Apotheker’s Exit Is Cheaper Than Expected for HP (But Still Pricey, Considering)
LÃ©o Apotheker is gone from Hewlett-Packard, but he left so suddenly that the board of directors didn’t have time to finalize his severance package. That is until today.
HP just filed an 8k with the U.S. Securities and Exchange Commission that outlines the terms under which he has agreed to leave. He will receive:
- A severance payment in the amount of $7.2 million payable in installments over the next 18 months.
- Accelerated vesting of 156,000 shares of restricted HP stock granted valued at $3,557,800 based on today’s closing price.
- An aggregate of 424,000 of the 728,000 performance-based restricted stock units (PRUs) awarded under his contract. Apotheker has waived his right to receive the remaining 304,000 PRUs that would have vested on October 31, 2012. He’ll only get them if HP hits its annual cash flow targets and in that case it amounts to another $10 million.
He’ll also get:
- An annual bonus of $2.4 million under the Hewlett-Packard Company 2005 Pay-for-Results Plan for his nearly 11 months of service with HP, payable Oct. 31.
- Coverage of relocation expense back to Europe, and up to $300,000 coverage he incurs on the loss of the sale of his $7 million, six-bedroom house in Atherton, Calif.
- Health benefits or payment for health insurance premiums for Apotheker and his family for 18 months.
- Reimbursement of legal fees related to the negotiation of the agreement.
It could have been worse. According to the terms of his contract, which you can read here, Apotheker stood to walk away with somewhere between $28 million and $35 million, depending on how you added things up.
HP shares are trading at levels that are roughly half of what they were when he joined as CEO last year. With HP clearly worried that angry shareholders might sue over what might be perceived as an outsize severance deal after a rocky 11-month stint — which is exactly what happened after the ouster of former CEO Mark Hurd — the board of directors and Apotheker have negotiated the final terms of his exit with less trouble, sources said.
When he left last year, Hurd initially walked away with a package worth $35 million, prompting a shareholder suit against HP and its board of directors led by a Connecticut law firm that argued the board violated its fiduciary responsibilities.
Later on, after joining Oracle, Hurd forfeited 345,000 HP stock options then worth more than $13 million — but now worth only about $8 million — that were included in his severance package in order to settle a lawsuit against him and Oracle that was brought by HP.