple") of
the Market Price on the date of grant of the restricted stock award, the
restrictions described above will lapse as to the second half of the restricted
shares. All restrictions will lapse upon a change in control of the Company, as
described below. If the First Installment Multiple with respect to a grant of
restricted stock is not achieved within the Five-Year Period, the Company shall
repurchase all such stock at the price, if any, paid for such stock by the
employee. If the First Installment Multiple has been achieved but the Second
Installment Multiple has not been achieved within the Five-Year Period, the
Company shall repurchase one-half of such stock at the price, if any, paid for
such stock by the employee. The Second Installment Multiple represents the
annual compound return (including dividends) of the Standard and Poor's 500
stock index for the period January 1, 1970 through December 31, 1994, compounded
over the Five-Year Period; the First Installment Multiple represents one-half of
such increase.
Each award will be evidenced by a written agreement between the Company and
the person to whom the award is made, setting forth the performance goals
described above and the period within which such goals
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must be met. No restrictions will be released until the Committee certifies that
the applicable performance levels have been satisfied. Distribution of earned
restricted stock will be made as soon as practicable after the expiration of the
applicable performance period. The Committee will require participants to
surrender sufficient restricted shares to pay applicable withholding taxes, and
such surrendered shares shall become available again for distribution under the
1995 Plan.
Stock Options
Award Agreement. The Committee will determine the terms of stock option
awards under the 1995 Plan (or delegate such determination, as described under
"Administration" above). Options granted under the 1995 Plan may be ISOs, NSOs,
or any combination thereof. Each award will be evidenced by a written agreement
between the Company and the person receiving the stock option. The agreement
will specify the option price, the expiration date of the option, the number of
shares for which the option is exercisable, any conditions to the exercise of
the option, such as continued employment, and such other terms and conditions as
the Committee in its sole discretion shall determine.
Option Price. The option price may not be less than the fair market value
of a share of Common Stock on the date of option grant, in the case of ISOs, or
85% of the fair market value of a share of Common Stock on the date of grant, in
the case of NSOs. The participant is not required to pay any consideration for
the grant of a stock option under the 1995 Plan.
Option Exercise. Options may be exercised at such times and subject to
such restrictions and conditions, including, without limitation, restrictions
based on the passage of time or the achievement of performance goals, as are
determined by the Committee. All stock options shall become fully exercisable
upon a change in control of the Company, as described below. No option shall be
exercisable more than 10 years after the date the option is granted. Options
granted under the 1995 Plan will generally expire six months after termination
of employment due to death or disability and three months after termination of
employment for any other reason. An option may be exercised under the 1995 Plan
by providing written notice to the Company specifying the number of shares of
Common Stock to be purchased and providing payment to the Company. Generally,
the option price shall be paid in full in cash, or in the discretion of the
Committee, by tendering shares of Common Stock of the Company with a fair market
value equal to the exercise price of the option shares to be purchased.
Certificates for the shares purchased on the exercise of an option will be
issued only upon payment in full of the option price. The Committee will require
participants to surrender sufficient shares acquired pursuant to the option to
pay applicable withholding taxes, and such surrendered shares shall become
available again for distribution under the 1995 Plan.
Automatic Stock Option Grants to Non-Employee Directors. Members of the
Company's Board of Directors who are not employees of the Company or its
subsidiaries will receive an annual grant under the 1995 Plan of 1,000 NSOs,
subject to anti-dilution adjustments. These grants are made at the conclusion of
each regular Annual Meeting of the Company's stockholders to non-employee
directors who will continue to serve on the Board thereafter. The exercise price
will be equal to the Market Price of the Common Stock on the date of grant. The
NSOs will become exercisable in five equal annual installments beginning on the
date of grant or immediately in the event of a change in control of the Company,
as described below. The NSOs will expire at the earliest of (1) ten years after
the date of grant, (2) six months after the termination of the director's
service due to death or disability and (3) one month after the termination of
the director's service for any other reason.
Nontransferability
Options and restricted stock granted pursuant to the 1995 Plan are
nontransferable by the participant, other than by will or by the laws of descent
and distribution, and options may be exercised, during the lifetime of the
participant, only by the participant.
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Change in Control
The 1995 Plan provides that in the event of a change in control of the
Company, all stock options granted thereunder shall become fully exercisable and
vested and the restrictions applicable to any outstanding grants of restricted
stock shall lapse and such shares shall be fully vested.
For purposes of the 1995 Plan, the term "change in control" is defined as
(1) the acquisition, directly or indirectly, of at least 20 percent of the
outstanding securities of the Company by a person other than the Company or an
employee benefit plan of the Company, (2) a greater than one-third change in the
composition of the Board over a period of 24 months (if such change was not
approved by a majority of the existing directors), (3) certain mergers and
consolidations involving the Company, (4) a liquidation of the Company or (5) a
sale of all or substantially all of the Company's assets. The term "change in
control" does not include a reincorporation of the Company in a different state
and certain other transactions.
Amendment or Termination
The 1995 Plan will automatically terminate on March 8, 2005. The board of
directors may terminate the 1995 Plan at any time prior to that date and may
make such changes in the 1995 Plan as it deems advisable, except that
stockholder approval shall be sought for changes which would require stockholder
approval under Rule 16b-3 of the Securities Exchange Act of 1934, as amended, or
Sections 162(m) or 422 of the Code.
Federal Tax Consequences
Restricted Stock. A recipient of restricted stock will have ordinary
taxable income equal to the excess of the fair market value of the shares at the
time if and when the share restrictions lapse over the amount (if any) paid by
the recipient for such restricted stock. Under current federal tax law, however,
the employee may elect to include as ordinary income for the year of the award
the fair market value of the shares on the grant date over the amount (if any)
paid by the recipient for such restricted stock. The restrictions on the shares
will not affect fair market value for purposes of such an election. If the
election is made, the recipient will not incur additional tax liability until
the sale or disposition of the shares, when any gain or loss will be a capital
gain or loss. If the shares are forfeited following such an election, the
recipient obtains no tax benefit with respect to the forfeiture or prior tax
payment, but will be able to claim a capital loss deduction equal to the
difference (if any) between the sum of the amount (if any) paid for the shares
plus the taxable income recognized at the time of the election minus the amount
(if any) received upon the forfeiture. The Company is entitled to a federal tax
deduction in the same amount and at the same time as the employee realizes
ordinary income.
Stock Options. The grant of a stock option creates no income tax
consequences to the participant or the Company. Upon the exercise of a NSO, the
participant generally will recognize ordinary taxable income equal to the excess
of the fair market value of the shares purchased (as of the exercise date) over
the option price. The Company will be entitled to a deduction in the same amount
and at the same time. Any gain or loss upon subsequent sale of the shares will
be a capital gain or loss.
Upon exercising an ISO, a participant has no taxable income (except that
the alternative minimum tax may apply), and the Company receives no deduction,
provided that the employment requirements specified in Section 422 of the Code
are satisfied. If the participant holds the stock acquired upon exercise for the
statutory holding period, then any gain or loss upon subsequent sale of the
common stock will be a long-term capital gain or loss equal to the difference
between the option price and any amount realized on the disposition. The Company
is allowed no deduction. The statutory holding period is the later of two years
from the grant date or one year from the date the common stock is transferred to
the participant pursuant to the exercise of the option. If a participant
disposes of shares acquired by the exercise of an ISO before expiration of the
holding
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period (a "disqualifying disposition"), then the amount of ordinary income
taxable to the participant is the lesser of (i) the fair market value of the
common stock on the exercise date less the option price, and (ii) the amount
realized on disposition less the option price. The Company will be entitled to a
deduction in the same amount and at the same time.
Other Limitations on Income Tax Deduction
Under Section 162(m) of the Internal Revenue Code, the Company may be
limited as to federal income tax deductions to the extent that total individual
compensation paid to the Chief Executive Officer and the other four most highly
compensated executive officers of the Company exceeds $1,000,000 in any one
year. The Company can preserve the deductibility of certain compensation in
excess of $1,000,000, however, provided that it complies with conditions imposed
by Section 162(m) of the Code, including the payment of performance-based
compensation pursuant to a plan approved by stockholders. The 1995 Plan is
designed to provide the Company flexibility and the opportunity to qualify
certain aspects of compensation as performance-based compensation under Section
162(m) of the Internal Revenue Code, should the Company at some time in the
future pay consideration that is subject to Section 162(m).
The foregoing summary of the effects of federal income taxation upon the
employee and the Company with respect to awards under the 1995 Plan does not
purport to be complete, and reference should be made to the applicable
provisions of the Code and the regulations thereunder. In addition, this summary
does not discuss the provisions of the income tax laws of any municipality,
state or foreign country in which the employee may reside or the Company may be
subject to taxation.
Benefits under Superseded Plans.
As a result of the discretionary nature of the 1995 Plan, it is not
possible to determine who the participants in such Plan will be, or the number
of options or other awards to be received by any person or group under such
Plan. If approved by the stockholders, however, the 1995 Plan will supersede the
Prior Plans.
The following table sets forth information with respect to the grant of options
under such superseded stock option plans to each of the executive officers, to
all current executive officers as a group, to all non-executive directors as a
group, and to all other employees as a group, during the last fiscal year.
<TABLE>
<CAPTION>
VALUE OF IN-THE-
MONEY OPTIONS ON
NAME AND POSITION NUMBER OF SHARES MARCH 8, 1995(1)
- --------------------------------------------------- ----------------- -----------------
<S> <C> <C>
John W. Everets.................................... -0- $ -0-
Chairman of the Board
Chief Executive Officer
Raymond R. Doherty................................. -0- -0-
President
Rene Lefebvre...................................... 30,000 54,375
Treasurer
Chief Financial Officer
All current Executive Officers as a group (3
persons)......................................... 30,000 54,375
Non-Executive Director Group (6 persons)........... -0- -0-
Non-Executive Officer Employee Group (47
persons)......................................... 165,000 226,875
</TABLE>
27
<PAGE> 30
- ---------------
(1) An "in-the money" option is an option for which the option price of the
underlying stock is less than the March 8, 1995 market price; the value
shown reflects stock market appreciation since the date of the granting of
the option.
Vote Required for Adoption.
The affirmative vote of the holders of a majority of all outstanding shares
present or represented at the meeting and entitled to vote thereon is required
to approve the adoption of the 1995 Plan, provided that the number of votes cast
for and against the 1995 Plan must exceed 50% of the number of shares entitled
to vote thereon. See "Quorum and Voting Procedures" below. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE 1995 PLAN AND YOUR PROXY WILL BE
SO VOTED UNLESS YOU SPECIFY OTHERWISE.
PROPOSAL FIVE -- RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Coopers & Lybrand have acted as the Company's independent accountants since
1976 and have been selected to act as the Company's independent public
accountants for the current year, subject to ratification by vote of the holders
of a majority of the shares of Common Stock voting thereon at the Annual
Meeting. Representatives of that firm are expected to be present at the Annual
Meeting and will have the opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions.
The Company's Board of Directors recommends that the stockholders vote FOR
the ratification of the selection of Coopers & Lybrand.
PROPOSALS OF SECURITY HOLDERS
Any proposal of a stockholder intended to be presented at the 1996 Annual
Meeting of Stockholders must be received at the corporate headquarters of the
Company not later than Monday, November 28, 1995 in order to be included in the
Company's Proxy Statement and form of proxy relating to that meeting.
QUORUM AND VOTING PROCEDURES
The By-Laws of the Company provide that a majority of the shares of Common
Stock issued and outstanding and entitled to vote, present in person or by
proxy, shall constitute a quorum at a meeting of stockholders of the Company.
Shares of Common Stock represented by a properly signed and returned proxy are
considered as present at the Annual Meeting for purposes of determining a
quorum. Abstentions are counted as present for purposes of determining the
existence of a quorum.
With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee; votes that are withheld will be excluded entirely
from the vote and will have no effect. Abstentions may be specified on all
proposals except the election of directors and will be counted as present for
purposes of determining the existence of a quorum regarding the item on which
the abstention is noted. Because amendment of the Restated Certificate of
Incorporation for the Classification Proposal or the Consent Proposal requires
the approval of a majority of the outstanding shares, abstentions on those
proposals will have the effect of a negative vote. Abstentions on the proposal
for approval of the 1995 Plan will have the same effect because such proposal
requires the affirmative vote of a majority of shares present in person or by
proxy and entitled to vote. Under the by-laws of the National Association of
Securities Dealers (NASD) that govern brokers using the NASD's automated
quotation system (NASDAQ), brokers who hold shares in street name do not have
the authority to vote on any items unless they have received instructions from
beneficial owners. If the broker is also a member of a national securities
exchange, NASD by-laws permit the
28
<PAGE> 31
broker to vote shares held in street name in accordance with the rules of the
exchange. For instance, under the rules of the New York Stock Exchange, brokers
that do not receive instructions are entitled to vote on the election of
directors and the amendments to the Restated Certificate of Incorporation, but
not with respect to approval of the 1995 Plan. Under applicable Delaware law, a
broker non-vote will have the same effect as a vote against the proposed
amendments to the Restated Certificate of Incorporation, and will have no effect
on the outcome of the election of directors or the proposal for approval of the
1995 Plan.
Under Section 160(c) of the Delaware General Corporation Law, the 1,225,182
shares of Common Stock repurchased by the Company from Healthco International,
Inc. are not entitled to vote or be counted for quorum purposes.
The vote required for the election of directors is the affirmative vote of
a plurality of the shares present or represented at the Annual Meeting and
entitled to vote thereon. Unless authority to vote for any director is withheld
in the Proxy, votes will be cast in favor of election of the nominees listed
herein. Votes withheld from election of directors will be excluded entirely from
the vote.
OTHER MATTERS
The Company's management knows of no business which will be presented for
consideration at the Annual Meeting other than that shown above. However, if any
such other business should properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed form of proxy to vote the proxies
in respect to any such business in accordance with their best judgment.
The cost of preparing, assembling and mailing this proxy material will be
borne by the Company. The Company may solicit proxies otherwise than by the use
of the mail, in that certain officers and regular employees of the Company,
without additional compensation, may use their personal efforts, by telephone or
otherwise, to obtain proxies. The Company requests individuals, firms and
corporations holding shares in their names, or in the names of their nominees,
which shares are beneficially owned by others, to send this proxy material to
and obtain proxies from such beneficial owners and will reimburse such holders
for their reasonable expenses in doing so.
By Order of the Board of Directors
DENNIS W. TOWNLEY
Secretary
March 28, 1995
29
<PAGE> 32
EXHIBIT A-1
Proposed Amendment to the Company's Restated Certificate of Incorporation
Relating to the Establishment of a Classified Board of Directors
10.
(a) The number of Directors that shall constitute the entire Board of
Directors of this corporation shall be not less than three (3) nor more than
twelve (12), subject to the provisions of this Article 10. The exact number of
Directors shall be fixed, within the foregoing limitations, by the vote of a
majority of the entire Board of Directors.
(b) The Board of Directors shall be and is divided into three classes:
Class I, Class II and Class III, which shall be as nearly equal in number as
possible; provided, however, that the number of Directors in any one class may
not exceed the number of Directors in any other class by more than one. Each
Director shall serve for a term ending on the date of the third annual meeting
of stockholders following the annual meeting at which the Director was elected;
provided, however, that each initial Director in Class I shall hold office until
the annual meeting of stockholders in 1996; each initial Director in Class II
shall hold office until the annual meeting of stockholders in 1997 and each
initial Director in Class III shall hold office until the annual meeting of
stockholders in 1998. Notwithstanding the foregoing provisions of this Article,
each Director shall serve until his successor is duly elected and qualified or
until his death, resignation or removal.
(c) In the event of any increase or decrease in the authorized number of
Directors, the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of Directors so as to maintain such classes as nearly equal as
possible. No decrease in the number of Directors constituting the Board of
Directors shall shorten the term of any incumbent Director.
(d) Newly created directorships resulting from any increase in the number
of Directors and any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall be filled
exclusively by the affirmative vote of a majority of the remaining Directors
then in office (and not by stockholders), even if such remaining Directors
constitute less than a quorum of the Board of Directors, or by a sole remaining
Director. Any Director elected in accordance with the preceding sentence shall
hold office for the remainder of the full term of the class of Directors in
which the new directorship was created or the vacancy occurred and until such
Director's successor is duly elected and qualified or until his death,
resignation or removal.
(e) Any Director may be removed from office only for cause, and only upon
the affirmative vote of the holders of at least seventy-five (75%) of the voting
power of the corporation's stock.
(f) Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of stock issued by this corporation having a preference over
the common stock as to dividends or upon liquidation shall have the right,
voting separately by class or series, to elect Directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies,
terms of removal and other features of such directorships shall be governed by
the terms of Article 4 and the resolution or resolutions establishing such class
or series adopted pursuant thereto and such Directors so elected shall not be
divided into classes pursuant to this Article 10 unless expressly provided by
such terms.
(g) Notwithstanding anything contained in this Certificate of Incorporation
or the corporation's By-Laws to the contrary, this Article 10 and Sections 2, 3,
5 and 6 of Article II of the corporation's By-Laws shall not be altered,
amended, or repealed, and no provisions inconsistent therewith shall be adopted,
without the affirmative vote of the holders of not less than seventy-five
percent (75%) of the outstanding stock of the
30
<PAGE> 33
corporation entitled to vote generally in the election of Directors, voting
together as a single class (it being understood that for the purposes of this
Article 10, each share shall have one vote except as otherwise provided in
accordance with Article 4).
EXHIBIT A-2
Proposed Amendment to the Company's Restated Certificate of Incorporation
Relating to the Prohibition of Stockholder Action by Written Consent
11.
(a) All actions taken by stockholders shall be taken only at an annual or
special meeting of stockholders. No action by stockholders may be taken by
written consent or otherwise without a meeting.
(b) Notwithstanding anything contained in this Certificate of Incorporation
or the corporation's By-Laws to the contrary, this Article 11 and Section 11 of
Article I of the corporation's By-Laws shall not be altered, amended or
repealed, and no provisions inconsistent therewith shall be adopted, without the
affirmative vote of the holders of not less than seventy-five percent (75%) of
the outstanding stock of the corporation entitled to vote generally in the
election of Directors, voting together as a single class.
31
<PAGE> 34
EXHIBIT B-1
Proposed Amendment to the Company's By-Laws
Relating to the Establishment of a Classified Board of Directors
(Deletions of existing language are noted in brackets;
additions of proposed language are capitalized.)
"ARTICLE II
DIRECTORS
Section 1. Powers. The business and affairs of the corporation shall be
managed by or under the direction of the Board of Directors.
Section 2. Number of Directors. The Board of Directors shall consist of
[not less than 3 nor more than 15 persons] A NUMBER WITHIN THE LIMITS SET FORTH
IN ARTICLE 10 OF THE CORPORATION'S CERTIFICATE OF INCORPORATION. The number of
Directors shall be fixed [by the stockholders at the annual meeting, and may be
increased or decreased by the stockholders or the Board of Directors at any
time,] BY THE VOTE OF A MAJORITY OF THE ENTIRE BOARD OF DIRECTORS IN EACH CASE
WITHIN THE LIMITS SET FORTH IN ARTICLE 10 OF THE CORPORATION'S CERTIFICATE OF
INCORPORATION. ANY INCREASE OR DECREASE IN THE AUTHORIZED NUMBER OF DIRECTORS
SHALL BE GOVERNED BY THE PROVISIONS OF SECTION 5 BELOW.
Section 3. Election, Classes and Tenure. [Each Director shall be elected
by plurality vote of the stockholders at the annual meeting or as provided in
Section 5 of this Article II. Each Director shall serve until the date fixed in
these By-Laws for the next annual meeting of stockholders after his election and
thereafter until his successor is elected and qualified, or until his earlier
resignation or removal.] THE BOARD OF DIRECTORS SHALL BE AND IS DIVIDED INTO
THREE CLASSES: CLASS I, CLASS II AND CLASS III, WHICH SHALL BE AS NEARLY EQUAL
IN NUMBER AS POSSIBLE; PROVIDED, HOWEVER, THAT THE NUMBER OF DIRECTORS IN ANY
ONE CLASS SHALL NOT EXCEED THE NUMBER OF DIRECTORS IN ANY OTHER CLASS BY MORE
THAN ONE. EACH DIRECTOR SHALL SERVE FOR A TERM ENDING ON THE DATE OF THE THIRD
ANNUAL MEETING OF STOCKHOLDERS FOLLOWING THE ANNUAL MEETING AT WHICH THE
DIRECTOR WAS ELECTED; PROVIDED, HOWEVER, THAT EACH INITIAL DIRECTOR IN CLASS I
SHALL HOLD OFFICE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 1996; AND EACH
INITIAL DIRECTOR IN CLASS II SHALL HOLD OFFICE UNTIL THE ANNUAL MEETING OF
STOCKHOLDERS IN 1997; AND EACH INITIAL DIRECTOR IN CLASS III SHALL HOLD OFFICE
UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 1998. NOTWITHSTANDING THE FOREGOING
PROVISIONS OF THIS SECTION 3, EACH DIRECTOR SHALL SERVE UNTIL HIS SUCCESSOR IS
DULY ELECTED AND QUALIFIED OR UNTIL HIS DEATH, RESIGNATION OR REMOVAL.
Section 4. Qualification. No Director must be a stockholder.
Section 5. Vacancies and Newly Created Directorships. [Vacancies and
newly created Directorships resulting from any increase in the authorized number
of Directors may be filled by the stockholders at any meeting or by written
consent, by a majority of the Directors then in office, although less than a
quorum, or by a sole remaining Director. When one or more Directors shall resign
from the board, effective at a future date, a majority of Directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies by vote to take effect when such resignation or
resignations shall become effective.] IN THE EVENT OF ANY INCREASE OR DECREASE
IN THE AUTHORIZED NUMBER OF DIRECTORS, THE NEWLY CREATED OR ELIMINATED
DIRECTORSHIPS RESULTING FROM SUCH INCREASE OR DECREASE SHALL BE APPORTIONED BY
THE BOARD OF DIRECTORS AMONG THE THREE CLASSES OF DIRECTORS SO AS TO MAINTAIN
SUCH CLASSES AS NEARLY EQUAL IN NUMBER AS POSSIBLE. NO DECREASE IN THE NUMBER OF
DIRECTORS CONSTITUTING THE BOARD OF DIRECTORS SHALL SHORTEN THE TERM OF ANY
INCUMBENT DIRECTOR. NEWLY CREATED DIRECTORSHIPS RESULTING FROM ANY INCREASE IN
THE NUMBER OF DIRECTORS AND ANY VACANCIES ON THE BOARD OF DIRECTORS RESULTING
FROM DEATH, RESIGNATION, DISQUALIFICATION, REMOVAL OR OTHER CAUSE SHALL BE
FILLED EXCLUSIVELY BY THE AFFIRMATIVE VOTE OF A MAJORITY OF THE REMAINING
DIRECTORS THEN IN OFFICE
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<PAGE> 35
(AND NOT BY STOCKHOLDERS), EVEN IF SUCH REMAINING DIRECTORS CONSTITUTE LESS THAN
A QUORUM OF THE BOARD OF DIRECTORS, OR BY A SOLE REMAINING DIRECTOR. ANY
DIRECTOR ELECTED IN ACCORDANCE WITH THE PRECEDING SENTENCE SHALL HOLD OFFICE FOR
THE REMAINDER OF THE FULL TERM OF THE CLASS OF DIRECTORS IN WHICH THE NEW
DIRECTORSHIP WAS CREATED OR THE VACANCY OCCURRED AND UNTIL SUCH DIRECTOR'S
SUCCESSOR IS DULY ELECTED AND QUALIFIED OR UNTIL HIS DEATH, RESIGNATION OR
REMOVAL.
Section 6. Removal. [Any Director or the entire Board of Directors may be
removed, with or without cause, by the holders of the shares then entitled to
vote at an election of the Directors.] ANY DIRECTOR MAY BE REMOVED FROM OFFICE
ONLY FOR CAUSE, AND ONLY UPON THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST
SEVENTY-FIVE PERCENT (75%) OF THE VOTING POWER OF THE CORPORATION'S STOCK.
Section 7. Resignation. Any Director of the corporation may resign at any
time by giving written notice to the Board of Directors, to the Chairman of the
Board, if any, to the President, or to the Secretary, and any member of a
committee may resign therefrom at any time by giving notice as aforesaid or to
the Chairman or Secretary of such committee. Any such resignation shall take
effect at the time specified therein, or, if the time be not specified, upon
receipt thereof; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 8. Annual Meeting. Immediately after each annual meeting of
stockholders and at the place thereof, if a quorum of the Directors is present,
there shall be a meeting of the Directors without notice.
Section 9. Regular Meetings. Regular meetings of the Directors may be
held at such times and places as shall from time to time be fixed by resolution
of the Board, and no notice need be given of regular meetings held at times and
places so fixed, PROVIDED, HOWEVER, that any resolution relating to the holding
of regular meetings shall remain in force only until the next annual meeting of
stockholders and that, if at any meeting of Directors at which a resolution is
adopted fixing the times or place or places for any regular meetings any
Director is absent, no meeting shall be held pursuant to such resolution without
notice to or waiver by such absent Director pursuant to Section 11 of this
Article II.
Section 10. Special Meetings. Special meetings of the Directors may be
called by the Chairman of the Board (if any), the President, or by any two
Directors, and shall be held at the place and on the date and hour designated in
the call thereof.
Section 11. Notices. Notices of any special meeting of the Directors
shall be given by the Secretary or an Assistant Secretary to each Director, by
mailing to him, postage prepaid, and addressed to him at his address as
registered on the books of the corporation, or if not so registered at his last
known home or business address, a written notice of such meeting at least four
days before the meeting or by delivering such notice to him at least 48 hours
before the meeting or by sending to him at least 48 hours before the meeting, by
prepaid telegram addressed to him at such address, notice of such meeting. In
the absence of all such officers, such notice may be given by the officer or one
of the Directors calling the meeting. Notice need not be given to any Director
who has waived notice (a) in writing executed by him before or after the meeting
and filed with the records of the meeting, or (b) by attending the meeting
except for the express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not lawfully called or
convened. A notice or waiver of notice of a meeting of the Directors need not
specify the business to be transacted at or the purpose of the meeting.
Section 12. Quorum. At any meeting of the Directors a majority of the
total number of Directors shall constitute a quorum for the transaction of
business; provided always that any number of Directors (whether one or more and
whether or not constituting a quorum) present at any meeting or at any adjourned
meeting may adjourn such meeting, provided that all absent Directors receive or
waive notice pursuant to Section 11 of Article II of any such adjournment that
exceeds four business days.
33
<PAGE> 36
Section 13. Action at Meeting. At any meeting of the Directors at which a
quorum is present, the action of the Directors on any matter brought before the
meeting shall be decided by vote of a majority of those present and voting,
unless a different vote is required by law, the Certificate of Incorporation, or
these By-Laws.
Section 14. Action by Written Consent. Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 15. Telephone Meetings. Members of the Board of Directors, or any
committee thereof, may participate in a meeting of such Board or committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 15 shall constitute presence
in person at such meeting.
Section 16. Place of Meetings. The Board of Directors may hold its
meetings, and have an office or offices, within or without the State of
Delaware.
Section 17. Compensation. The Board of Directors shall have the authority
to fix the compensation of Directors.
Section 18. Committees. (a) The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the corporation. The
Board may designate one or more Directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property or assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the By-Laws of the corporation. Such a committee may, to the extent
expressly provided in the resolution of the Board of Directors, have the power
or authority to declare a dividend or to authorize the issuance of stock.
(b) At any meeting of any committee, a majority of the whole committee
shall constitute a quorum and, except as otherwise provided by statute, by the
Certificate of Incorporation, or by these By-Laws, the affirmative vote of at
least a majority of the members present at a meeting at which there is a quorum
shall be the act of the committee.
(c) Each committee, except as otherwise provided by resolution of the Board
of Directors, shall fix the time and place of its meetings within or without the
State of Delaware, shall adopt its own rules and procedures, and shall keep a
record of its acts and proceedings and report the same from time to time to the
Board of Directors."
34
<PAGE> 37
EXHIBIT B-2
Proposed Amendment to the Company's By-Laws
Relating to the Prohibition of Stockholder Action by Written Consent
(Deletions of existing language are noted in brackets;
additions of proposed language are capitalized.)
ARTICLE I
STOCKHOLDERS
Section 10. Record Date.
[(a)] In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action [other than stockholder action by written consent], the Board of
Directors may fix a record date which shall not precede the date such record
date is fixed and shall not be more than 60 nor less than ten days before the
date of such meeting, nor more than 60 days prior to any such other action. If
no record is fixed, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given. The record
date for any other purpose [other than stockholder action by written consent]
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting, provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
[(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors shall fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record or other person seeking to take corporate
action by written consent or to have the stockholders authorize action to be
taken by written consent, shall, by written notice to the Secretary of the
Corporation, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within ten days after the date upon
which such a request is received, adopt a resolution fixing a record date. If a
request for the fixing of a record date is not made and received by the
Secretary prior to the delivery of a written consent to the Corporation in
accordance with 8 Del. C. sec. 228(c), the Board of Directors shall promptly,
but in all events within ten days after the date on which such a consent is
delivered to the Corporation in accordance with 8 Del. C. sec. 228(c), adopt a
resolution fixing a record date. If no record date has been fixed by the Board
of Directors within ten days of the date on which such a request is received or
within 10 days of the date on which such consent is delivered, whichever is
earlier, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by applicable law, shall be the first date on which
such a signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation in accordance with 8 Del. sec. 228(c). If
no record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by applicable law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which the
Board of Directors adopts the resolution taking such prior action.]
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<PAGE> 38
Section 11. Action by [Written Consent] STOCKHOLDERS.
[(a) Any action required by law to be taken at any annual or special
meeting of stockholders of the Corporation, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice to the stockholders and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take corporate action referred to therein unless, within 60 days of the earliest
dated consent delivered in the manner required by this Section to the
Corporation, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation in accordance with Subsection (a) of
this Section. Consents may be revoked by written notice (i) to the Corporation,
(ii) to the stockholder or stockholders soliciting consents or soliciting
revocations in opposition to action by consent proposed by the Corporation (the
"Soliciting Stockholders"), or (iii) to a proxy solicitor or other agent
designated by the Corporation or the Soliciting Stockholders.
(c) Within three business days after receipt of a request for the fixing of
a record date, as required by Subsection (b) of Section 10 of Article I, or
after delivery of a consent in accordance with Subsection (a) of this Section,
whichever is earlier, the Board of Directors or the Secretary of the Corporation
may engage inspectors of elections for the purpose of performing a ministerial
review of the validity of the consents and revocations. Any cost of retaining
inspectors of election shall be borne by the Corporation. Consents and
revocations shall be delivered to the inspectors upon receipt by the
Corporation, the Soliciting Stockholders or their proxy solicitors or other
designated agents. As soon as consents and revocations are received, the
inspector shall review the consents and revocations and shall maintain a count
of the number of valid and unrevoked consents. Within three business days after
the earlier of: (i) 60 days after the date of the earliest dated consent
delivered to the Corporation in the manner provided in Subsection (a) of this
Section or (ii) notification by the Corporation or the Soliciting Stockholders
(whichever is soliciting consents) stating that the Corporation or Soliciting
Stockholders, as the case may be, have a good faith belief that the requisite
number of valid and unrevoked consents to authorize or take the action specified
in the consents has been delivered in accordance with Subsection (a) of this
Section, the inspectors shall issue a preliminary report to the Corporation and
the Soliciting Stockholders stating: (i) the number of valid consents; (ii) the
number of valid revocations; (iii) the number of valid and unrevoked consents;
(iv) the number of invalid consents; (v) the number of invalid revocations; and
(vi) whether, based on the preliminary count, the requisite number of valid and
unrevoked consents has been obtained to authorize or take the action specified
in the consents.
The Corporation and the Soliciting Stockholders shall have 48 hours to
review the consents and revocations and to advise the inspectors and the
opposing party in writing as to whether they intend to challenge the preliminary
report of the inspectors. If no written notice of an intention to challenge the
preliminary report is received within 48 hours after the inspector's issuance of
the preliminary report, the preliminary report shall become final. If the
Corporation or the Soliciting Stockholders issue written notice of an intention
to challenge the inspector's preliminary report within 48 hours after the
issuance of that report, a challenge session shall be scheduled by the
inspectors within 48 hours of the receipt of such written notice. A transcript
of the challenge session shall be recorded by a certified court reporter. Within
24 hours following the completion of the challenge session, the inspectors shall
issue their final report to the Soliciting Stockholders
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<PAGE> 39
and the Corporation, which report shall contain the information included in the
preliminary report, plus all changes in the vote totals as a result of the
challenge and a certification of whether the requisite number of valid and
unrevoked consents was obtained to authorize or take the action specified in the
consents. A copy of the final report of the inspectors shall be included in the
book in which the proceedings of meetings of stockholders are recorded.]
ALL ACTIONS TAKEN BY STOCKHOLDERS SHALL BE TAKEN ONLY AT AN ANNUAL OR SPECIAL
MEETING OF STOCKHOLDERS IN ACCORDANCE WITH THE PROVISIONS OF THIS ARTICLE I. NO
ACTION BY STOCKHOLDERS MAY BE TAKEN BY WRITTEN CONSENT OR OTHERWISE WITHOUT A
MEETING.
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EXHIBIT C
HPSC, INC.
1995 STOCK INCENTIVE PLAN
As adopted 3/8/95
1. Purpose; Restrictions. The purpose of this HPSC, Inc. 1995 Stock
Incentive Plan (the "Plan") is to advance the interests of HPSC, Inc., a
Delaware corporation (the "Company"), and of its shareholders by strengthening
the ability of the Company to attract, retain and motivate key employees of the
Company or any present or future Subsidiary1 of the Company (the Company and all
such Subsidiaries shall be collectively referred to as the "Company Group") by
providing such employees with an opportunity to purchase or receive as bonuses
stock of the Company and to attract, retain and motivate non-employee directors
of the Company by providing such directors with an opportunity to purchase stock
of the Company, thereby permitting such employees and directors to share in the
Company's success while aligning their interests with those of the Company's
shareholders. It is intended that this purpose will be effected by granting (i)
incentive stock options ("Incentive Options"), which are intended to qualify
under the provisions of Section 422 of the Code, and non-statutory stock options
("Nonqualified Options"), which are not intended to meet the requirements of
Section 422 of the Code and which are intended to be taxed upon exercise under
Section 83 of the Code (both Incentive Options and Nonqualified Options shall be
collectively referred to as "Options") and (ii) restricted stock awards that are
subject to performance-vesting requirements ("Restricted Stock Awards").
Notwithstanding the foregoing, no Incentive Options shall be granted under
this Plan unless this Plan shall have been approved by the stockholders of the
Company within twelve (12) months after the Effective Date.
2. Effective Date. This Plan was adopted on March 8, 1995, which is also
the Effective Date of the Plan.
3. Stock Covered by the Plan. Subject to adjustment as provided in
Sections 9 and 10 below, the shares that may be made subject to Options or
Restricted Stock Awards under this Plan ("Shares") shall not exceed in the
aggregate 550,000 shares of the common stock, $.01 par value, of the Company
("Common Stock"). Any Shares subject to an Option or Restricted Stock Award
which for any reason expires or is terminated unexercised as to such Shares and
any Shares withheld or reacquired by the Company pursuant to withholding,
payment, forfeiture or a repurchase right hereunder may again be the subject of
an Option or Restricted Stock Award under the Plan. The Shares purchased or
issued under the Plan may, in whole or in part, be either authorized but
unissued Shares or issued Shares reacquired by the Company.
4. Administration. This Plan shall be administered by the Compensation
Committee of the Board (the "Committee"); provided that each of the members of
the Committee shall be, and shall have been at all times within the one year
period ending on the date of appointment to the Committee, a person who in the
opinion of counsel to the Company is (i) a "disinterested person" as such term
is used in Rule 16b-3 promulgated under the Exchange Act and (ii) an "outside
director" as such term is used in proposed regulation Section 1.162.27(e)(3)
under Section 162(m) of the Code. The Committee shall have authority, subject to
the express provisions of the Plan, to construe the Plan and the respective
Options, Restricted Stock Awards, and related agreements, to prescribe, amend
and rescind rules and regulations relating to the Plan, to determine, within the
limits of the Plan, the amounts, times, forms, terms, conditions and status (as
Incentive or Nonqualified Options) of the respective Options, Restricted Stock
Awards, and related agreements (other than the terms and conditions of Director
Options set forth in Section 5(b)), and to make all other
- ---------------
1 Capitalized terms not otherwise defined herein are defined in Section 12
below.
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<PAGE> 41
determinations in the judgment of the Committee necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Option, Restricted
Stock Award, or related agreement in the manner and to the extent it shall deem
expedient to carry the Plan into effect, and it shall be the sole and final
judge of such expediency.
Notwithstanding the foregoing, the Committee shall have authority to
establish guidelines for the grant of Options and Restricted Stock Awards to key
employees of the Company Group who are not executive officers of the Company and
to delegate to the Company's chief executive officer authority to grant Options
and Restricted Stock Awards, within such guidelines, to such eligible
non-executive key employees.
No member of the Committee and no delegate of the Committee shall be liable
for any action or determination under the Plan taken or made in good faith.
5. Eligible Recipients; Automatic Grants to Non-Employee Directors.
(a) Key Employees. Subject to the restrictions of this Plan, Options and
Restricted Stock Awards may be granted to such key employees of the Company
Group ("Employees"), including without limitation directors of the Company who
are Employees, as are selected by the Committee or (except as to Employees who
are Company executive officers) by the Committee's delegate pursuant to Section
4 above (an "Employee Participant" or a "Participant").
(b) Non-Employee Directors. Subject to the restrictions of this Plan,
Nonqualified Options will be granted annually pursuant to this Section 5(b) to
each director of the Company who is a director on the date of grant and who is
not an Employee ("Non-Employee Directors"). Each Non-Employee Director who is
such at the conclusion of any regular annual meeting of the Company's
stockholders while this Plan is in effect and who will continue to serve on the
Board thereafter (a "Director Participant" or, unless the context otherwise
requires, a "Participant") shall receive on such date a Nonqualified Option to
purchase 1,000 Shares, subject to adjustment as provided in Section 10 below (a
"Director Option"). Each Director Option shall be subject to the following terms
and conditions:
(i) Price. The purchase price per Share payable upon the exercise of
a Director Option shall be one hundred percent (100%) of the fair market
value per Share of the Common Stock on the date of grant of the Director
Option.
(ii) Exercise. Each Director Option shall become exercisable for the
full amount or for any part thereof in installments of twenty percent (20%)
each, beginning on the date of grant and continuing on each anniversary
thereof, provided that each outstanding Director Option shall become
immediately exercisable for the full amount or any part thereof upon the
occurrence of a Change in Control of the Company. Unexercised portions of
vested installments may be accumulated and subsequently exercised prior to
the expiration of the Option.
(iii) Expiration. Each Director Option shall terminate and may no
longer be exercised upon the earliest of (1) ten years after the date of
grant, (2) six months after termination of the Participant's Service due to
death or Disability, and (3) one month after termination of the
Participant's Service for any other reason.
(iv) Other Terms. Each Director Option shall be subject to all other
terms of the Plan (including without limitation the terms of Sections 7, 9,
10 and 11) except to the extent that such terms are inconsistent with the
express provisions of this Section 5(b).
6. Duration of the Plan. This Plan shall terminate ten years from the
Effective Date hereof, unless terminated earlier pursuant to Section 13 below,
and no Options or Restricted Stock Awards may be granted or made thereafter.
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<PAGE> 42
7. Terms and Conditions of Options and Restricted Stock Awards. Options
and Restricted Stock Awards granted or made under this Plan shall be evidenced
by grant forms or agreements in such form and containing such terms and
conditions as the Committee or (except as to grants and awards to Employees who
are Company executive officers) the Committee's delegate shall determine;
provided, however, that such grant forms and agreements shall evidence among
their terms and conditions the following:
(a) Price. The purchase price per Share payable upon the exercise of
each Option (other than a Director Option) or the consideration (if any) in
addition to services of the Participant required pursuant to each
Restricted Stock Award granted or made hereunder shall be determined by the
Committee at the time the Option or Restricted Stock Award is granted or
made subject to the following restrictions. Subject to Section 7(k)(i), if
applicable, the purchase price per Share payable upon the exercise of each
Incentive Option granted hereunder shall not be less than one hundred
percent (100%) of the fair market value per Share of the Common Stock on
the day the Incentive Option is granted. The purchase price per Share
payable upon the exercise of each Nonqualified Option granted hereunder
shall be not less than eighty-five percent (85%) of the fair market value
per Share of the Common Stock on the date of the grant. Fair market value
shall be determined in accordance with procedures to be established in good
faith by the Committee. Restricted Stock Awards may be issued in
consideration of services to be rendered, which shall be valued for such
purposes by the Committee. No Share shall be issued for less than its par
value, if any, paid in cash, property or services.
(b) Number of Shares. Each grant or award form or agreement shall
specify the number of Shares to which it pertains.
(c) Performance Vesting and Other Terms of Restricted Stock
Awards. All Shares covered by a Restricted Stock Award will be issued
promptly after the date of grant of the award, subject to the following
terms and conditions:
(i) Performance Vesting. Such Shares shall remain unvested and
subject to the restrictions of this Section 7(c) until such time (if at
all) as one or both of the following vesting conditions (the "Vesting
Conditions") are met within the period of five years beginning on the
date of grant of the Restricted Stock Award (the "Vesting Period").
The Partial Vesting Condition is met when the closing price of a
share of the Common Stock as reported on the NASDAQ national market
system for a consecutive ten-day period equals or exceeds 134.175% of
the closing price of a share of the Common Stock on the first day of the
Vesting Period. If the Partial Vesting Condition is met for a Restricted
Stock Award and the Participant also meets the Service requirement
defined below (the "Service Requirement"), fifty percent (50%) of the
Shares covered by the award shall thereupon vest in the Participant and
the restrictions of this Section 7(c) shall terminate with respect to
such vested Shares (but not with respect to the remaining unvested
Shares), subject to payment by the Participant of any additional
consideration required under the Restricted Stock Award. The Service
Requirement is met by continuous Service; provided that if a
Participant's Service is terminated by the Company without cause or by
reason of death or Disability, the Participant shall be deemed to meet
the Service Requirement until the first day of the fifth month following
such termination. The Committee's good faith determination of whether
the termination of a Participant's Service was without cause shall be
binding for purposes of the Plan.
The Full Vesting Condition is met when the closing price of a share
of the Common Stock as reported on the NASDAQ national market system for
a consecutive ten-day period equals or exceeds 168.35% of the closing
price of a share of the Common Stock on the first day of the Vesting
Period. If the Full Vesting Condition is met and the Participant also
meets the Service Requirement,
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<PAGE> 43
the remaining fifty percent (50%) or, if the Partial Vesting Condition
was not previously met, then one hundred percent (100%) of the Shares
covered by the award shall thereupon vest in the Participant and the
restrictions of this Section 7(c) shall terminate, subject to payment by
the Participant of any additional consideration required under the
Restricted Stock Award.
Notwithstanding any of the foregoing, if a Change in Control of the
Company occurs during the Vesting Period of a Restricted Stock Award and
before the date of forfeiture pursuant to this Section 7(c) of Shares
covered by the award, all unvested Shares covered by the award shall
thereupon vest in the Participant and the restrictions of this Section
7(c) shall terminate, subject to payment by the Participant of any
additional consideration required (without regard to the occurrence of a
Change in Control) in the Restricted Stock Award.
(ii) Forfeiture of Unvested Shares. If any Shares covered by a
Restricted Stock Award to a Participant remain unvested at the end of
the Vesting Period or if any such Shares remain unvested at a time
during the Vesting Period when the Participant fails to meet the Service
Requirement, such Shares shall thereupon be forfeited to the Company
without any further action by the Company or the Participant and for no
consideration other than the amount (if any) of cash or other property
paid by the Participant for such Shares. A Participant shall be deemed
to fail to meet the Service Requirement on the first day of the fifth
month following termination of his or her Service without cause or by
reason of death or Disability and on the date of termination of his or
her Service for any other reason (including, without limitation,
termination for cause and any voluntary termination by the participant).
(iii) Escrow of Unvested Shares. While Shares covered by a
Restricted Stock Award remain unvested, they shall be held in escrow by
the Company in certificate or book-entry form and they may not be sold,
hypothecated, or otherwise disposed of by the Participant or anyone
claiming through him or her.
(iv) Stockholder Rights. Subject to the restrictions of this
Section 7(c), each Participant shall enjoy all the benefits of ownership
with respect to all Shares covered by a Restricted Stock Award
(including the rights to vote such Shares and to receive dividends
thereon), regardless of whether such Shares are vested or unvested;
provided that all such rights shall immediately cease with respect to
any unvested Shares upon the forfeiture of such Shares.
(v) Other Terms. Each Restricted Stock Award shall be subject to
all other terms of the Plan (including without limitation the other
terms of this Section 7 and of Sections 9, 10 and 11) and of any form or
agreement embodying the award, except to the extent that such terms are
inconsistent with the express provisions of this Section 7(c).
(d) Exercise of Options. Each Option (other than a Director Option)
shall be exercisable for the full amount or for any part thereof at such
time or at such intervals and in such installments as the Committee (or its
delegate, if applicable) may determine at the time it grants such Option;
provided, however, that no Option shall be exercisable with respect to any
Shares later than ten years after the date of the grant of such Option (or
five years in the case of Incentive Options to which Section 7(k)(ii)
applies) and provided, further, that each outstanding Option shall become
immediately exercisable for the full amount or any part thereof upon the
occurrence of a Change in Control of the Company. An Option shall be
exercisable only by delivery of a written notice to the Company's
Treasurer, or any other officer of the Company designated by the Committee
to accept such notices on its behalf, specifying the number of Shares for
which the Option is exercised and accompanied by either (i) payment or (ii)
if permitted by the Committee, irrevocable instructions to a broker to
promptly deliver to the Company full payment in accordance with Section
7(e)(ii) below of the amount necessary to pay the aggregate
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<PAGE> 44
exercise price. With respect to an Incentive Option, the permission of the
Committee referred to in clause (ii) of the preceding sentence must be
granted at the time the Incentive Option is granted.
(e) Payment. Payment shall be made in full (i) at the time the Option
is exercised, (ii) promptly after the Participant forwards the irrevocable
instructions referred to in Section 7(d)(ii) above to the appropriate
broker, if exercise of an Option is made pursuant to Section 7(d)(ii)
above, or (iii) at the time specified in the Restricted Stock Award if any
payment is required pursuant to the Award. Payment shall be made either (I)
in cash, (II) by check, (III) if permitted by the Committee (with respect
to an Incentive Option, such permission to have been granted at the time of
the Incentive Option grant), by delivery and assignment to the Company of
shares of Company stock having a fair market value (as determined by the
Committee) equal to the exercise or purchase price, or (IV) by a
combination of one or more of the foregoing methods. If shares of Company
stock are to be used to pay the exercise price of an Incentive Option, the
Company prior to such payment must be furnished with evidence satisfactory
to it that the acquisition of such shares and their transfer in payment of
the exercise price satisfy the requirements of Section 422 of the Code and
other applicable laws.
(f) Withholding Taxes; Delivery of Shares. The Company's obligation
to deliver Shares upon exercise of an Option or pursuant to a Restricted
Stock Award shall be subject to the Participant's satisfaction of all
applicable federal, state and local income and employment tax withholding
obligations. Without limiting the generality of the foregoing, the Company
shall have the right to deduct from payments of any kind otherwise due to
the Participant any federal, state or local taxes of any kind required by
law to be withheld with respect to any Shares issued upon exercise of
Options or pursuant to Restricted Stock Awards. Furthermore, to the extent
possible, each Participant shall satisfy such obligations by having the
Company withhold vested and unrestricted Shares or by delivering to the
Company already owned unrestricted Shares, having a value equal to the
amount required to be withheld, as determined by the Committee.
(g) Non-Transferability. No Option or Restricted Stock Award shall be
transferable by the Participant otherwise than by will or the laws of
descent or distribution, and each Option shall be exercisable during the
Participant's lifetime only by the Participant.
(h) Termination of Restricted Stock Awards and Options. Each
Restricted Stock Award shall be subject to the termination and forfeiture
provisions of Section 7(c) above. Except to the extent the Committee
provides specifically in a grant form or Option agreement for a lesser
period (or a greater period, in the case of Nonqualified Options only),
each Option (other than a Director Option) shall terminate and may no
longer be exercised if the Participant ceases for any reason to render
continuous Service, in accordance with the following provisions:
(i) if the Participant ceases to render Service for any reason
other than death or Disability, the Participant may, at any time within
a period of three months after the date of such cessation of Service,
exercise the Option to the extent that the Option was exercisable on the
date of such cessation;
(ii) if the Participant ceases to render Service because of
Disability, the Participant may, at any time within a period of six
months after the date of such cessation of Service, exercise the Option
to the extent that the Option was exercisable on the date of such
cessation; and
(iii) if the Participant ceases to render Service because of death,
the Option, to the extent that the Participant was entitled to exercise
it on the date of death, may be exercised within a period of six months
after the Participant's death by the person or persons to whom the
Participant's rights under the Option pass by will or by the laws of
descent or distribution;
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provided, however, that no Option may be exercised to any extent by anyone
after the date of its expiration; and provided, further, that Options may
be exercised at any time only as to Shares which at such time are available
for acquisition pursuant to the terms of the applicable grant form or
agreement.
(i) Rights as Stockholder. A Participant shall have no rights as a
stockholder with respect to any Shares covered by an Option until the date
of issuance of a stock certificate in the Participant's name for such
Shares. A Participant shall have such rights as a stockholder with respect
to any Shares covered by a Restricted Stock Award as are provided in
Section 7(c) above.
(j) Repurchase of Shares by the Company. Any Shares acquired upon
exercise of an Option (other than a Director Option) may in the discretion
of the Committee be subject to repurchase by or forfeiture to the Company
if and to the extent and at the repurchase price, if any, specifically set
forth in the Option grant form or agreement pursuant to which the Shares
were acquired. Certificates representing Shares subject to such repurchase
or forfeiture may be subject to such escrow and stock legending provisions
as may be set forth in the Option grant form or agreement pursuant to which
the Shares were acquired. Any Shares issued pursuant to a Restricted Stock
Award shall be subject to such forfeiture to the Company and to such escrow
provisions as are specified in Section 7(c) above and may be subject to
such additional repurchase and forfeiture rights and escrow and stock
legending provisions as the Committee (in its discretion) may set forth in
any form or agreement embodying the award.
(k) 10% Stockholder. If any Participant to whom an Incentive Option
is granted pursuant to the provisions of the Plan is on the date of grant
the owner of stock (as determined under Section 424(d) of the Code)
possessing more than ten percent (10%) of the total combined voting power
or value of all classes of stock of the Company, its parent, if any, or
Subsidiaries, then the following special provisions shall be applicable:
(i) The exercise price per Share subject to such Option shall not
be less than one hundred and ten percent (110%) of the fair market value
of each Share on the date of grant; and
(ii) The Option shall not have a term in excess of five years from
the date of grant.
(l) Confidentiality Agreements. Each Participant shall execute, prior
to or contemporaneously with the grant of any Option or Restricted Stock
Award hereunder, the Company's then standard form of agreement, if any,
relating to nondisclosure of confidential information, assignment of
inventions and related matters.
(m) Aggregate Limitation. The maximum number of Shares with respect
to which any Options and Restricted Stock Awards may be granted under the
Plan to any individual during each successive twelve-month period
commencing on the Effective Date of the Plan shall not exceed 200,000
shares.
(n) Right to Terminate. Nothing contained in the Plan or in any
Option or Restricted Stock Award granted hereunder shall restrict the right
of any member of the Company Group to terminate the employment of any
Participant or other Service by the Participant at any time and for any
reason, with or without notice. Nothing contained in the Plan or in any
Option granted hereunder shall give any Non-Employee Director the right to
continue in Service as a director.
8. Restrictions on Incentive Options. Incentive Options granted under
this Plan shall be specifically designated as such and shall be subject to the
additional restriction that the aggregate fair market value, determined as of
the date the Incentive Option is granted, of the Shares with respect to which
Incentive Options are exercisable for the first time by a Participant during any
calendar year shall not exceed $100,000. If an Incentive Option which exceeds
the $100,000 limitation of this Section 8 is granted, the portion of such Option
which is exercisable for Shares in excess of the $100,000 limitation shall be
treated as a Nonqualified
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Option pursuant to Section 422(d) of the Code. In the event that such
Participant is eligible to participate in any other stock incentive plans of the
Company, its parent, if any, or a Subsidiary which are also intended to comply
with the provisions of Section 422 of the Code, such annual limitation shall
apply to the aggregate number of shares for which options may be granted under
all such plans.
9. Suspension of Rights Prior to a Dissolution, Reorganization,
Etc. Prior to any dissolution, liquidation, merger, consolidation or
reorganization of the Company as to which the Company will not be the surviving
corporation, or the sale or exchange of substantially all of the Common Stock or
the sale of substantially all of the assets of the Company (the "Event"), unless
such Event would constitute a Change in Control of the Company, the Board or the
Committee may decide to terminate each outstanding Option and Restricted Stock
Award. If the Board or the Committee so decides, each Option (including Director
Options) and Restricted Stock Award shall terminate as of the effective date of
the Event, but the Board or the Committee shall suspend the exercise of all
outstanding Options a reasonable time prior to the Event, giving each person
affected thereby not less than fourteen days written notice of the date of
suspension, prior to which date such person may purchase in whole or in part the
Shares otherwise available to him or her as of the date of purchase. If the
Event is not consummated, the suspension shall be removed and all Options and
Restricted Stock Awards shall continue in full force and effect, subject to
their terms.
10. Adjustment in Shares. Appropriate adjustment shall be made by the
Committee in the maximum number of Shares subject to the Plan and in the number,
kind, and exercise or purchase price of Shares covered by outstanding Options
and Restricted Stock Awards granted hereunder and in the number of Shares in
each Director Option subsequently issued pursuant to Section 5(b) to give effect
to any stock dividends, stock splits, stock combinations, recapitalizations and
other similar changes in the capital structure of the Company after the
Effective Date of the Plan. In the event of a change of the Common Stock
resulting from a merger or similar reorganization as to which the Company is the
surviving corporation, the number and kind of Shares which thereafter may be
purchased pursuant to an Option or issued pursuant to a Restricted Stock Award
under the Plan and the number and kind of Shares then subject to Options or
Restricted Stock Awards granted hereunder and the price per Share thereof shall
be appropriately adjusted in such manner as the Committee may deem equitable to
prevent dilution or enlargement of the rights available or granted hereunder.
11. Investment Representations; Transfer Restrictions. The Company may
require Participants, as a condition of purchasing Shares pursuant to the
exercise of an Option or of receiving Shares pursuant to a Restricted Stock
Award, to give written assurances in substance and form satisfactory to the
Company to the effect that such person is acquiring the Shares for the
Participant's own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate (including without limitation
confirmation that the Participant is aware of any applicable restrictions on
transfer of the Shares, as specified in the by-laws of the Company or otherwise)
in order to comply with federal and applicable state securities laws.
12. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Change in Control" has the meaning defined in Section 14 below.
(c) "Code" means the Internal Revenue Code of 1986, as heretofore and
hereafter amended, and the regulations promulgated thereunder.
(d) "Committee" has the meaning defined in Section 4 above.
(e) "Common Stock" has the meaning defined in Section 3 above.
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<PAGE> 47
(f) "Company" has the meaning defined in Section 1 above.
(g) "Company Group" has the meaning defined in Section 1 above.
(h) "Director Option" has the meaning defined in Section 5(b) above.
(i) "Disability" has the meaning defined in Section 22(e)(3) of the
Code.
(j) "Effective Date" has the meaning defined in Section 2 above.
(k) "Employee" has the meaning defined in Section 5(a) above.
(l) "Event" has the meaning defined in Section 9 above.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
heretofore and hereafter amended.
(n) "Incentive Option" has the meaning defined in Section 1 above.
(o) "Non-Employee Director" has the meaning defined in Section 5(b)
above.
(p) "Nonqualified Option" has the meaning defined in Section 1 above.
(q) "Options" has the meaning defined in Section 1 above.
(r) "Participant" has the meaning defined in Section 5 above.
(s) "Plan" has the meaning defined in Section 1 above.
(t) "Restricted Stock Award" has the meaning defined in Section 1
above.
(u) "Service" means the performance of work for one or more members of
the Company Group as an Employee or service as a Non-Employee Director of
the Company.
(v) "Service Requirements" has the meaning defined in Section 7(c)
above.
(w) "Shares" has the meaning defined in Section 3 above.
(x) "Subsidiary" has the meaning defined in Section 424(f) of the
Code.
(y) "Vesting Conditions", "Partial Vesting Condition" and "Full
Vesting Condition" have the meanings defined in Section 7(c) above.
(z) "Vesting Period" has the meaning defined in Section 7(c) above.
13. Termination or Amendment of Plan. The Board may by written action at
any time terminate the Plan or make such changes in or additions or deletions to
the Plan as it deems advisable without further action on the part of the
stockholders of the Company, provided:
(a) that no such termination or amendment shall adversely affect or
impair any then outstanding Option or Restricted Stock Award or related
agreement without the consent of the Participant holding such Option or
Restricted Stock Award or related agreement; and
(b) that no such amendment which (i) increases the maximum number of
Shares subject to this Plan (except to the extent provided in Sections 9
and 10), (ii) materially increases the benefits accruing to Participants,
(iii) materially modifies the requirements as to eligibility for
participation in the Plan, (iv) changes any of the terms governing Director
Options expressly set forth in Section 5(b) of this Plan, or (v) makes any
other change which, pursuant to the Code or regulations thereunder or
Section 16(b)
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of the Exchange Act and the rules and regulations thereunder, requires
action by the stockholders may be made without obtaining, or being
conditioned upon, stockholder approval; and
(c) that no such amendment which would change the amount, timing or
price of the Director Option grants made to Non-Employee Directors
hereunder may be made more often than once every six months except to
comport with changes in the Code, the Employee Retirement Income Security
Act of 1974, as amended, or the applicable rules and regulations
thereunder.
With the consent of the Participant affected, the Committee may amend
outstanding Options or Restricted Stock Awards or related agreements in a manner
not inconsistent with the Plan. The Committee shall have the right to amend or
modify the terms and provisions of the Plan and of any outstanding Incentive
Options granted under the Plan to the extent necessary to qualify any or all
such Options for such favorable federal income tax treatment (including deferral
of taxation upon exercise) as may be afforded incentive stock options under
Section 422 of the Code.
14. Change in Control. A change in control of the Company (a "Change in
Control") will occur upon:
(a) The acquisition by any individual, entity or group (within the
meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20 percent or more of either (i) the then outstanding
shares of the Common Stock or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of the directors (the "Outstanding Company Voting
Securities"); provided, however, that the following acquisitions shall not
constitute a Change in Control: (A) any acquisition directly from the
Company (excluding an acquisition by virtue of the exercise of a conversion
privilege); (B) any acquisition by the Company or by any corporation
controlled by the Company; (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any
corporation pursuant to a consolidation or merger, if, following such
consolidation or merger, the conditions described in clauses (i), (ii), and
(iii) of paragraph (c) of this Section 14 are satisfied; or
(b) Individuals who, as of the Effective Date, constitute the Board
(the "Incumbent Board") ceasing for any reason to constitute at least
two-thirds of the Board over any period of 24 consecutive months or less;
provided, however, that any individual becoming a director subsequent to
the Effective Date whose election, or nomination for election by the
Company's shareholders, was approved by a vote or resolution of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Company with or merger of the Company into another
corporation or business entity in each case, unless, following such
consolidation or merger, (i) more than 60 percent of, respectively, the
then outstanding shares of common stock of the corporation resulting from
such consolidation or merger and/or the combined voting power of the then
outstanding voting securities of such corporation or business entity
entitled to vote generally in the election of directors (or other persons
having the general power to direct the affairs of such entity) is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Common Stock and Outstanding Company Voting Securities immediately
prior to such consolidation or merger in substantially the same proportions
as their ownership, immediately prior to such consolidation or merger, of
the
46
<PAGE> 49
Common Stock and/or Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding the Company, any employee benefit plan (or
related trust) of the Company or such corporation or other business entity
resulting from such consolidation or merger and any Person beneficially
owning, immediately prior to such consolidation or merger, directly or
indirectly, 35 percent or more of the Common Stock and/or Outstanding
Company Voting Securities, as the case may be) beneficially owns, directly
or indirectly, 35 percent or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such consolidation
or merger or the combined voting power of the then outstanding voting
securities of such corporation or business entity entitled to vote
generally in the election of its directors (or other persons having the
general power to direct the affairs of such entity) and (iii) at least
two-thirds of the members of the board of directors (or other group of
persons having the general power to direct the affairs of the corporation
or other business entity) resulting from such consolidation or merger were
members of the Incumbent Board at the time of the execution of the initial
agreement providing for such consolidation or merger; provided that any
right which shall vest by reason of the action of the Board pursuant to
this paragraph (c) shall be divested, with respect to any such right not
already exercised, upon (A) the rejection of such agreement of
consolidation or merger by the stockholders of the Company or (B) its
abandonment by either party thereto in accordance with its terms; or
(d) Adoption by the requisite majority of the whole Board, or by the
holders of such majority of stock of the Company as is required by law or
by the Certificate of Incorporation or By-Laws of the Company as then in
effect, of a resolution or consent authorizing (i) the dissolution of the
Company or (ii) the sale or other disposition of all or substantially all
of the assets of the Company, other than to a corporation or other business
entity with respect to which, following such sale or other disposition, (A)
more than 60 percent of, respectively, the then outstanding shares of
common stock of such corporation and/or the combined voting power of the
outstanding voting securities of such corporation or other business entity
entitled to vote generally in the election of directors (or other persons
having the general power to direct the affairs of such entity) is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Common Stock and Outstanding Company Voting Securities immediately
prior to such sale or other disposition in substantially the same
proportions as their ownership, immediately prior to such sale or other
disposition, of the Common Stock and/or Outstanding Company Voting
securities, as the case may be, (B) no Person (excluding the Company and
any employee benefit plan (or related trust) of the Company or such
corporation or other business entity and any Person beneficially owning,
immediately prior to such sale or other disposition, directly or
indirectly, 35 percent or more of the Common Stock and/or Outstanding
Company Voting Securities, as the case may be) beneficially owns, directly
or indirectly, 35 percent or more of, respectively, the then outstanding
shares of common stock of such corporation and/or the combined voting power
of the then outstanding voting securities of such corporation or other
business entity entitled to vote generally in the election of directors (or
other persons having the general power to direct the affairs of such
entity) and (C) at least two-thirds of the members of the board of
directors (or other group of persons having the general power to direct the
affairs of such corporation or other entity) were members of the Incumbent
Board at the time of the execution of the initial agreement or action of
the Board providing for such sale or other disposition of assets of the
Company; provided that any right which shall vest by reason of the action
of the Board or the stockholders pursuant to this paragraph (d) shall be
divested, with respect to any such right not already exercised, upon the
abandonment by the Company of such dissolution, or such sale or other
disposition of assets, as the case may be.
A Change in Control shall not occur upon the mere reincorporation of
the Company in another state.
47
<PAGE> 50
HPSC, INC.
P PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
R
O The undersigned hereby appoints John W. Everets and Raymond R.
X Doherty or either of them, with full power of substitution, as proxy to
Y represent and to vote as designated on the reverse side all the shares of
Common Stock of HPSC, Inc. (the "Company"), which the undersigned would be
entitled to vote at the Annual Meeting of Stockholders to be held at 60
School Street, Boston, Massachusetts on Thursday, May 11, 1995, 9:00 A.M.
Eastern Daylight Time or at any adjournment thereof, in respect to all
matters which may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5.
If the undersigned hold(s) any shares in a fiduciary, custodial or
joint capacity or capacities this proxy is signed by the undersigned in
every such capacity as well as individually.
-----------
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE) SEE REVERSE
SIDE
-----------
<PAGE> 51
/ / PLEASE MARK
VOTES AS IN
THIS EXAMPLE
(continued from other side)
1. To fix the number of directors at eight and to elect the following nominees
Joseph A. Biernat, J. Kermit Birchfield, Louis J. P. Calisti, Dollie A. Cole,
Samuel P. Cooley, Raymond A. Doherty, John W. Everets and Thomas M. McDougal.
FOR WITHHELD
/ / / /
MARK HERE
FOR ADDRESS
/ /______________________________________________ CHANGE AND
For all nominees except as noted above NOTE BELOW / /
2. To amend the Company's Restated Certificate of FOR AGAINST ABSTAIN
Incorporation to provide for a classified Board / / / / / /
of Directors.
3. To amend the Company's Restated Certificate of FOR AGAINST ABSTAIN
Incorporation to prohibit stockholder action by / / / / / /
written consent in lieu of meeting.
FOR AGAINST ABSTAIN
4. To approve the 1995 Stock Incentive Plan. / / / / / /
5. To ratify the selection of Coopers & Lybrand LLP
as the Company's independent public accountants FOR AGAINST ABSTAIN
for the current fiscal year. / / / / / /
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as you name appears hereon. If acting as attorney,
executor, trustee or in other representative capacity, sign name and title.
Signature: ________________________________________ Date: _________________
Signature: ________________________________________ Date: _________________
