Transition Agreement - Hewlett-Packard Co. and Lewis E. Platt
TRANSITION AGREEMENT
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This Transition Agreement (the "Agreement") is made and entered into
effective as of May 20, 1999 (the "Effective Date") between Lewis E. Platt (the
"Employee") and Hewlett-Packard Company, a Delaware corporation (the "Company").
R E C I T A L S
A. The Employee is currently employed by the Company as its President and
Chief Executive Officer. In addition, the Employee serves as Chairman of the
Company's Board of Directors.
B. The Company and the Employee desire to enter into this Agreement to
provide certain compensation to the Employee under the circumstances described
herein and to encourage the Employee to continue his service to the Company.
C. Capitalized terms used in the Agreement, to the extent not otherwise
defined, are defined in Section 5 below.
A G R E E M E N T
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of the Employee by the Company, the
parties agree as follows:
1. Transition Payment. Except as otherwise provided below, subject to the
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Employee's continued status as Chairman, upon the occurrence of a "Payment Date"
(as defined below), the Employee shall be entitled to receive a transition
payment in an amount equal to one and one half times the Employee's Target Pay,
less applicable withholding (the "Transition Payment"). The Transition Payment
shall be paid to the Employee in a single lump sum cash payment within fifteen
(15) days after the Payment Date. The term "Payment Date" means the earlier of
(i) the second anniversary of the Effective Date, provided the Employee is
Chairman on such date, or (ii) such earlier date as the Board removes the
Employee as Chairman other than for Cause (as defined in Section 5 below),
provided, that for this purpose, the Employee's resignation as Chairman at the
request of the Board shall be treated as removal by the Board. If, on or before
the second anniversary of the Effective Date, the Employee ceases to serve as
Chairman for any other reason, then the Employee shall not be entitled to the
Transition Payment.
2. Termination of Agreement. The terms of this Agreement shall terminate
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upon the earlier of (i) the date that all obligations of the parties hereunder
have been satisfied, or (ii) the second anniversary of the Effective Date. A
termination of the terms of this Agreement pursuant to the preceding sentence
shall be effective for all purposes, except that such termination shall not
affect the payment or provision of compensation or benefits on account of a
termination of employment occurring prior to the termination of the term of this
Agreement. Notwithstanding the foregoing, the provisions of Sections 7, 8, 9,
10, 11 and 12 shall survive termination of this Agreement.
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3. Obligations. During the term of the Employee's employment with the
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Company, the Employee shall devote substantially all of his business efforts
and time to the Company. The foregoing, however, shall not preclude the
Employee from engaging in such activities and services as do not materially
interfere or conflict with the Employee's duties and responsibilities to the
Company. The Employee shall comply with and be bound by the Company's operating
policies, procedures and practices from time to time in effect during
employment. If, during the term of this Agreement, the Employee remains
Chairman after his employment with the Company terminates, the Employee and the
Board agree to negotiate in good faith the Employee's compensation for his Board
service.
4. Retirement Benefits. The Employee is currently covered under the
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Company's Excess Benefit Retirement Plan and its Officers Early Retirement Plan
(such programs referred to collectively herein as the "Non-Qualified Retirement
Plans"), in addition to the Company's Retirement Plan and its Deferred Profit-
Sharing Plan. Except as provided below with respect to the Officers Early
Retirement Plan, during the term of this Agreement the Company shall continue to
maintain such Non-Qualified Retirement Plans (or such comparable alternative
non-qualified retirement arrangements as the Company may, in its discretion,
determine to be sufficient to satisfy its obligations to the Employee under this
Section 4), so as to provide benefits to the Employee that are no less favorable
than those available to the Employee under such Plans as of the Effective Date,
it being the Company's intention to deliver benefits to the Employee at a level
that is not less than that currently provided under the Non-Qualified Retirement
Plans. Notwithstanding the preceding sentence, on March 18, 1999 the
Compensation Committee of the Board (the "Compensation Committee") terminated
the Officers Early Retirement Plan effective November 1, 1999. In connection
with such termination, the Company will calculate a lump sum equivalent benefit
for the Employee, and will credit such amount to the Employee's account under
the Company's Executive Deferred Compensation Plan, subject to the terms and
conditions of that Plan. In the event the Employee's employment with the
Company terminates for any reason other than by the Company for Cause, any
employment or other similar requirement applicable to the amount so credited to
the Executive Deferred Compensation Plan (together with any earnings credited
thereto) shall be waived.
5. Definition of Terms. The following terms referred to in this Agreement
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shall have the following meanings:
(a) Board. "Board" means the Board of Directors of the Company. Where
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applicable, the term "Board" shall include a committee of the Board.
(b) Cause. "Cause" means (i) the Employee's willful failure to
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substantially perform his material duties (other than as a failure resulting
from the Employee's complete or partial incapacity due to physical or mental
illness or impairment) for a period of thirty (30) days after a written demand
for substantial performance is delivered to the Employee by the Board that
specifically identifies the manner in which the Board believes that the Employee
has not substantially performed his duties, (ii) a material and willful
violation of a federal or state law or regulation applicable to the business of
the Company, and (iii) a willful act by the Employee that constitutes gross
misconduct and that is injurious to the Company. No act, or failure to act, by
the
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Employee shall be considered "willful" unless committed without good faith and
without a reasonable belief that the act or omission was in the Company's best
interests.
(c) Chairman. "Chairman" means Chairman of the Company's Board.
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(d) Target Pay. "Target Pay" means the Employee's combined base
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salary and variable compensation amount as of the Effective Date as determined
in accordance with the Company's 1999 Variable Pay Plan as in effect as of the
Effective Date.
6. Golden Parachute Payments. In the event it shall be determined that
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any payment by the Company to or for the benefit of the Employee, whether paid
or payable under this Agreement or otherwise but determined without regard to
any additional payments required under this Section 6 (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any comparable federal, state or local
excise tax (such excise tax, together with any interest and penalties, is
hereinafter collectively referred to as the "Excise Tax"), then the Employee
shall be entitled to receive an additional payment from the Company (a "Gross-Up
Payment") in such an amount that after the payment of all taxes (including,
without limitation, any interest and penalties on such taxes and the Excise Tax)
on the payment and on the Gross-Up Payment, the Employee shall retain an amount
equal to the Payment minus all applicable taxes on the Payment. The intent of
the parties is that the Company shall be solely responsible for, and shall pay,
any Excise Tax on the Payment and Gross-Up Payment and any income and employment
taxes (including without limitation, penalties and interest) imposed on any
Gross-Up Payment (as well as any loss of tax deduction caused by the Gross-Up
Payment). Unless the Company and the Employee otherwise agree in writing, all
determinations required to be made under this Section and the assumptions to be
utilized in arriving at such determinations shall be made in writing in good
faith by the accounting firm serving as the Company's independent public
accountants immediately prior to the event giving rise to such Payment (the
"Accountants"). For purposes of making the calculations required by this Section
6, the accountants may make reasonable assumptions and approximations concerning
the application of Sections 280G and 4999 of the Code. The Company and the
Employee shall furnish to the Accountants such information and documents as the
Accountants may reasonably request to make a determination under this Section.
The Company shall bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this Section.
7. Non-Compete; Non-Solicit.
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(a) The parties hereto recognize that the Employee's services are
special and unique and that the level of compensation and the provisions herein
for compensation under Section 1 are partly in consideration of and conditioned
upon the Employee's not competing with the Company, and that the Employee's
covenant not to compete or solicit as set forth in this Section 7 during and
after employment and Board service is essential to protect the business and good
will of the Company.
(b) The Employee agrees that during the term of employment with the
Company and service on the Board and for a period of eighteen (18) months
thereafter (the "Covenant Period"), the Employee shall not render services for
any organization or engage directly or indirectly in any business that, in the
opinion of the Company, competes with or is in conflict with the interests of
the Company.
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(c) During the Covenant Period, the Employee shall not, directly or
indirectly, induce or attempt to influence any employee of the Company to leave
its employ.
(d) During the Covenant Period, the Employee shall not, without prior
written authorization from the Company, disclose to anyone outside the Company,
or use in other than the Company's business, any confidential information and
material relating to the business of the Company.
(e) The Employee agrees that the Company would suffer an irreparable
injury if the Employee were to breach the covenants contained in Sections 7(b),
(c) or (d) and that the Company would by reason of such breach or threatened
breach be entitled to injunctive relief in a court of appropriate jurisdiction
and the Employee hereby stipulates to the entering of such injunctive relief
prohibiting the Employee from engaging in such breach.
(f) If any of the restrictions contained in this Section 7 shall be
deemed to be unenforceable by reason of the extent, duration or geographical
scope or other provisions thereof, then the parties hereto contemplate that the
court shall reduce such extent, duration, geographical scope or other provision
hereof and enforce this Section 7 in its reduced form for all purposes in the
manner contemplated hereby.
8. Successors.
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(a) Company's Successors. Any successor to the Company (whether
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direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and assets shall assume the obligations under this Agreement and agree expressly
to perform the obligations under this Agreement in the same manner and to the
same extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and assets that
executes and delivers the assumption agreement described in this Section 8(a) or
that becomes bound by the terms of this Agreement by operation of law.
(b) Employee's Successors. The terms of this Agreement and all rights
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of the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, devisees and legatees.
9. Notices. Notices and all other communications contemplated by this
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Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to him at the home address that he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its General Counsel.
10. Information. The Employee agrees not to disclose to others, or to take
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or use for the Employee's own purposes or for the purposes of others, during or
after the Employee's employment, any Information owned or controlled by the
Company or any of its subsidiary or affiliated companies. The Employee agrees
that these restrictions shall also apply to all (i) Information in the Company's
possession belonging to third parties, and (ii) Information conceived,
originated,
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discovered or developed, in whole or in part, by the Employee while an employee
of the Company. As used herein, "Information" includes trade secrets and other
confidential or proprietary business, technical, personnel or financial
information, whether or not the Employee's work product, in written, graphic,
oral or other tangible or intangible forms, including but not limited to
specifications, samples, records, data, computer programs, drawings, diagrams,
models, customer names, business or marketing plans, studies, analyses,
projections and reports, communications by or to attorneys (including attorney-
client privileged communications), memos and other materials prepared by
attorneys or under their direction (including attorney work product), and
software systems and processes. Any Information which is not readily available
to the public shall be considered to be a trade secret and confidential
property, even if it is not specifically marked as such, unless the Company
advises the Employee otherwise in writing. The Employee agrees that upon the
conclusion of his service to the Company, he will return to the Company all
property (including any copies thereof) belonging to the Company, including all
documents or other media in the Employee's possession or control which in any
way incorporate or reflect any Information.
11. Arbitration.
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(a) Agreement. The Company and The Employee agree that any dispute or
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controversy arising out of, relating to, or in connection with this Agreement,
or the interpretation, validity, construction, performance, breach, or
termination thereof shall be settled by binding arbitration, unless otherwise
required by law, to be held in Santa Clara County, California, in accordance
with the National Rules for the Resolution of Employment Disputes then in effect
of the American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction.
(b) Governing Law. The arbitrators shall apply California law to the
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merits of dispute or claim, without reference to rules of conflicts of law. The
Employee hereby expressly consents to the personal jurisdiction of the state and
federal courts located in California for any action or proceeding arising form
or relating to this Agreement or relating to any arbitration in which the
parties are participants.
(c) Costs and Fees of Arbitration. The Employee shall pay the initial
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arbitration filing (not to exceed $200.00), and the Company shall pay the
remaining costs and expenses of such arbitration (unless the Employee requests
that each party pay one-half of the costs and expenses of such arbitration or
unless otherwise required by law). The Company and the Employee shall each pay
separately its counsel fees and expenses unless otherwise required by law.
(d) Equitable Relief. The parties may apply to any court of competent
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jurisdiction for a temporary restraining order, preliminary injunction, or other
interim or conservatory relief, as necessary, without breach of this arbitration
agreement and without abridgment of the powers of the arbitrator.
(e) Employee's Representation. THE EMPLOYEE HAS READ AND UNDERSTANDS
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THIS SECTION, WHICH DISCUSSES ARBITRATION. THE EMPLOYEE UNDERSTANDS THAT BY
SIGNING THIS AGREEMENT, HE AGREES TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF,
RELATING TO, OR IN CONNECTION WITH THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE OR BREACH OF THIS AGREEMENT, TO BINDING ARBITRATION, UNLESS
OTHERWISE REQUIRED BY LAW,
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AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF HIS RIGHT TO A JURY
TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO THIS AGREEMENT.
12. Miscellaneous Provisions.
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(a) No Duty to Mitigate. The Employee shall not be required to
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mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor shall any such payment be
reduced by any earnings that the Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified, waived
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or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Whole Agreement. No agreements, representations or understandings
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(whether oral or written and whether express or implied) that are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof.
(d) Choice of Law. The validity, interpretation, construction and
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performance of this Agreement shall be governed by the laws of the State of
California.
(e) Severability. The invalidity or unenforceability of any provision
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or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(f) Employment At Will; Limitation of Remedies. The Company and the
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Employee acknowledge that the Employee's employment is at will, as defined in
the applicable law. If the Employee's employment terminates for any reason, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement.
(g) No Assignment of Benefits. The rights of any person to payments
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or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this Section 12(g) shall be
void.
(h) Taxes. All payments made pursuant to this Agreement will be
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subject to all applicable reporting obligations and any tax or other
contributions required to be withheld under Federal, state or local law, as
interpreted by the Company.
(i) Assignment by Company. The Company may assign its rights under
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this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company or to the Company. In the
case of any such assignment, the term "Company" when used in a section of this
Agreement shall mean the corporation that actually employs the Employee.
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(j) Counterparts. This Agreement may be executed in counterparts,
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each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
COMPANY: By: /s/ S.T. Jack Brigham III
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June 15, 1999
Title: Senior Vice President Corporate Affairs,
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General Counsel
EMPLOYEE: /s/ Lewis E. Platt
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Lewis E. Platt
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