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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended DECEMBER 31, 1995
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-11618
HPSC, INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-2560004
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
60 STATE STREET, BOSTON, MASSACHUSETTS 02109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 720-3600
Securities registered pursuant to section 12(b) of the Act:
NONE
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Securities registered pursuant to section 12(g) of the Act:
COMMON STOCK-PAR VALUE $.01 PER SHARE
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any other
amendment to this Form 10-K.
YES X NO
--
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $15,897,314 at February 29, 1996, representing 3,346,803 shares.
The number of shares of common stock, par value $.01 per share, outstanding as
of February 29, 1996 was 4,686,530.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended
December 31, 1995 (the "1995 Annual Report") are incorporated by reference into
Parts I, II and IV of this annual report on Form 10-K.
The 1995 Annual Report, except for the parts therein which have been
specifically incorporated by reference, shall not be deemed "filed" as part of
this report on Form 10-K.
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PART I
Item 1. BUSINESS
GENERAL
HPSC, Inc. (the "Company" or "HPSC") is a financial services company
dedicated to providing financing for healthcare professionals. HPSC formerly
provided financing exclusively to the dental profession, but in mid-1993 it
began to expand into other healthcare markets and through its wholly-owned
subsidiary, American Commercial Finance Corporation ("AACFC"), into asset based
lending which focuses primarily on accounts receivable and inventory financing.
The Company's new business volume in 1995 increased substantially
compared to 1994 - $68,554,000 versus $32,609,000. In 1993, Healthco
International, Inc. (Healthco), the dental equipment supplier which previously
supplied the Company with substantially all of its business, filed for
bankruptcy. The bankruptcy of Healthco initially posed several significant
challenges to the Company. Management has worked to replace its lost business
while at the same time pursuing its plan to diversify into other markets. Within
the dental industry the Company continues its efforts to expand its business by
capitalizing on its reputation for providing a high level of customer service
and innovative and competitive financing programs. Today the Company provides
financing for over 500 different dental distributors and healthcare providers.
While certain of these vendors provide a substantial amount of business for the
Company, the Company is no longer dependent on any single source for its
business. The Company is now also providing financing to the ophthalmic,
podiatry, veterinary and chiropractic professions.
The Company finances dental, medical and other healthcare equipment as
well as leasehold improvements, office furniture, supplies and certain other
costs involved in opening, maintaining or acquiring a healthcare facility or
practice. The Company finances transactions only after a customer's credit has
been approved and a financing agreement has been executed.
The Company does not maintain any inventory. Typically, the manufacturer or
distributor delivers the equipment directly to the customer, and the Company
purchases the equipment from the supplier, at its customary selling price to the
customer, upon installation and customer acceptance.
Substantially all of the Company's agreements with its customers are
non-cancelable and provide for a full payout at a fixed financing rate with a
fixed payment schedule. The majority of the agreements have a term of between
three and seven years. All leases are classified as direct financing leases.
The Company's principal sources of funding include fixed rate
borrowings of varying maturities and a revolving line of credit at variable
rates (see Note B of Notes to Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition Liquidity and
Capital Resources" in the 1995 Annual Report). The Company's income depends, to
a significant extent, upon its ability to maintain a satisfactory spread between
its cost of borrowings and the rates that it charges its customers. In a rising
interest rate environment, the Company's use of variable rate financing could
adversely affect its ability to maintain these margins. Competitive pressures
and other market conditions could hinder the Company's ability to raise the
rates charged to its customers as quickly as its variable rate financing costs
rise.
In July 1995 the Company completed payment for 1,225,182 shares of its
Common Stock that it repurchased from certain secured creditors of Healthco
("Secured Creditors") pursuant to a Purchase and Sale Agreement among the
Company and the Secured Creditors dated as of November 1, 1994. Healthco had
pledged the shares of the Company's Common Stock to secure its obligations to
the Secured Creditors. Upon final payment by the Company, the shares were
released from the pledge and the Secured Creditors also released the Company
from any claims that may arise out of the bankruptcy of Healthco. The Company
has retired 1,125,182 of these shares and holds 100,000 of these shares in its
treasury.
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Item 1. BUSINESS (continued)
SEGMENT
The Company is principally engaged in providing financing to healthcare
professionals.
MARKETING AND SOURCES OF SUPPLY
The Company obtains its customers principally from equipment vendor
referral programs and from advertising and direct mail brochures targeted to
dentists and other professionals who use equipment in their practices. The
vendor referral programs permit the Company to utilize vendors' sales personnel
operating from retail distribution centers throughout the United States to
generate business for the Company. The Company also sends representatives to
major trade conventions.
The Company advertises its services through industry publications, its
own marketing brochures which it distributes and also through direct mail
advertising. Existing customers and referrals from existing customers of the
Company are also important sources of business.
LEASES AND NOTES RECEIVABLE
At December 31, 1995 the Company's lease, note receivable and asset
based lending portfolio of $140,652,000 consisted of approximately 8,300
accounts and 6,300 customers with a weighted average remaining term of
approximately 36 months. Lease and note terms ranged from 12-72 months, with the
majority having a 36- or 60-month term. No single customer accounted for more
than 1.0% of the Company's total receivables at December 31, 1995.
FINANCING TERMS AND CONDITIONS
The Company generally finances equipment to customers through standard
non-cancelable full payout leases or conditional sales agreements or notes.
Following execution of an agreement, the equipment is delivered from either a
distributor or a manufacturer directly to the customer. Following installation
and customer acceptance of the equipment, the Company purchases the equipment
from the supplier. The Company is the owner of the leased equipment and holds a
security interest in equipment financed with conditional sales agreements or
notes.
The Company makes no warranties to customers as to any matter,
including the condition, performance or suitability of the equipment. In
substantially all cases, customers are obligated to remit to the Company all
amounts due regardless of the performance of the equipment, to maintain and
service the equipment and to insure the equipment against casualty loss.
The Company establishes residual values when the equipment is purchased
and leased. Substantially all the Company's direct financing leases include a
lease purchase option. Historically, because substantially all lessees have
exercised this option at the recorded value, the Company generally does not
incur gains/losses from the sale or releasing of equipment.
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Item 1. BUSINESS (continued)
CREDIT REVIEW AND LOSS EXPERIENCE
The Company conducts a credit review of each prospective customer,
using both commercial credit bureaus and its own internal credit procedures. The
Company's collection department is responsible for monitoring slow paying
accounts and collection activities when the Company determines such action to be
appropriate. Slow paying accounts are subject to service charges.
An analysis of changes in the last three fiscal years in the allowance
for uncollectible accounts and other pertinent information follows (in
thousands):
==============================================================================================================
Gross Write Offs
Leases and (Net of Provision Delinquent Allowance
Notes Recoveries) for Losses Installments for Losses
Receivable (1)
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December 31, 1995 $140,652 $1,379 $1,296 $2,618 $4,512
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December 31, 1994 103,531(2) 3,056 754 3,496 4,595
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December 25, 1993 126,369 17,423 15,104 4,805 6,897
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<FN>
(1) An account is considered delinquent when not paid within 30 days of the
billing due date.
(2) Approximately $1,166,000 of this 1994 amount relates to Credident, Inc.,
the Company's Canadian subsidiary. The Company sold substantially all of
the assets of Credident to a third party in June, 1995. (See Note A of the
"Notes to Consolidated Financial Statements" in the 1994 Annual Report.)
For discussion of the provision for losses and allowance for losses, see
"Management's Discussion and Analysis of Financial Condition - Results of
Operations, Fiscal 1995 Compared to 1994 and Fiscal 1994 Compared to 1993"
in the 1995 Annual Report.
FUNDING
At December 31, 1995 the Company had financing from fixed rate
securitizations, variable rate revolving lines of credit, and fixed rate bank
loans and asset sales. See Note B of the "Notes to Consolidated Financial
Statements" and "Management's Discussion and Analysis of Financial Condition -
Liquidity and Capital Resources" in the 1995 Annual Report.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS
The Company does not have any material patents, trademarks, licenses,
franchises or concessions.
SEASONALITY
The Company's business is not seasonal; however, healthcare
professionals generally tend to purchase more equipment in the fourth quarter,
which may result in a higher volume of equipment purchases to be financed by the
Company in that quarter.
WORKING CAPITAL
The Company does not carry inventory or provide rights of return to its
customers. Its working capital requirements relate directly to its volume of
financing transactions (see "Business - Credit Review and Loss Expedrience" and
"Management's Discussion and Analysis of Financial Condition - Liquidity and
Capital Resources" in the 1995 Annual Report).
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Item 1. BUSINESS (continued)
MATERIAL CUSTOMERS
No customer or group of related customers accounted for 1.0% or more of
fiscal 1995 revenues. No individual supplier of leased equipment accounted for
more than 8% of the current year's originations.
RAW MATERIALS
The Company's business does not depend on raw materials.
BACKLOG
At December 31, 1995, the Company had a backlog of approximately
$35,000,000, consisting of customer applications which have been approved but
have not yet resulted in a completed transaction, compared to $25,000,000 at the
end of 1994. Not all approved applications will result in financing transactions
for the Company.
GOVERNMENT CONTRACTS OR SUB-CONTRACTS
The Company does not have a material amount of government contracts or
subcontracts.
COMPETITION
The equipment financing business is highly competitive. Participants in
the industry compete through vendor/customer service, product innovation, and
price. Pricing is affected by each participant's ability to control origination
and funding costs, portfolio risk management and operating overhead costs. The
Company's ability to compete effectively in this market depends upon: (i) its
ability to procure financing on attractive terms; (ii) its knowledge of and
experience in its markets; (iii) its flexibility and adaptability in dealing
with the special needs of its clients; (iv) its relationships with equipment
vendors; (v) its ability to continue to expand its business into areas other
than the dental profession and (vi) its ability to manage its portfolio
effectively.
The Company competes with finance divisions, affiliates and
subsidiaries of equipment manufacturers, other leasing and finance companies,
certain banks engaged in leasing and lease brokers. Many of these organizations
are much larger than the Company, have greater financial or other resources than
the Company and have access to funds at more favorable rates and terms than
those available to the Company.
RESEARCH AND DEVELOPMENT
The Company does not have research and development activities.
ENVIRONMENTAL PROTECTION
The Company's compliance with laws and regulations relating to the
protection of the environment will not have a material effect on its capital
expenditures, earnings or competitive position.
EMPLOYEES
At December 31, 1995, the Company and its subsidiaries had 44 full-time
employees, including 23 in general and administration and 21 in sales and
marketing.
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Item 1. BUSINESS (continued)
FOREIGN OPERATIONS
The Company, through its Canadian subsidiary, Credident, Inc., engaged
in the financing of dental equipment in Canada. In 1994 the Company sold
substantially all of Credident's assets to Newcourt Credit Group, Inc.
Credident, Inc. was in substantially the same business as the Company, (see Note
A of Notes to Consolidated Financial Statements). The Company has ceased to
underwrite any new business in Canada. See "Management's Discussion and Analysis
of Financial Condition" in the 1995 Annual Report.
EXPORT SALES
The Company does not have any export sales.
Item 2. PROPERTIES
The Company leases approximately 8,320 square feet of office space at
60 State Street, Boston, Massachusetts from the Trustees of 60 State Street
Trust. Approximately 2,431 square feet at 433 South Main Street, West Hartford,
Connecticut are leased by its wholly-owned subsidiary, American Commercial
Finance Corporation. The Company also rents space as required for its sales
locations on a short-term basis. (See Note C of the "Notes to Consolidated
Financial Statements" in the 1995 Annual Report.) In March 1996, the Company
executed an agreement to lease an additional 3,000 square feet adjacent to the
current space at 60 State Street.
Item 3. LEGAL PROCEEDINGS
The Company was not subject to any material legal proceedings at
December 31, 1995.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 1995.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock of HPSC is traded on the NASDAQ National Market
System. The high and low sales prices for the common stock as reported by NASDAQ
for each quarter in the last two fiscal years, as well as the approximate number
of record holders and information with respect to dividend restrictions, are
incorporated by reference from page 17 of the 1995 Annual Report.
Item 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended December 31, 1995 is
incorporated by reference from page 16 of the 1995 Annual Report.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition of the
Company is incorporated by reference from pages 17 through 19 of the 1995 Annual
Report.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item together with the Report of
Independent Accountants is incorporated by reference from pages 4 through 14 and
page 16 of the 1995 Annual Report. (See also the "Financial Statement Schedule"
filed under Item 14 of this Form 10-K.)
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the directors, nominees for director and executive
officers of the Company:
NOMINEES FOR CLASS I DIRECTOR
Lowell P. Weicker, Jr., age 64, was elected a director in December
1995. Mr. Weicker began his political career in 1962, when he was elected as a
member of Connecticut's House of Representatives for Town of Greenwich. He
served three terms. Mr. Weicker served concurrently as First Selectman of
Greenwich from 1964 to 1968. He was elected to the U.S. Congress from
Connecticut's 4th District in 1968. He was subsequently elected to the United
States Senate in 1970, 1976 and 1982. Mr. Weicker served in the U. S. Senate
until January 1989. In January 1991, Mr. Weicker was elected Governor of
Connecticut, a position which he held until January 1995. Mr. Weicker has been
associated with the firm of Dresing, Lierman, Weicker since 1995.
Dresing, Lierman, Weicker provides a variety of health care related services.
Thomas M. McDougal, D.D.S., age 56, was elected a director of HPSC in
1991. He has been a practicing dentist for approximately 30 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.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
CLASS II DIRECTORS (TERM EXPIRES AT THE 1997 ANNUAL MEETING)
Joseph A. Biernat, age 68, 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.
Raymond R. Doherty, age 50, 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 Healthco
International, Inc., a company engaged in sales of dental equipment and formerly
affiliated with the Company, 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.
Samuel P. Cooley, age 64, 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.
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Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (cont'd)
CLASS III DIRECTORS (TERM EXPIRES AT THE 1998 ANNUAL MEETING)
John W. Everets, age 49, 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 1990 until July
1993. Previously he was Executive Vice President of Advest, Inc., an investment
banking firm, from 1977 to January 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.
Dollie A. Cole, age 65, 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.
J. Kermit Birchfield, age 56, 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
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 and Dairy Mart Convenience Stores, Inc.
OTHER EXECUTIVE OFFICERS
Rene Lefebvre, age 49, has been Chief Financial Officer, Vice President
of Finance and Treasurer 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, a subsidiary of AT&T Capital Corporation.
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Item 11. 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.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------- ----------------------
Restricted
Stock Securities All Other
Other Annual Awards Underlying Compensation
NAME AND PRINCIPAL POSITION YEAR SALARY Bonus Compensation ------ Options ------------
- --------------------------- ---- ------ ----- ------------ (1)(2) ------- (3)
John W. Everets (4) ............... 1995 $210,000 $ -0- $ -0- $809,375 -0- $18,959
Chief Executive Officer and 1994 210,000 125,000 96,636 (5) -0- -0- 15,904
Chairman of the Board 1993 110,719 -0- 11,054 (6) -0- 175,000 1,135
Raymond R. Doherty (7) ............ 1995 190,000 -0- -0- 393,750 -0- 18,606
President, Chief Operating 1994 190,000 75,000 -0- -0- -0- 22,885
Officer and Director 1993 112,856 -0- 5,095 (8) -0- 90,000 2,404
Rene Lefebvre (9) ................. 1995 125,000 -0- -0- 109,375 -0- 10,905
Chief Financial Officer, 1994 78,731 15,000 -0- -0- 30,000 1,790
Vice President of Finance
and Treasurer
<FN>
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(1) At the Annual Meeting held May 11, 1995, the stockholders approved the
Company's 1995 Stock Incentive Plan (the "1995 Stock Plan"). The 1995 Stock
Plan provides for the issuance of up to 550,000 options and/or grants of
shares of restricted stock to key employees and non-employee directors. The
1995 Stock Plan is administered by the Compensation Committee of the Board
of Directors. Upon the recommendation of the Compensation Committee , the
Board of Directors has adopted an amendment to the 1995 Plan to provide
service requirements for participation in the 1995 Stock Plan in addition to
the performance conditions which were contained in the 1995 Stock Plan as
adopted.
The 1995 Stock Plan, as amended (the "Amended 1995 Stock Plan") provides
that shares of restricted stock granted under the Amended 1995 Stock Plan
shall vest for participants when (i) certain performance conditions are met
(50% vest if and when during the five-year period from the date of grant
(the "Performance Period") the closing price of a share of the Company's
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
on the grant date (the "Partial Performance Condition"), and the remaining
50% vest if and when during the Performance Period the closing price of a
share of the Company's 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 on the grant date (the "Full Performance Condition") and
(ii) the holder of the restricted stock has completed five (5) years of
continuous service from the grant date.
The Partial Performance Condition for the shares of restricted stock granted
to Messrs. Everets, Doherty and Lefebvre in 1995 is $5.90 per share and the
Full Performance Condition is $7.37 per share. Upon a change of control of
the Company, all awards granted prior to such date become fully vested. Upon
the termination of a participant's employment by the Company without cause
or by reason of death or disability during the Performance Period, any
awards for which the Partial Performance Condition or the Full Performance
Condition shall have been satisfied no later than four monts after the date
of such termination of employment shall become fully vested.
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Item 11. EXECUTIVE COMPENSATION (cont'd)
(2) The amounts reported in this column represent the market price of the stock
awarded under the Amended 1995 Stock Plan on the grant date without
diminution in value attributable to the restrictions on such stock. The
aggregate non-vested restricted stock holdings at the end of fiscal 1995
were as follows: for Mr. Everets - 185,000 shares (the value of these shares
at fiscal year end equaled $878,750, which is 108.6% of the value at the
grant date); for Mr. Doherty - 90,000 shares (the value at fiscal year end
for these shares equaled $427,500, which is 108.6% of the value at the grant
date); and for Mr. Lefebvre, 25,000 shares (the value at year end equaled
$118,750, which is 108.6% of the value at the grant date). Dividends on
stock awards will be paid at the same rate as dividends, if any, are paid to
all shareholders.
(3) 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, 1995: Mr. Everets, $3,240 and $4,049; Mr. Doherty, $3,240 and $3,696;
and Mr. Lefebvre, $810 and $2,500. Also includes the value of shares of
Common Stock in the Company's ESOP allocated to participants in the fiscal
year ended December 31, 1995 (for services rendered during the previous
fiscal year) in the following amounts: Mr. Everets, $11,670; Mr. Doherty,
$11,670; and Mr. Lefebvre, $7,595. The value of the allocated ESOP shares
was calculated by using the year-end closing price of $4.75 per share for
fiscal 1995. The Company has not allocated shares of Common Stock to
participants in its ESOP for services rendered during the fiscal year ended
December 31, 1995 as of the date of this Proxy Statement.
(4) Mr. Everets' employment with the Company commenced in July 1993. His
compensation is governed by an employment agreement dated July 19, 1993. See
"Employment Agreements" below.
(5) Includes relocation and temporary living expenses of $81,806 paid in fiscal
1994 in connection with Mr. Everets' relocation to the Boston area.
(6) Includes relocation and temporary living expenses of $9,794 paid in fiscal
1993 in connection with Mr. Everets' relocation to the Boston area.
(7) Mr. Doherty's compensation is governed by an employment agreement dated
August 2, 1993. See "Employment Agreements" below.
(8) Includes $3,835 paid by the Company for an automobile for Mr. Doherty.
(9) Mr. Lefebvre's employment with the Company commenced in May 1994. His
compensation is governed by an employment agreement dated April 6, 1994. See
"Employment Agreements" below.
OPTION GRANTS IN LAST FISCAL YEAR
The Company made no option or SAR grants to its executive officers in
its last fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information regarding the exercise of
stock options by the Company's executive officers during fiscal 1995 and the
value of unexercised "in-the-money" options at year-end. The columns showing the
number of options exercised during fiscal 1995 and the value realized thereby
have been omitted because none of the executive officers exercised any options
during fiscal 1995.
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Item 11. EXECUTIVE COMPENSATION (cont'd)
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT 1995 IN-THE-MONEY OPTIONS
FISCAL YEAR-END AT 1995 FISCAL YEAR-END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
- ----------------------------------------------------------------------------------------------------------
John W. Everets ............. 165,000/10,000 $341,250/$15,000
Raymond R. Doherty........... 107,000/43,000 $194,250/$87,000
Rene Lefebvre ............... 12,000/18,000 $42,750/$64,125
<FN>
- --------------
(1) An "in-the-money" option is an option for which the option price of the
underlying stock is less than the December 31, 1995 market price ($4.75 per
share); the value shown reflects stock price appreciation since the date of
grant of the option.
EMPLOYMENT AGREEMENTS
John W. Everets and Raymond R. Doherty
On July 19, 1993, the Company entered into an employment agreement with
each of John W. Everets and Raymond R. 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
developed by the Compensation Committee of the Board in consultation with
management and approved by the full 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 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 the employee 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.
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.
13
14
Item 11. EXECUTIVE COMPENSATION (cont'd)
EMPLOYMENT AGREEMENTS (CONT'D)
Rene Lefebvre
During April 1994, the Company entered into an employment agreement
with Rene Lefebvre for employment commencing in May 1994. 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 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. 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
The Company pays each non-employee director a 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
or its committees. Pursuant to the 1995 Stock Plan, each non-employee continuing
director is granted 1,000 non-qualified stock options on the day of each Annual
Meeting of Stockholders during the term of such Plan.
Mr. Weicker received a non-qualified option grant exercisable for 4,000
shares of Common Stock at $4.75 per share, the fair market value of Common Stock
on the date of grant, at the time that he joined the Board of Directors.
14
15
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 25,
1996, 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 ("SEC").
Amount and Nature
of Beneficial
Ownership of HPSC % OF
Name (and Address of Owner of More than 5%) Common Stock(1)(2) CLASS
- ---------------------------------------------------------- ------------------ -----
Dimensional Fund Advisors, Inc............................ 354,400(3) 7.56%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Fidelity Management and Research Corporation 352,500(4) 7.52%
82 Devonshire Street
Boston, MA 02109-3605
Tweedy, Browne Company, L.P............................... 433,285(5) 9.25%
52 Vanderbilt Avenue
New York, NY 10017
John W. Everets and Raymond R. Doherty 300,000(6) 6.40%
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) 7.47%
as Trustees of the HPSC, Inc.
Supplemental Employee Stock
Ownership Plan and Trust
60 State Street, 35th Floor
Boston, MA 02109-1803
John W. Everets........................................... 455,414(8)(9)(10)(11) 9.38%
60 State Street, 35th Floor
Boston, MA 02109-1803
Joseph A. Biernat......................................... 7,000 *
J. Kermit Birchfield...................................... 37,667(12) *
Dollie A. Cole............................................ 36,500 *
Samuel P. Cooley.......................................... 8,000 *
Raymond R. Doherty........................................ 220,214(8)(9)(11) 4.59%
Rene Lefebvre............................................. 59,599(9)(11) 1.27%
Thomas M. McDougal........................................ 21,000 *
Lowell P. Weicker, Jr..................................... 4,000 *
All Directors and Executive Officers as a group (9 persons) 849,394(11) 16.80%
<FN>
- ----------
* Percent of class less than 1%.
(Notes continued on following page.)
(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, 7,000 shares each;
Ms. Cole and Dr. McDougal, 21,000 shares each; Mr. Weicker, 4,000 shares,
Mr. Everets, 170,000 shares; Mr. Doherty, 114,000 shares; Mr. Lefebvre,
18,000 shares; and such group, 369,000 shares.
15
16
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(cont'd)
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (CONT'D)
(2) Includes allocated shares under the HPSC, Inc. Employee Stock Ownership
Plan (the "ESOP") of 4,714 for Mr. Everets, 6,711 for Mr. Doherty, 1,599
for Mr. Lefebvre and 13,024 for all executive officers and directors as a
group.
(3) Dimensional Fund Advisors, Inc. ("Dimensional") has filed an Amendment No.
5 to Schedule 13G with the SEC reporting that it is a registered investment
adviser and is deemed to have beneficial ownership of 354,400 shares of
Common Stock of the Company as of December 31, 1995, 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 ("FMRC") filed a Form 13G with
the SEC for the year ended December 31, 1995 reporting that it has
investment discretion with respect to 352,500 shares of Common Stock of the
Company. FMRC reports that it has no voting authority with respect to such
shares.
(5) Tweedy, Browne Company L.P. ("TBC"), TBK Partners, L.P. ("TBK") and
Vanderbilt Partners, L.P. ("Vanderbilt") filed an Amendment No. 4 to their
Form 13Ds on October 28, 1995 with the Securities and Exchange Commission.
TBC is the beneficial owner of 408,285 shares of the Company's Common
Stock. TBK owns directly 15,000 shares. Vanderbilt owns directly 10,000
shares. The aggregate number of shares of the Company's Common Stock of
which TBC, TBK and Vanderbilt could be deemed to be beneficial owners is
433,285. TBC has investment discretion with respect to 408,285 shares and
sole power to dispose or direct the disposition of all of such shares. TBC
has shared power to vote or direct the vote of 350,285 shares. TBK has the
sole power to vote or direct the voting of and to dispose or direct the
disposition of the TBK shares. Vanderbilt has the sole power to vote or
direct the voting of and dispose or direct the disposition of the
Vanderbilt shares. The general partners of TBC and Vanderbilt are
Christopher H. Browne, William H. Browne and John D. Spears. The general
partners of TBK are Christopher H. Browne, William H. Browne, Thomas P.
Knapp and John D. Spears. The general partners of TBC, by reason of their
positions as such, may be deemed to have shared power to dispose of or to
direct the disposition of 408,285 shares and shared power to vote or to
direct the vote of 350,285 shares. Each of the general partners of TBK and
Vanderbilt, by reason of his position as such, may be deemed to have shared
power to vote or direct the vote of and to dispose or direct the
disposition of the 15,000 shares held by TBK and the 10,000 shares held by
Vanderbilt, respectively.
(6) 59,652 of these shares have been allocated to the accounts of ESOP
participants and 240,348 shares are unallocated. Messrs. Doherty and
Everets disclaim beneficial ownership of all such shares, other than the
shares allocated to their respective 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.
16
17
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(cont'd)
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (CONT'D)
(8) 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.
(9) 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.
(10) Includes 100 shares held by Mr. Everets' son, A. Hale W. Everets. Mr.
Everets disclaims beneficial ownership of such shares.
(11) Includes 185,000, 90,000 and 25,000 restricted shares granted to Messrs.
Everets, Doherty and Lefebvre on May 12, 1995, as described under the
Summary Compensation Table.
(12) Includes 3,000 shares held by Mr. Birchfield's spouse. Mr. Birchfield
disclaims beneficial ownership of such shares.
17
18
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 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. Such borrowings may not exceed $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: Mr. Everets, $98,000, secured by 26,133 shares; Mr. Doherty, $37,500,
secured by 10,000 shares; and Mr. Lefebvre, $37,500, secured by 10,000 shares.
REPURCHASE OF SHARES FORMERLY HELD BY HEALTHCO INTERNATIONAL, INC.
In July 1995 the Company completed payment for 1,225,182 shares of the
Company's Common Stock which it repurchased from certain secured creditors of
Healthco International, Inc. ("Healthco"), which was formerly the largest
shareholder of the Company and which declared bankruptcy in June 1993, pursuant
to a Purchase and Sale Agreement between the Company and the Healthco secured
creditors, dated as of November 1, 1994. Healthco had pledged the shares of the
Company's Common Stock to secure its obligations to the secured creditors. The
shares were released from the pledge agreement upon the Company's completion of
the payment. The secured creditors also released the Company from any claims
that may arise out of the bankruptcy of Healthco, effective upon payment by the
Company for the shares. The Company has retired 1,125,182 of these shares and
holds 100,000 of these shares in its treasury.
18
19
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
Page Number In
(a) 1. Financial Statements Annual Report
-------------------- -------------
Incorporated by reference from the Company's
Annual Report to Stockholders for the fiscal
year ended December 31, 1995:
Report of Independent Accountants
Consolidated Balance Sheets at December 31,
1995 and December 31, 1994 4
Consolidated Statements of Income for each
of the three years in the period ended
December 31, 1995 5
Consolidated Statements of Changes in Stock-
holders' Equity for each of the three years in
the period ended December 31, 1995 6
Consolidated Statements of Cash Flows for
each of the three years in the period ended
December 31, 1995 7
Notes to Consolidated Financial Statements 8-13
Page Number in
(a) 2. Financial Statement Schedule Form 10-K
---------------------------- ---------
Included in Part IV of this report:
Schedule II - Valuation and Qualifying
Accounts for each of the three years in
the period ended December 31, 1995 21
19
20
LOCATION OF DOCUMENTS PERTAINING TO EXECUTIVE COMPENSATION PLANS AND
ARRANGEMENTS
Item in
Name of Document this Report Cross Reference
---------------- ----------- ---------------
1. HPSC, Inc. Stock Option 10.2 Incorporated by reference to Exhibit
Plan dated March 5, 1986 10.6 to HPSC's Annual Report on Form
10-K for the fiscal year ended
December 30, 1989
2. Employment Agreement 10.4 Incorporated by reference to Exhibit
between the Company and 10.1 to HPSC's Quarterly Report on
John W. Everets, dated Form 10-Q for the quarter ended
July 19, 1993 September 25, 1993
3. Employment Agreement 10.5 Incorporated by reference to Exhibit
between the Company and 10.2 to HPSC's Quarterly Report on
Raymond R. Doherty dated Form 10-Q for the quarter ended
as of August 2, 1993 September 25, 1993
4. HPSC, Inc. Employee Stock 10.9 Incorporated by reference to Exhibit
Ownership Plan Agreement 10.9 to HPSC's Annual Report on
dated December 22, 1993 Form 10-K for the fiscal year ended
between HPSC, Inc. and John December 25, 1993
Everets and Raymond
Doherty, as trustees
5. HPSC, Inc. 401 (k) Plan dated 10.15 Incorporated by reference to Exhibit
February, 1993 between 10.15 to HPSC's Annual Report on
HPSC, Inc. and Metropolitan Form 10-K for the fiscal year ended
Life Insurance Company December 25, 1993
6. First Amendment effective 10.10 Incorporated by reference to Exhibit
January 1, 1993 to HPSC, Inc. 10.2 to HPSC's Quarterly Report on
Employee Stock Ownership Form 10-Q for the quarter ended
Plan June 25, 1994
7. Second Amendment effective 10.11 Incorporated by reference to Exhibit
January 1, 1994 to HPSC, 10.11 to HPSC's Annual Report on
Inc., Employee Stock Form 10-K for the fiscal year ended
Ownership Plan December 31, 1994
8. Third Amendment effective 10.12 Incorporated by reference to Exhibit
January 1, 1993 to HPSC, Inc. 10.12 to HPSC's Annual Report on
Employee Stock Ownership Form 10-K for the fiscal year ended
Plan December 31, 1994
9. HPSC, Inc. Supplemental 10.13 Incorporated by reference to Exhibit
Employee Stock Ownership 10.3 to HPSC's Quarterly Report on
Plan and Trust dated July 25, Form 10-Q for the quarter ended June
1994 25, 1994
10. HPSC, Inc. 1994 Stock Plan
dated as of March 23, 1994
and related forms of 10.14 Incorporated by reference to Exhibit
Nonqualified Option Grant 10.4 to HPSC's Quarterly Report on
and Option Exercise Form Form 10-Q for the quarter ended June
25, 1994
20
21
LOCATION OF DOCUMENTS PERTAINING TO EXECUTIVE COMPENSATION PLANS AND
ARRANGEMENTS (cont'd)
Item in
Name of Document this Report Cross Reference
---------------- ----------- ---------------
11. Employment Agreement 10.8 Incorporated by reference to Exhibit
between HPSC, Inc. and Rene 10.5 to HPSC's Quarterly Report on
Lefebvre dated April 6, 1994 Form 10-Q for the quarter ended June
25, 1994
12. Amendment dated as of May 10.6 Incorporated by reference to Exhibit
25, 1994 to Employment 10.6 to HPSC's Quarterly Report on
Agreement between HPSC, Form 10-Q for the quarter ended June
Inc. and John W. Everets 25, 1994
13. Amendment dated as of May 10.7 Incorporated by reference to Exhibit
25, 1994 to Employment 10.7 to HPSC's Quarterly Report on
Agreement between HPSC, Form 10-Q for the quarter ended June
Inc. and Raymond R. Doherty 25, 1994
14. Amended and Restated 10.29 File herewith.
HPSC, Inc. 1995 Stock
Incentive Plan
15. Stock Option grant to Lowell 10.30 Filed herewith.
P. Weicker effective
December 7, 1995
21
22
(a) 3 EXHIBITS
Exhibit
-------
No. Title Method of Filing
--- ----- ----------------
3.1 Restated Certificate of Filed herewith
Incorporation of HPSC, Inc.
3.2 Certificate of Amendment to Filed herewith
Restated Certificate of
Incorporation of HPSC, Inc. filed
in Delaware on September 14,
1987
3.3 Certificate of Amendment to Filed herewith
Restated Certificate of
Incorporation of HPSC, Inc. filed
in Delaware on May 22, 1995
3.4 Amended and Restated By-Laws Filed herewith
4.1 Rights Agreement dated as of Incorporated by reference to
August 3, 1993 between the Exhibit 4 to HPSC's Amendment
Company and The First National No. 1 to its Current Report on
Bank of Boston, N.A., including Form 8-K filed August 11, 1993.
as Exhibit B thereto the form of
Rights Certificate
10.1 Lease dated as of March 8, Incorporated by reference to
1994 between the Trustees of Exhibit 10.1 to HPSC's Annual
60 State Street Trust and Report on Form 10-K for the
HPSC, Inc., dated September fiscal year ended December 31,
10, 1970 and relating to the 1994
principal executive offices of
HPSC, Inc. at 60 State Street,
Boston, Massachusetts
10.2 HPSC, Inc. Stock Option Plan, Incorporated by reference to
dated March 5, 1986 Exhibit 10.6 to HPSC's Annual
Report on Form 10-K for the
fiscal year ended December 30,
1989
10.3 Employment Agreement Incorporated by reference to
between the Company and Exhibit 10.1 to HPSC's Quarterly
John W. Everets, dated Report on Form 10-Q for the
July 19, 1993 quarter ended September 25,
1993
10.4 Employment Agreement Incorporated by reference to
between the Company and Exhibit 10.2 to HPSC's Quarterly
Raymond R. Doherty dated Report on Form 10-Q for the
as of August 2, 1993 quarter ended September 25,
1993
10.5 Amendment dated as of May 25, Incorporated by reference to
1994 to Employment Agreement Exhibit 10.6 to HPSC's Quarterly
between HPSC, Inc. and Report on Form 10-Q for the
22
23
John W. Everets quarter ended June 25, 1994
10.6 Amendment dated as of May 25, Incorporated by reference to
1994 to Employment Agreement Exhibit 10.7 to HPSC's Quarterly
between HPSC, Inc. and Report on Form 10-Q for the
Raymond R. Doherty quarter ended June 25, 1994
23
24
(a) 3 EXHIBITS (cont'd)
Exhibit
-------
No. Title Method of Filing
--- ----- ----------------
10.7 Employment Agreement Incorporated by reference to
between HPSC, Inc. and Rene Exhibit 10.5 to HPSC's Quarterly
Lefebvre dated April 6, 1994 Report on Form 10-Q for the
quarter ended June 25, 1994
10.8 HPSC, Inc. Employee Stock Incorporated by reference to
Ownership Plan Agreement Exhibit 10.9 to HPSC's Annual
dated December 22, 1993 Report on Form 10-K for the
between HPSC, Inc. and John fiscal year ended December 25,
W. Everets and Raymond R. 1993
Doherty, as trustees
10.9 First Amendment effective Incorporated by reference to
January 1, 1993 to HPSC, Inc. Exhibit 10.2 to HPSC's Quarterly
Employee Stock Ownership Plan Report on Form 10-Q for the
quarter ended June 25, 1994
10.10 Second Amendment effective Incorporated by reference to
January 1, 1994 to HPSC, Inc. Exhibit 10.11 to HPSC's Annual
Employee Stock ownership Plan Report on Form 10-K for the fiscal
year ended December 31, 1994
10.11 Third Amendment effective Incorporated by reference to
January 1, 1993 to HPSC, Inc. Exhibit 10.12 to HPSC's Annual
Employee Stock Ownership Plan Report on Form 10-K for the
fiscal year ended December 31, 1994
10.12 HPSC, Inc. Supplemental Incorporated by reference to
Employee Stock Ownership Plan Exhibit 10.3 to HPSC's Quarterly
and Trust dated July 25, 1994 Report on Form 10-Q for the
quarter ended June 25, 1994
10.13 HPSC, Inc. 1994 Stock Plan Incorporated by reference to
dated as of March 23, 1994 and Exhibit 10.4 to HPSC's Quarterly
related forms of Nonqualified Report on Form 10-Q for the
Option Grant and Option quarter ended June 25, 1994
Exercise Form
10.14 HPSC, Inc. 401(k) Plan dated Incorporated by reference to
February, 1993 between HPSC, Exhibit 10.15 to HPSC's Annual
Inc. and Metropolitan Life Report on Form 10-K for the
Insurance Company fiscal year ended December 25,
1993
10.15 Indenture and Service Incorporated by reference to
Agreement dated as of Exhibit 10.10 to HPSC's Annual
December 23, 1993 by and Report on Form 10-K for the
among HPSC Funding Corp. I, fiscal year ended December 25,
HPSC, Inc. and State Street 1993
Bank and Trust company of
Connecticut, N.A.
24
25
(a) 3 EXHIBITS (cont'd)
Exhibit
-------
No. Title Method of Filing
--- ----- ----------------
10.16 Sale and Contribution Incorporated by reference to
Agreement dated as of Exhibit 10.11 to HPSC's Annual
December 23, 1993 between Report on Form 10-K for the
HPSC Funding Corp I and fiscal year ended December 25,
HPSC, Inc. 1993
10.17 Note Purchase Agreement Incorporated by reference to
dated as of December 23, 1993 Exhibit 10.12 to HPSC's Annual
among HPSC Funding Corp. I, Report on Form 10-K for the
HPSC, Inc. and the Prudential fiscal year ended December 25,
Life Insurance Company of 1993
America
10.18 Insurance Agreement dated as Incorporated by reference to
of December 23, 1993 among Exhibit 10.13 to HPSC's Annual
Municipal Bond Investors Report on Form 10-K for the
Assurance Corporation, HPSC fiscal year ended December 25,
Funding Corp. I, HPSC, Inc. and 1993
State Street Bank and Trust
Company of Connecticut, N.A.
10.19 Undertaking with respect to Incorporated by reference to
Exhibits to certain Agreements Exhibit 10.14 to HPSC's Annual
Report on Form 10-K for the
fiscal year ended December 25,
1993
10.20 Amended and Restated Incorporated by reference to
Revolving Loan Agreement Exhibit 10.3 to HPSC's Quarterly
dated May 12, 1995, among Report on Form 10-Q for the
HPSC, Inc. The First National quarter ended June 30, 1995
Bank of Boston individually
and as Agent, and Bank of
America Illinois, individually
and as Co-Agent
10.21 First Amendment to Amended Filed herewith
and Restated Revolving Credit
Agreement dated as of
November 13, 1995, by and
among HPSC, Inc., The First
National Bank of Boston
individually and as Agent, and
Bank of America Illinois,
individually and as Co-Agent
25
26
(a) 3 EXHIBITS (cont'd)
Exhibit
-------
No. Title Method of Filing
--- ----- ----------------
10.22 Second Amendment to Filed herewith
Amended and Restated
Revolving Credit Agreement
dated as of December 1, 1995,
by and among HPSC, Inc., The
First National Bank of Boston
individually and as Agent, and
Bank of America Illinois,
individually and as Co- Agent
10.23 Loan Agreement dated 4/13/95 Incorporated by reference to
between HPSC, Inc. and Exhibit 10.1 to HPSC's Quarterly
Springfield Institution for Report on Form 10-Q for the
Savings quarter ended March 31, 1995
10.24 Sale Agreement dated Filed herewith
November 16, 1995 between
HPSC, Inc. and Springfield
Institution for Savings
10.25 Stock Purchase Agreement, Incorporated by reference to
dated as of November 1, 1994, Exhibit 10.3 to HPSC's Quarterly
by and among HPSC, Inc. and Report on Form 10-Q for the
each of Chemical Bank; The quarter ended September 24,
CIT Group/Business Credit, 1994
Inc.; Van Kampen Merritt
Prime Rate Income Trust; the
Nippon Credit Bank, Ltd.;
Union Bank of Finland,
Grand Cayman Branch; HPSC, Inc.;
The Bank of Tokyo Trust Company;
and Morgens, Waterfall, Vintiadis &
Co. Inc., and related Schedules
10.26 Purchase and Contribution Incorporated by reference to
Agreement dated as of Exhibit 10.31 to HPSC's Annual
January 31, 1995 between Report on Form 10-K for the fiscal
HPSC, Inc. and HPSC Bravo year ended December 31, 1994
Funding Corp.
10.27 Credit Agreement dated as of Incorporated by reference to
January 31, 1995 among Exhibit 10.32 to HPSC's Annual
HPSC Bravo Funding Corp., Report on Form 10-K for the fiscal
Triple-A One Funding year ended December 31, 1994
Corporation, as lender, and
CapMAC, as Administrative
Agent and as Collateral Agent
26
27
(a) 3 EXHIBITS (cont'd)
Exhibit
-------
No. Title Method of Filing
--- ----- ----------------
10.28 Agreement to furnish copies of Incorporated by reference to
Omitted Exhibits to Certain Exhibit 10.33 to HPSC's Annual
Agreements with HPSC Bravo Report on Form 10-K for the
Funding Corp. fiscal year ended December 31,
1994
10.29 Amended and Restated HPSC, Filed herewith
Inc. 1995 Stock Incentive Plan
10.30 Stock Option grant to Lowell P. Filed herewith.
Weicker effective December 7,
1995.
13 Annual Report to Stockholders Filed herewith
for the fiscal year ended
December 31, 1995
21 Subsidiaries of HPSC, Inc. Filed herewith
23 Report of Coopers & Lybrand, Filed herewith
L.L.P.
27 HPSC, Inc. Financial Data Filed herewith
Schedule
Copies of Exhibits may be obtained for a nominal charge by writing to:
INVESTOR RELATIONS
HPSC, INC.
60 STATE STREET
BOSTON, MASSACHUSETTS 02019
(b) Reports on Form 8-K
None
27
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, HPSC, Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HPSC, Inc.
By: /s/ John W. Everets
----------------------------
Dated: March 29, 1996 John W. Everets
Chairman, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of HPSC,
Inc. and in the capacities and on the dates indicated.
Name Title Dated
- ---- ----- -----
By: /s/ John W. Everets Chairman, Chief Executive March 29, 1996
-------------------------------------- Officer and Director (Principal
John W. Everets Executive Officer)
By: /s/ Rene Lefebvre Vice President, Chief March 29, 1996
-------------------------------------- Financial Officer and
Rene Lefebvre Treasurer (Principal Financial
Officer)
By: /s/ Raymond R. Doherty President and Director March 29, 1996
--------------------------------------
Raymond R. Doherty
By: /s/ Dennis J. McMahon Vice President, Administration March 29, 1996
-------------------------------------- (Principal Accounting Officer)
Dennis J. McMahon
By: /s/ Dollie A. Cole Director March 29, 1996
--------------------------------------
Dollie A. Cole
By: /s/ Thomas M. McDougal Director March 29, 1996
--------------------------------------
Thomas M. McDougal
By: /s/ Samuel P. Cooley Director March 29, 1996
--------------------------------------
Samuel P. Cooley
By: /s/ Joseph A. Biernat Director March 29, 1996
--------------------------------------
Joseph A. Biernat
By: /s/ J. Kermit Birchfield Director March 29, 1996
--------------------------------------
J. Kermit Birchfield
By: /s/ Lowell P. Weicker, Jr. Director March 29, 1996
--------------------------------------
Lowell P. Weicker, Jr.
28
29
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of HPSC, Inc.:
Our report on the consolidated financial statements of HPSC, Inc. has
been incorporated by reference in this Form 10-K from the 1995 Annual Report to
Stockholders of HPSC, Inc. In connection with our audits of such financial
statements, we have also audited the related financial statement schedule listed
in item 14(a)2 of this Form 10-K.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND, L.L.P.
Boston, Massachusetts
March 25,1996
30
SCHEDULE VIII
HPSC, INC.
VALUATION AND QUALIFYING ACCONTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(IN THOUSANDS)
- -------------------------------------------------------------------------------------------
Balance at Charged to
Beginning of Costs and Deductions Balance at
Description Year Expenses (1) end of year
- -------------------------------------------------------------------------------------------
Allowance for losses 1995 $ 4,595 $ 1,296 $ 1,379 $ 4,512
- -------------------------------------------------------------------------------------------
Allowance for losses 1994 4,897 754 3,056 4,595
- -------------------------------------------------------------------------------------------
Allowance for losses 1993 9,216 15,104 17,423 6,897
- -------------------------------------------------------------------------------------------
<FN>
(1) DEDUCTIONS ARE WRITE-OFFS NET OF RECOVERIES.