<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AGILENT TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / 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>
<TABLE>
<CAPTION>
<S> <C>
Agilent Technologies, Inc.
3000 Hanover Street
Palo Alto, California
94304*
Edward W. Barnholt
President and
Chief Executive Officer
[LOGO]
</TABLE>
To our Stockholders:
I am pleased to invite you to attend the annual meeting of
stockholders of Agilent Technologies, Inc. to be held on Tuesday,
February 29, 2000 at 10 o'clock in the morning at the Flint Center for
the Performing Arts located at 21250 Stevens Creek Boulevard,
Cupertino, California.
This is the solicitation by Agilent Technologies of proxies for its
first annual meeting of stockholders. Agilent Technologies was formed
in May 1999 as a wholly-owned subsidiary of Hewlett-Packard Company
and comprises businesses that were separated from Hewlett-Packard's
other operations in November 1999. On November 18, 1999, Agilent
Technologies became a publicly-traded company with the issuance of
72,000,000 shares of common stock in an initial public offering. As of
December 31, 1999, Hewlett-Packard owned 84.1% of the outstanding
shares of our common stock. Hewlett-Packard has announced that it
currently plans to complete its divestiture of Agilent Technologies by
the middle of calendar year 2000 by distributing all of the shares of
Agilent Technologies common stock owned by Hewlett-Packard to the
holders of Hewlett-Packard's common stock.
Details regarding admission to the meeting and the business to be
conducted are more fully described in the accompanying Notice of
Annual Meeting and Proxy Statement.
Also enclosed in this mailing are two other documents: our 1999 Annual
Report, which contains information about Agilent Technologies'
businesses and our 1999 Financial Report, which contains financial
information about Agilent Technologies, including our 1999 audited
financial statements.
If you are unable to attend the meeting in person, you may listen to
audio highlights which will be posted a few days after the meeting on
our Web site located at http://www.agilent.com under "Investor
Relations."
Your vote is important. Whether or not you plan to attend the annual
meeting, I hope you will vote as soon as possible. You may vote by
following the instructions on your proxy card. Voting will ensure your
representation at the annual meeting if you do not attend in person.
Thank you for your ongoing support of and continued interest in
Agilent Technologies.
Sincerely,
/s/ NED BARNHOLT
*Please note that we are planning to move into our new headquarters
in the middle of the 2000 calendar year. The address at the new
location will be: 395 Page Mill Road, Palo Alto, California 94306.
<PAGE>
2000 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS................................................................. 1
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING................................... 2
WHY AM I RECEIVING THESE MATERIALS?.................................................................... 2
WHAT INFORMATION IS CONTAINED IN THESE MATERIALS?...................................................... 2
WHAT PROPOSALS WILL BE VOTED ON AT THE MEETING?........................................................ 2
WHAT IS AGILENT TECHNOLOGIES' VOTING RECOMMENDATION?................................................... 2
WHAT SHARES OWNED BY ME CAN BE VOTED?.................................................................. 2
WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A STOCKHOLDER OF RECORD AND AS A BENEFICIAL OWNER?.... 2
HOW CAN I VOTE MY SHARES IN PERSON AT THE MEETING?..................................................... 2
HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE MEETING?................................................ 2
CAN I CHANGE MY VOTE?.................................................................................. 3
HOW ARE VOTES COUNTED?................................................................................. 3
WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH OF THE PROPOSALS?....................................... 3
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY OR VOTING INSTRUCTION CARD?......................... 3
HOW CAN I OBTAIN AN ADMISSION TICKET FOR THE MEETING?.................................................. 3
WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?.................................................... 3
BOARD STRUCTURE AND COMPENSATION......................................................................... 4
PROPOSALS TO BE VOTED ON................................................................................. 5
PROPOSAL NO. 1--Election of Class I Directors.......................................................... 5
PROPOSAL NO. 2--Ratification of Independent Accountants................................................ 8
PROPOSAL NO. 3--Approval of Agilent Technologies, Inc. Pay-For-Results Plan............................ 8
COMMON STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS............................................... 11
Beneficial Ownership Table............................................................................. 11
Section 16(a) Beneficial Ownership Reporting Compliance................................................ 12
EXECUTIVE COMPENSATION................................................................................... 13
Summary Compensation Table............................................................................. 13
Option Grants Table.................................................................................... 15
Aggregated Option Exercises and Year-End Option Values Table........................................... 15
Estimated Annual Retirement Benefits Table Under Pension Plans......................................... 16
ARRANGEMENTS BETWEEN AGILENT TECHNOLOGIES AND HEWLETT-PACKARD............................................ 17
ADDITIONAL QUESTIONS AND INFORMATION REGARDING THE ANNUAL MEETING AND STOCKHOLDER PROPOSALS.............. 28
WHAT HAPPENS IF ADDITIONAL PROPOSALS ARE PRESENTED AT THE MEETING?..................................... 28
WHAT CLASS OF SHARES ARE ENTITLED TO BE VOTED?......................................................... 28
WHAT IS THE QUORUM REQUIREMENT FOR THE MEETING?........................................................ 28
WHO WILL COUNT THE VOTE?............................................................................... 28
IS MY VOTE CONFIDENTIAL?............................................................................... 28
WHO WILL BEAR THE COST OF SOLICITING VOTES FOR THE MEETING?............................................ 28
MAY I PROPOSE ACTIONS FOR CONSIDERATION AT NEXT YEAR'S ANNUAL MEETING OF STOCKHOLDERS OR NOMINATE
INDIVIDUALS TO SERVE AS DIRECTORS?................................................................... 29
APPENDIX A--AGILENT TECHNOLOGIES, INC. PAY-FOR-RESULTS PLAN.............................................. A-1
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGILENT TECHNOLOGIES, INC.
3000 HANOVER STREET
PALO ALTO, CALIFORNIA 94304*
(650) 857-1501
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<S> <C>
TIME 10:00 a.m. on Tuesday, February 29, 2000
PLACE Flint Center for the Performing Arts
21250 Stevens Creek Boulevard
Cupertino, California
ITEMS OF BUSINESS (1) To elect Class I directors to a 3 year term
(2) To ratify the appointment of independent
accountants
(3) To approve a pay-for-results compensation plan
(4) To consider such other business as may properly
come before the meeting
RECORD DATE You are entitled to vote if you were a stockholder at
the close of business on Friday, December 31, 1999.
MEETING ADMISSION Two cut-out admission tickets are included on the back
cover of this proxy statement. Please contact the
Agilent Technologies Corporate Secretary at our
corporate headquarters if you need additional tickets.
The meeting will begin promptly at 10 o'clock.
VOTING BY PROXY Please submit a proxy as soon as possible so that your
shares can be voted at the meeting in accordance with
your instructions. For specific instructions on voting,
please refer to the instructions on the proxy card.
</TABLE>
By Order of the Board of Directors
/s/ D. CRAIG NORDLUND
D. CRAIG NORDLUND
Senior Vice President, General Counsel
and Secretary
THIS PROXY STATEMENT AND ACCOMPANYING PROXY CARD ARE BEING DISTRIBUTED ON OR
ABOUT JANUARY 13, 2000.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*Please note that we are planning to move into our new headquarters in the
middle of the 2000 calendar year. The address at the new location will be:
395 Page Mill Road, Palo Alto, California 94306.
1
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
<TABLE>
<S> <C>
Q: WHY AM I RECEIVING THESE MATERIALS?
A: The board of directors of Agilent
Technologies is providing these proxy
materials for you in connection with
Agilent Technologies' annual meeting of
stockholders which will take place on
February 29, 2000. You are invited to
attend the meeting and are requested to
vote on the proposals described in this
proxy statement.
Q: WHAT INFORMATION IS CONTAINED IN THESE
MATERIALS?
A: The information included in this proxy
statement relates to the proposals to be
voted on at the meeting, the voting
process, the compensation of directors and
our most highly paid officers, and certain
other required information. Our 1999
Annual Report and 1999 Financial Report
are also enclosed.
Q: WHAT PROPOSALS WILL BE VOTED ON AT THE
MEETING?
A: There are three proposals scheduled to be
voted on at the meeting:
- the election of Class I directors for a
3 year term;
- the ratification of independent
accountants; and
- the approval of a pay-for-results
compensation plan.
Q: WHAT IS AGILENT TECHNOLOGIES' VOTING
RECOMMENDATION?
A: Our board of directors recommends that you
vote your shares "FOR" each of the
nominees to the board and "FOR" each of
the other proposals.
Q: WHAT SHARES OWNED BY ME CAN BE VOTED?
A: All shares owned by you as of
December 31, 1999, the RECORD DATE, may
be voted by you. These shares include
those (1) held directly in your name as
the STOCKHOLDER OF RECORD and (2) held for
you as the BENEFICIAL OWNER through a
stockbroker, bank or other nominee.
Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING
SHARES AS A STOCKHOLDER OF RECORD AND AS A
BENEFICIAL OWNER?
A: Most Agilent Technologies stockholders
hold their shares through a stockbroker,
bank or other nominee rather than directly
in their own name. As summarized below,
there are some distinctions between shares
held of record and those owned
beneficially.
STOCKHOLDER OF RECORD
If your shares are registered directly in
your name with Agilent Technologies'
Transfer Agent, Harris Trust and Savings
Bank, you are considered, with respect to
those shares, the STOCKHOLDER OF RECORD
and these proxy materials are being sent
directly to you by Agilent Technologies.
As the STOCKHOLDER OF RECORD, you have the
right to grant your voting proxy directly
to Agilent Technologies or to vote in
person at the meeting. Agilent
Technologies has enclosed a proxy card for
you to use.
BENEFICIAL OWNER
If your shares are held in a stock
brokerage account or by a bank or other
nominee, you are considered the BENEFICIAL
OWNER of shares held IN STREET NAME and
these proxy materials are being forwarded
to you by your broker or nominee who is
considered, with respect to those shares,
the STOCKHOLDER OF RECORD. As the
beneficial owner, you have the right to
direct your broker on how to vote and are
also invited to attend the meeting.
However, since you are not the STOCKHOLDER
OF RECORD, you may not vote these shares
in person at the meeting. Your broker or
nominee has enclosed a voting instruction
card for you to use.
Q: HOW CAN I VOTE MY SHARES IN PERSON AT THE
MEETING?
A: Shares held directly in your name as the
STOCKHOLDER OF RECORD may be voted in
person at the annual meeting. If you
choose to do so, please bring the enclosed
proxy card or proof of identification.
EVEN IF YOU PLAN TO ATTEND THE ANNUAL
MEETING, WE RECOMMEND THAT YOU ALSO SUBMIT
YOUR PROXY AS DESCRIBED BELOW SO THAT YOUR
VOTE WILL BE COUNTED IF YOU LATER DECIDE
NOT TO ATTEND THE MEETING.
Q: HOW CAN I VOTE MY SHARES WITHOUT ATTENDING
THE MEETING?
A: Whether you hold shares directly as the
stockholder of record or beneficially in
street name, you may direct your vote
without attending the meeting. You may
vote by granting a proxy or, for shares
held in street name, by submitting voting
instructions to your broker or nominee.
For specific instructions on how to grant
a proxy or submit voting instructions,
please refer to your proxy card or, for
shares held in street name, the voting
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
instruction card included by your broker
or nominee.
Q: CAN I CHANGE MY VOTE?
A: You may change your proxy instructions at
any time prior to the vote at the annual
meeting. For shares held directly in your
name, you may accomplish this by granting
a new proxy or by attending the annual
meeting and voting in person. Attendance
at the meeting will not cause your
previously granted proxy to be revoked
unless you specifically so request. For
shares held beneficially by you, you may
accomplish this by submitting new voting
instructions to your broker or nominee.
Q: HOW ARE VOTES COUNTED?
A: In the election of directors, you may vote
"FOR" all of the nominees or your vote may
be "WITHHELD" with respect to one or more
of the nominees. For the other proposals,
you may vote "FOR", "AGAINST" or
"ABSTAIN". If you "ABSTAIN", it has the
same effect as a vote "AGAINST". If you
sign your proxy card or broker voting
instruction card with no further
instructions, your shares will be voted in
accordance with the recommendations of the
board.
Q: WHAT IS THE VOTING REQUIREMENT TO APPROVE
EACH OF THE PROPOSALS?
A: In the election for Class I directors, the
2 persons receiving the highest number of
"FOR" votes will be elected. All other
proposals require the affirmative "FOR"
vote of a majority of those shares present
and entitled to vote. If you are a
BENEFICIAL OWNER and do not provide the
STOCKHOLDER OF RECORD with voting
instructions, your shares may constitute
BROKER NON-VOTES, as described in "WHAT IS
THE QUORUM REQUIREMENT FOR THE MEETING?"
on page 28. In tabulating the voting
result for any particular proposal, shares
which constitute BROKER NON-VOTES are not
considered entitled to vote.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN
ONE PROXY OR VOTING INSTRUCTION CARD?
A: It means your shares are registered
differently or are in more than one
account. Please provide voting
instructions for all proxy and voting
instruction cards you receive.
Q: HOW CAN I OBTAIN AN ADMISSION TICKET FOR
THE MEETING?
A: Two cut-out admission tickets are included
on the back of this proxy statement. A
limited number of tickets are available
for additional joint owners. To request
additional tickets, please contact the
Agilent Technologies Corporate Secretary
at our corporate headquarters. If you
forget to bring an admission ticket, you
will be admitted to the meeting only if
you are listed as a stockholder of record
as of December 31, 1999 and bring proof of
identification. If you hold your shares
through a stock broker or other nominee
and fail to bring an admission ticket, you
will need to provide proof of ownership by
bringing either a copy of the voting
instruction card provided by your broker
or a copy of a brokerage statement showing
your share ownership as of December 31,
1999.
Q: WHERE CAN I FIND THE VOTING RESULTS OF THE
MEETING?
A: We will announce preliminary voting
results at the meeting and publish final
results in our quarterly report on
Form 10-Q for the second quarter of fiscal
2000.
</TABLE>
ADDITIONAL Q&A INFORMATION REGARDING THE ANNUAL MEETING AND STOCKHOLDER
PROPOSALS MAY BE FOUND ON PAGES 28 THROUGH 29 BELOW.
3
<PAGE>
BOARD STRUCTURE AND COMPENSATION
Our board is divided into three classes serving staggered three-year terms.
Our board has 6 directors and the following 4 committees: (1) Audit,
(2) Compensation, (3) Nominating and (4) Executive. The membership during fiscal
1999 and the function of each committee are described below. During the period
beginning May 1999, the formation of Agilent Technologies, and the end of the
1999 fiscal year, the board held 4 meetings. Each director attended at least 75%
of all board meetings held during the period for which he was a director. There
were no committee meetings.
<TABLE>
<CAPTION>
NAME OF DIRECTOR AUDIT COMPENSATION NOMINATING EXECUTIVE
<S> <C> <C> <C> <C>
NON-EMPLOYEE DIRECTORS:
Gerald Grinstein(1) X X X
Thomas E. Everhart(2) X X X
Walter B. Hewlett(2) X X
David M. Lawrence, M.D.(2) X X X*
Randall L. Tobias(3)
EMPLOYEE DIRECTORS:
Edward W. Barnholt(4) X X
</TABLE>
X = Committee member; * = Chair
(1) Mr. Grinstein has served as a director since August 1999.
(2) Dr. Everhart, Mr. Hewlett and Dr. Lawrence have served as directors since
July 1999.
(3) Mr. Tobias has served as a director since October 1999.
(4) Mr. Barnholt has served as a director since May 1999.
AUDIT COMMITTEE
Our audit committee is responsible for review of our auditing, accounting,
financial reporting and internal control functions and for the selection of
independent accountants. In addition, the committee is expected to monitor the
quality of our accounting principles and financial reporting, our compliance
with foreign trade regulations as well as the independence of and the non-audit
services provided by our independent accountants. In discharging its duties, the
audit committee is expected to:
- review and approve the scope of the annual audit and the independent
accountant's fees;
- meet independently with our internal auditing staff, our independent
accountants and our senior management; and
- review the general scope of our accounting, financial reporting, annual
audit and internal audit program, matters relating to internal control
systems as well as the results of the annual audit.
COMPENSATION COMMITTEE
Our compensation committee determines, approves and reports to the board on all
elements of compensation for our elected officers including total cash
compensation and long-term equity based incentives.
NOMINATING COMMITTEE
Our nominating committee proposes a slate of directors for appointment by our
stockholders at each annual meeting and candidates to fill any vacancies on the
board of directors. It is also responsible for approving management succession
plans and addressing board of directors organizational and governance issues.
EXECUTIVE COMMITTEE
Our executive committee meets or takes written action when the board is not
otherwise meeting and has the level of authority delegated to it from time to
time by the board of directors, except that it cannot amend our bylaws,
recommend any action that requires the approval of the stockholders or to take
any other action not permitted under Delaware law to be delegated to a
committee.
4
<PAGE>
DIRECTOR COMPENSATION ARRANGEMENTS AND STOCK OWNERSHIP GUIDELINES
The following table provides information on Agilent Technologies'
compensation and reimbursement practices during fiscal 1999 for non-employee
directors. Directors who are employed by Agilent Technologies do not receive any
compensation for their board activities.
<TABLE>
<S> <C>
COMPENSATION TABLE
FOR FISCAL 1999
Annual Director Retainer(1) $100,000
Annual Retainer for Board Chairman(1) $400,000
Minimum Percentage of Annual Retainer to be Paid in Agilent
Technologies Stock Options 75%
One Time Initial Payment to be Paid in Agilent Technologies Stock
Options(1) $250,000
One Time Initial Payment to be Paid in Agilent Technologies Stock
Options for Board Chairman(1) $500,000
Additional Retainer for Committee Chair $5,000
Reimbursement for Expenses Attendant to Board Membership Yes
</TABLE>
(1) Agilent Technologies stock options granted as initial payments or as part of
the annual retainers were granted on November 18, 1999, the date of Agilent
Technologies' initial public offering.
In addition, each of Dr. Everhart, Mr. Hewlett and Dr. Lawrence were granted
on November 18, 1999, 1,000 restricted shares of Agilent Technologies' common
stock as compensation for his service on an advisory board during the formation
process of Agilent Technologies.
PROPOSAL NO. 1
ELECTION OF CLASS I DIRECTORS
Our board of directors is divided into three classes serving staggered
three-year terms. Directors for each class are elected at the annual meeting of
stockholders held in the year in which the term for their class expires.
The term for two directors will expire at this 2000 annual meeting.
Directors elected at the 2000 annual meeting will hold office for a three-year
term expiring at the annual meeting in 2003 (or until their respective
successors are elected and qualified, or until their earlier death, resignation
or removal). All of the nominees are currently directors of Agilent
Technologies. They were previously elected by Hewlett-Packard, acting as a sole
stockholder of Agilent Technologies.
5
<PAGE>
Information regarding the business experience of each nominee is provided
below.
NOMINEES FOR A THREE-YEAR TERM THAT WILL EXPIRE IN 2003
<TABLE>
<S> <C>
EDWARD W. BARNHOLT Mr. Barnholt has served as our President and Chief Executive
Age 56 Officer and as a director since May 1999. Before being named our
Chief Executive Officer, Mr. Barnholt served as General Manager
of Hewlett-Packard's Measurement Organization from 1998 to 1999,
which included Hewlett-Packard's Electronic Instruments Group,
the Microwave and Communications Group, the Communications Test
Solutions Group, the Automated Test Group, the Chemical Analysis
Group, the Components Group and the Medical Products Group. From
1990 to 1998, he served as General Manager of Hewlett-Packard's
Test and Measurement Organization. He was elected a Senior Vice
President of Hewlett-Packard in 1993 and an Executive Vice
President in 1996. He is a director of KLA-Tencor Corporation.
GERALD GRINSTEIN Mr. Grinstein has served as Chairman of our board of directors
Age 67 since August 1999. From 1985 to 1995, he held a number of
positions at Burlington Northern, Inc. He was named its Chairman
and Chief Executive Officer in July 1991 and retired from his
position as chairman of Burlington Northern Santa Fe Corporation
(the successor to Burlington Northern, Inc.) in September 1995.
Mr. Grinstein served as Chairman of the Board of Delta Air
Lines, Inc. from August 1997 to October 1999 and has served as a
principal of Madrona Investment Group, L.L.C., a Seattle based
investment company, since October 1996. He is a director of Delta
Air Lines, Inc., PACCAR Inc., Vans, Inc., The Pittston Company,
Expedia.com and Imperial Sugar Corporation.
</TABLE>
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION TO THE BOARD OF
THESE NOMINEES.
Our other directors are not up for election this year and will continue in
office for the remainder of their terms or earlier in accordance with our
bylaws. Information regarding the business experience of each nominee is
provided below.
DIRECTORS WHOSE TERMS WILL EXPIRE IN 2001
<TABLE>
<S> <C>
WALTER B. HEWLETT Mr. Hewlett has served as a director since July 1999.
Age 55 Mr. Hewlett is an independent software developer involved with
computer applications in the humanities. In 1997, Mr. Hewlett was
elected to the Board of Overseers of Harvard University. In 1994,
Mr. Hewlett participated in the formation of Vermont Telephone
Company of Springfield, Vermont and currently serves as its
Chairman. Mr. Hewlett founded the Center for Computer Assisted
Research in the Humanities in 1984, for which he serves as a
director. Mr. Hewlett has been a trustee of The William and Flora
Hewlett Foundation since its founding in 1966 and currently
serves as its Chairman. Mr. Hewlett has served as a director of
Hewlett-Packard since 1987. He is the son of Hewlett-Packard
co-founder William R. Hewlett.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
RANDALL L. TOBIAS Mr. Tobias has served as a director since October 1999. Prior to
Age 57 assuming this position, from 1993 to 1998, Mr. Tobias served as
Chairman of the Board of Directors and Chief Executive Officer of
Eli Lilly and Company and has served as its Chairman Emeritus
since January 1999. Prior to joining Eli Lilly, Mr. Tobias served
as Vice Chairman of the Board of AT&T from 1986 to 1993 and as
Chairman and Chief Executive Officer of AT&T International (an
AT&T subsidiary) from 1991 to 1993. Mr. Tobias is a director of
Kimberly-Clark Corporation, Knight-Ridder, Inc. and Phillips
Petroleum Company.
DIRECTORS WHOSE TERMS WILL EXPIRE IN 2002
THOMAS E. EVERHART Dr. Everhart has served as a director since July 1999. From
Age 67 February to July 1998, Dr. Everhart acted as the Pro-Vice
Chancellor of the University of Cambridge. Since October 1998, he
has served as a trustee of the California Institute of
Technology. Prior to assuming that position, Dr. Everhart served
as President of the California Institute of Technology from
September 1987 until his retirement in October 1997, when he
became President Emeritus. Since December 1997, Dr. Everhart has
acted as the Senior Scientific Advisor to the W. M. Keck
Foundation. He is a director of General Motors Corporation,
Raytheon Company, Hughes Electronics Corporation, Reveo, Inc. and
Saint-Gobain Company. He is also a director of the Corporation
for National Research Initiatives, the Electric Power Research
Institute and a member of the Board of Trustees of the California
Institute of Technology and of the Board of Overseers of Harvard
University.
DAVID M. LAWRENCE, M.D. Dr. Lawrence has served as a director since July 1999. Dr.
Age 57 Lawrence has served as Chairman of the Board since 1992 and Chief
Executive Officer since 1991 of Kaiser Foundation Health
Plan, Inc. and Kaiser Foundation Hospitals. He held a number of
management positions with those organizations prior to assuming
his current positions, including Vice Chairman of the Board and
Chief Operating Officer. Dr. Lawrence is a director of Pacific
Gas and Electric Company and Raffles Medical Group, Inc.
</TABLE>
7
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The board of directors has appointed PricewaterhouseCoopers LLP as Agilent
Technologies' independent accountants to audit its consolidated financial
statements for the 2000 fiscal year. During fiscal 1999, PricewaterhouseCoopers
LLP served as Hewlett-Packard's independent accountants and was appointed as
Agilent Technologies' independent accountants in August 1999.
Although we are not required to seek your approval of this appointment, the
board believes it to be sound corporate practice to do so. If the appointment is
not ratified, the audit committee will investigate the reasons for your
rejection and the board will reconsider the appointment.
Representatives of PricewaterhouseCoopers LLP are expected to attend the meeting
where they will be available to respond to questions and, if they desire, to
make a statement.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS AGILENT TECHNOLOGIES' INDEPENDENT
ACCOUNTANTS FOR THE 2000 FISCAL YEAR.
PROPOSAL NO. 3
APPROVAL OF AGILENT TECHNOLOGIES, INC. PAY-FOR-RESULTS PLAN (VARIABLE PAY)
The compensation committee of the board of directors has adopted the Agilent
Technologies, Inc. Pay-For-Results Plan. At the annual meeting, we are asking
stockholders to approve the Pay-For-Results Plan in order to qualify payments
made to certain Agilent Technologies officers under the Pay-For-Results Plan as
deductible for U.S. federal income tax purposes. The board believes that the
Pay-For-Results Plan benefits stockholders by linking a portion of executive and
management compensation to performance and by qualifying amounts paid pursuant
to the Pay-For-Results Plan for a U.S. federal income tax deduction.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AGILENT
TECHNOLOGIES, INC. PAY-FOR-RESULTS PLAN.
SUMMARY OF THE PAY-FOR-RESULTS PLAN
GENERAL
The Pay-For-Results Plan is designed to directly link the annual cash
compensation for designated Agilent Technologies executives and managers to
business performance. Under the Pay-For-Results Plan, base pay will be targeted
at market median base pay levels. If pre-determined business performance
measures are met and/or exceeded, additional cash bonuses may be awarded. Total
cash compensation (base pay plus cash bonuses) will be targeted at market median
total cash compensation levels if performance goals are met, and at or above
market levels if performance measures are significantly exceeded. The
Pay-For-Results Plan will be administered in six-month performance periods,
which coincide with each half of Agilent Technologies' fiscal year.
ADMINISTRATION
The compensation committee of the board of directors will administer the
Pay-For-Results Plan and has full power to interpret and administer the
Pay-For-Results Plan. The compensation committee may empower a committee or
person or persons to administer the Pay-For-Results Plan with respect to
participants other than "covered employees" as that term is defined in
Section 162(m) of the United States Internal Revenue Code.
PARTICIPATION AND ELIGIBILITY
The compensation committee will designate the plan participants for each
six-month performance period. Persons employed by Agilent Technologies or one of
its affiliates and in active service during
8
<PAGE>
a performance period will be eligible to participate.
The compensation committee will determine Pay-For-Results Plan participation
based on an employee's job position. If a plan participant changes from one
eligible position to another or transfers into a position that is not eligible
for participation under the Pay-For-Results Plan, any bonus will be prorated
based on the plan participant's time in each eligible position and his or her
performance measured against the applicable performance measures. A plan
participant will forfeit any bonus for a performance period during which such
participant is involuntarily terminated by Agilent Technologies for cause or
voluntarily terminates his or her employment with Agilent Technologies for
reasons other than death, permanent and total disability or retirement.
The compensation committee has designated 102 plan participants for the
performance period, which began on November 1, 1999 and will end April 30, 2000.
PLAN OPERATION
As previously described, the Pay-For-Results Plan will be administered in
six-month performance periods which coincide with each half of Agilent
Technologies' fiscal year. The target bonus is an amount that may be paid if
100% of all applicable performance measures are met in the performance period.
The target bonus shall be equal to a fixed percentage of the plan participant's
base salary. The compensation committee shall determine such fixed percentage by
the 45th day of the performance period.
At the beginning of each performance period, the compensation committee will
determine who will participate in the Pay-For-Results Plan and for each plan
participant:
- - the applicable performance measures, which could be based on net order
dollars, net profit growth, net revenue dollars, revenue growth, individual
performance, earnings per share, return on assets, return on equity, other
company-wide and business unit financial objectives, customer satisfaction
indicators and operational efficiency measures;
- - the threshold bonus percentage, the target bonus and the maximum bonus; and
- - the percentages to be allocated for each performance measure.
For each 6-month performance period, a plan participant may earn a bonus of up
to 2 times the target bonus.
Following the end of each performance period, the compensation committee will
determine the actual performance results for each performance measure, the
amount to which each plan participant is entitled based on the percentage
allocated by the compensation committee to each performance measure against the
target bonus for each plan participant, and the bonus to which each plan
participant is entitled. If the relevant performance measures are not achieved,
the plan participant may not receive any bonus or only a portion of the target
bonus. If the relevant performance measures are exceeded, the plan participant
may be eligible for a bonus in excess of the target bonus.
In determining the amount of cash compensation paid pursuant to the
Pay-For-Results Plan, the compensation committee has the discretion to consider
certain extraordinary events, such as a major accounting change, unanticipated
material acquisition, divestiture or investment activity, or unforeseen
flow-through charges, which may affect the evaluated performance results.
With the exception of the Agilent Technologies, Inc. Executive Deferred
Compensation Plan and the Agilent Excess Benefit Retirement Plan, Agilent
Technologies intends that any benefits payable or accruable to plan participants
under Agilent Technologies benefit programs will be based on such plan
participant's base pay rather than on his or her actual total cash compensation.
FEDERAL INCOME TAX CONSIDERATIONS
All amounts paid pursuant to the Pay-For-Results Plan are taxable income to the
employee when paid. Agilent Technologies will be entitled to a federal income
tax deduction for all amounts paid under the Pay-For-Results Plan if it is
approved by stockholders and meets the other requirements of Section 162(m) of
the United States Internal Revenue Code.
AMENDMENT AND TERMINATION OF THE PLAN
The compensation committee may amend, suspend or terminate the Pay-For-Results
Plan at any time and for any reason.
9
<PAGE>
ESTIMATED BONUSES
The following table shows the range of bonuses payable under the Pay-For-Results
Plan during fiscal 2000 to (1) the Agilent Technologies officers named in the
Summary Compensation Table on page 3, (2) all current executive officer
participants and (3) all other employees, including all current officers who are
not executive officers. The maximum bonus represents 2 times the target bonus.
RANGE OF BONUSES FOR FISCAL 2000 UNDER THE PAY-FOR-RESULTS PLAN
<TABLE>
<CAPTION>
DOLLAR VALUE ($)
NAME AND POSITION MINIMUM--MAXIMUM
<S> <C>
Edward W. Barnholt $0--$1,200,000
Chairman, President and
Chief Executive Officer
Byron Anderson $0--$300,000
Senior Vice President
Richard D. Kniss $0--$273,900
Senior Vice President
John E. Scruggs $0--$282,000
Senior Vice President
William P. Sullivan $0--$264,000
Senior Vice President
All current executive $0--$1,336,074
officers as a group(1)
All other employees, as a $0--$6,218,368
group
</TABLE>
(1) Dorothy D. Hayes, Vice President and Controller will not be a participant in
the Pay-For-Results Plan.
Other than Mr. Barnholt, none of Agilent Technologies' current directors are
eligible to participate in the Pay-For-Results Plan.
INCORPORATION BY REFERENCE
The foregoing is only a summary of the Pay-For-Results Plan and is qualified in
its entirety by reference to its full text, a copy of which is attached hereto
as Appendix A.
10
<PAGE>
COMMON STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information, as of December 31, 1999,
concerning:
- beneficial ownership of Agilent Technologies common stock by
Hewlett-Packard, the only beneficial owner of more than 5% of Agilent
Technologies' common stock;
- beneficial ownership of Agilent Technologies common stock by all directors
and executive officers named in the Summary Compensation Table on page 13;
and
- beneficial ownership of Agilent Technologies common stock by all directors
and executive officers as a group.
In addition, to the extent our directors and officers own shares of
Hewlett-Packard common stock at the time of the distribution, they will
participate in the distribution on the same terms as other holders of
Hewlett-Packard common stock. Therefore, the table also sets forth information,
as of December 31, 1999, concerning:
- beneficial ownership of Hewlett-Packard common stock by all directors and
executive officers named in the Summary Compensation Table on page 13; and
- beneficial ownership of Hewlett-Packard common stock by all directors and
executive officers as a group.
The number of shares beneficially owned by each entity, person, director or
executive officer is determined under the rules of the Securities and Exchange
Commission, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership includes
any shares as to which the individual has the sole or shared voting power or
investment power and also any shares which the individual has the right to
acquire as of February 29, 2000, 60 days after the record date of December 31,
1999, through the exercise of any stock option or other right. Unless otherwise
indicated, each person has sole investment and voting power, or shares such
powers with his or her spouse, with respect to the shares set forth in the
following table.
BENEFICIAL OWNERSHIP TABLE
<TABLE>
<CAPTION>
SHARES OF SHARES OF
AGILENT TECHNOLOGIES HEWLETT-PACKARD
BENEFICIALLY OWNED BENEFICIALLY OWNED
------------------------------------------- --------------------------------------------
NAME OF BENEFICIAL OWNER NUMBER NATURE(1) PERCENTAGE NUMBER NATURE(1) PERCENTAGE
- -------------------------------- ---------- ---------------- ------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Hewlett-Packard Company......... 380,000,000 Direct 84.1 % -- -- --
Edward W. Barnholt.............. -- -- -- 122,925 Direct *
226,000 Vested Options
5,292 Indirect(2)
Gerald Grinstein................ -- -- -- 5,500 Direct *
Restricted
Thomas E. Everhart.............. 1,000 Shares * 4,076 Direct *
5,604 Vested Options
Restricted
Walter B. Hewlett............... 1,000 Shares * 100,000 Direct *
3,924 Vested Options
17,210 Indirect(3)
Restricted
David M. Lawrence, M.D.......... 1,000 Shares * 1,452 Direct *
4,560 Vested Options
Randall L. Tobias............... 2,000 Direct * 1,000 Direct(4) *
Byron Anderson.................. -- -- -- 23,879 Direct *
12,500 Vested Options
1,242 Indirect(5)
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
SHARES OF SHARES OF
AGILENT TECHNOLOGIES HEWLETT-PACKARD
BENEFICIALLY OWNED BENEFICIALLY OWNED
------------------------------------------- --------------------------------------------
NAME OF BENEFICIAL OWNER NUMBER NATURE(1) PERCENTAGE NUMBER NATURE(1) PERCENTAGE
- -------------------------------- ---------- ---------------- ------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Kniss................ -- -- -- 16,391 Direct *
24,200 Vested Options
John E. Scruggs................. -- -- -- 17,526 Direct *
31,000 Vested Options
William P. Sullivan............. -- -- -- 974 Direct *
7,800 Vested Options
All directors and executive
officers as a group........... 6,500 * 860,667 *
</TABLE>
- ------------------------------
* Represents holdings of less than one percent.
(1) "Vested Options" are options which may be exercised as of February 29, 2000.
"Restricted Shares" are subject to a vesting schedule, forfeiture risk and
other restrictions.
(2) Includes 5,292 shares held by Mr. Barnholt as a custodian for his children.
(3) Includes 15,930 shares of Hewlett-Packard common stock held by Mr. Hewlett
for the benefit of his children and 1,280 shares of Hewlett-Packard common
stock held by his spouse. Excludes 60,042,696 shares of Hewlett-Packard
common stock held by the William R. Hewlett Revocable Trust, of which
Mr. Hewlett is a co-trustee, and 2,143,500 shares of Hewlett-Packard common
stock held by the William and Flora Hewlett Foundation, of which
Mr. Hewlett is a director. Mr. Hewlett shares voting and investment power
over the shares held by the William R. Hewlett Revocable Trust and the
William and Flora Hewlett Foundation. Mr. Hewlett disclaims any beneficial
interest in the excluded shares because he has no economic interest in any
of these shares.
(4) Excludes 1,000 shares of Hewlett-Packard common stock held by the Mariane W.
Tobias Revocable Trust, a trust in the name of Mr. Tobias' spouse, 400
shares of Hewlett-Packard common stock held by the JK Foundation, a family
foundation of which Mr. Tobias' spouse is chairman and director, 400 shares
of Hewlett-Packard common stock held by the Trust for the Benefit of James
R. Ullyot, a trust in which Mr. Tobias' spouse has voting and investment
power, and 350 shares of Hewlett-Packard common stock held by the Mariane W.
Tobias Individual Retirement Account. Mr. Tobias disclaims any beneficial
interest in the excluded shares because he has no voting or investment power
in any of these shares.
(5) Includes 621 shares held for the benefit of his daughter and 621 shares held
in trust for his son, for which trust he is trustee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors,
executive officers and holders of more than 10% of our common stock to file with
the Securities and Exchange Commission reports regarding their ownership and
changes in ownership of our stock. Agilent Technologies believes that during
fiscal 1999, its officers, directors and 10% stockholders complied with all
Section 16(a) filing requirements. In making this statement, Agilent
Technologies has relied upon the written representations of its directors and
officers.
12
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain compensation information for the
chief executive officer and the four other executive officers of Agilent
Technologies who, based on the salary and bonus compensation information from
Hewlett-Packard and its subsidiaries, were the most highly compensated for the
year ended October 31, 1999. All information set forth in this table reflects
compensation earned by these individuals for services with Hewlett-Packard and
its subsidiaries for the fiscal year ended October 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------
AWARDS PAYOUTS
----------------------- ---------------
ANNUAL COMPENSATION RESTRICTED LONG TERM
---------------------- STOCK SECURITIES INCENTIVE ALL OTHER
BONUS AWARD(S) UNDERLYING PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($)(1) ($)(2) OPTIONS (#) ($) ($)(4)
- -------------------------------------- --------- ---------- ---------- ---------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Edward W. Barnholt ................... 1999 $ 920,635 $ 474,684 $ 409,141 70,000 $ 0(3) $ 313,892
President and Chief Executive
Officer
Byron Anderson ....................... 1999 425,000 135,690 22,932 20,000 0 109,474
Senior Vice President, Electronic
Products and Solutions
Richard D. Kniss ..................... 1999 388,025 162,436 19,397 20,000 0 97,775
Senior Vice President, Chemical
Analysis
John E. Scruggs ...................... 1999 415,167 193,350 21,166 22,000 0 80,110
Senior Vice President, Automated
Test
William P. Sullivan .................. 1999 408,438 174,331 177,570 15,000 0 30,678
Senior Vice President, Semiconductor
Products
</TABLE>
FOOTNOTES TO SUMMARY COMPENSATION TABLE
(1) The amounts shown in this column reflect payments under Hewlett-Packard's
1999 Variable Pay Plan and Hewlett-Packard's cash profit-sharing plan.
Hewlett-Packard's 1999 Variable Pay Plan is available to designated key
employees of Hewlett-Packard. The cash profit-sharing plan is available to
all employees of Hewlett-Packard.
Under the cash profit-sharing plan, a portion of Hewlett-Packard's earnings
generated during each half of Hewlett-Packard's fiscal year is paid to
employees. The amount paid is based upon the performance of Hewlett-Packard
as measured by return on assets and revenue growth.
Hewlett-Packard's 1999 Variable Pay Plan permitted Hewlett-Packard to
designate a portion of the annual cash compensation planned for certain key
employees as variable pay. The Hewlett-Packard compensation committee
established the performance metrics under the 1999 Variable Pay Plan for
fiscal 1999. These metrics varied with respect to the individual
participants based on their position within Hewlett-Packard. The executive
officers named in the Summary Compensation Table were paid the following
amounts under the 1999 Variable Pay Plan for fiscal 1999: Mr. Barnholt,
$406,278;
13
<PAGE>
Mr. Anderson, $108,290; Mr. Kniss, $137,420; Mr. Scruggs, $167,594; and
Mr. Sullivan, $152,411. The amounts attributable to the Variable Pay Plan
for fiscal 1999 are included in the table above under "Bonus."
(2) The amounts disclosed in this column reflect, for fiscal 1999, the dollar
values of Hewlett-Packard's common stock which Hewlett-Packard contributed
under its Employee Stock Purchase Plan, as a match for every two shares
purchased by the named executive officer and, for Mr. Barnholt,
performance-based restricted shares of Hewlett-Packard's common stock which
Hewlett-Packard granted.
The Employee Stock Purchase Plan is a broad-based plan which is available to
all employees of Hewlett-Packard. The matching shares vest two years after
the date of Hewlett-Packard's contributions, which occur on a rolling fiscal
quarter basis, and are subject to forfeiture during the two-year period in
the event of termination or certain other events. The named executive
officers receive non-preferential dividends on these restricted shares. In
fiscal 1999, Hewlett-Packard, under its Employee Stock Purchase Plan,
granted 667 shares of restricted stock to Mr. Barnholt worth $54,001; 295
shares of restricted stock to Mr. Anderson worth $22,932; 249 shares of
restricted stock to Mr. Kniss worth $19,397; and 272 shares of restricted
stock to Mr. Scruggs worth $21,166. Mr. Sullivan did not participate in the
Hewlett-Packard Employee Stock Purchase Plan during fiscal 1999.
In fiscal 1999, Hewlett-Packard granted 6,000 shares of performance-based
restricted stock to Mr. Barnholt valued at $355,140 based upon the grant
date closing price of $59.19 per share. The performance-based restricted
stock will vest only to the extent that Hewlett-Packard achieves stated
performance goals with respect to earnings per share and return on assets
over a three-year period ending October 31, 2001.
In fiscal 1999, Hewlett-Packard granted 3,000 shares of restricted stock
valued at $177,570 to Mr. Sullivan. The restricted stock granted to
Mr. Sullivan is not subject to performance-based goals with respect to
earnings per share and return on assets.
At October 31, 1999 each of the executive officers named in the Summary
Compensation Table held the following number of shares of restricted stock
with a value based on the October 29, 1999 closing price of $74.19 per
share: Mr. Barnholt held 41,000 shares of restricted stock valued at
$3,041,790, Mr. Anderson held 25,000 shares of restricted stock valued at
$1,854,750, Mr. Kniss held 10,000 shares of restricted stock valued at
$741,900, Mr. Scruggs held 16,300 shares of restricted stock valued at
$1,209,297, and Mr. Sullivan held 8,300 shares of restricted stock valued at
$615,777.
(3) In November 1999, the Hewlett-Packard compensation committee reviewed the
results for the three-year performance period ended October 31, 1999 and
determined that the performance objectives associated with performance-based
restricted stock granted in fiscal year 1997 had been met at target.
Therefore, no adjustments to the stock grants were made and the amount in
the Long Term Incentive Payouts column is correspondingly $0.
(4) The amounts disclosed in this column include payment by Hewlett-Packard of
$85 in fiscal 1999 for term life insurance on behalf of each of the
executive officers named in the Summary Compensation Table and
Hewlett-Packard's contributions under its Tax Saving Capital Accumulation
Plan in fiscal 1999 of $6,400 on behalf of each of Mr. Barnholt, Anderson,
Kniss and Scruggs and of $3,714 on behalf of Mr. Sullivan. In addition, the
amounts disclosed in this column include the following one-time payments for
accrued sick leave: $307,407 to Mr. Barnholt, $102,989 to Mr. Anderson,
$91,290 to Mr. Kniss, $73,625 to Mr. Scruggs and $26,879 to Mr. Sullivan.
14
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows all grants of options to acquire shares of
Hewlett-Packard common stock granted to the executive officers named in the
Summary Compensation Table on page 13 for the fiscal year ended October 31,
1999.
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING HEWLETT-PACKARD EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE PRESENT VALUE
NAME YEAR GRANTED(#)(1) FISCAL YEAR ($/SH.)(2) EXPIRATION DATE ($)(3)
- ------------------------------------- --------- ------------- ------------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward W. Barnholt................... 1999 70,000 0.4% 59.19 Nov. 2008 1,488,200
Byron Anderson....................... 1999 20,000 0.1 59.19 Nov. 2008 425,200
Richard D. Kniss..................... 1999 20,000 0.1 59.19 Nov. 2008 425,200
John E. Scruggs...................... 1999 22,000 0.1 59.19 Nov. 2008 467,720
William P. Sullivan.................. 1999 15,000 0.1 59.19 Nov. 2008 318,900
</TABLE>
- ------------------------
(1) The options granted are exercisable 25% after the first year, 50% after the
second year, 75% after the third year, and 100% after the fourth year.
(2) The exercise price may be paid by delivery of already-owned shares and tax
withholding obligations related to exercise may be paid by offset of the
underlying shares, subject to certain conditions.
(3) Hewlett-Packard used a modified Black-Scholes model of option valuation to
determine grant date present value. Hewlett-Packard does not advocate or
necessarily agree that the Black-Scholes model can properly determine the
value of an option. Calculations for the named officers are based on a
seven-year option term, which reflects Hewlett-Packard's experience that its
options, on average, are exercised within seven years of grant. Other
assumptions used for the valuations for fiscal 1999 are: an annual interest
rate of 5.53%; an annual dividend yield of 1.0% and volatility of 30%. The
resulting values are reduced by 8% to reflect Hewlett-Packard's experience
with forfeitures.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table shows aggregate exercises of options to purchase
Hewlett-Packard common stock in the fiscal year ended October 31, 1999, by the
executive officers named in the Summary Compensation Table on page 13.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT FISCAL THE-MONEY OPTIONS AT
SHARES VALUE YEAR-END (#) FISCAL YEAR-END ($)(1)
ACQUIRED ON REALIZED -------------------------- -------------------------
NAME YEAR EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- --------- ----------- ---------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Edward W. Barnholt........... 1999 82,288 6,757,816 178,500 137,500 7,993,245 2,111,675
Byron Anderson............... 1999 36,400 2,963,674 14,000 38,000 304,165 587,755
Richard Kniss................ 1999 9,200 631,304 12,900 32,300 309,259 518,593
John E. Scruggs.............. 1999 16,000 1,352,848 16,625 40,875 380,054 642,431
William P. Sullivan.......... 1999 7,650 219,865 0 28,600 0 631,694
</TABLE>
- ------------------------
(1) The value of unexercised options is based upon the difference between the
exercise price and the average of the high and low market prices on
October 29, 1999 of $73.88.
15
<PAGE>
PENSION PLANS
The following table shows the estimated annual benefits payable upon
retirement to Hewlett-Packard eligible employees in the United States under
Hewlett-Packard's Deferred Profit-Sharing Plan or the Deferred Plan,
Hewlett-Packard's Retirement Plan, or the Retirement Plan, and Hewlett-Packard's
Excess Benefit Retirement Plan or the Excess Benefit Plan. To calculate the
number of years of an eligible employee's service, the pension plans will bridge
each eligible employee's service with Hewlett-Packard to that eligible
employee's service with Agilent Technologies.
ESTIMATED ANNUAL RETIREMENT BENEFITS(1)(2)
<TABLE>
<CAPTION>
HIGHEST
FIVE-YEAR
AVERAGE 15 YEARS 20 YEARS 25 YEARS 30 YEARS
COMPENSATION OF SERVICE OF SERVICE OF SERVICE OF SERVICE
- ---------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
$ 400,000 $ 87,207 $ 116,276 $ 145,345 $ 174,414
600,000 132,207 176,276 220,345 264,414
800,000 177,207 236,276 295,345 354,414
1,000,000 222,207 296,276 370,345 444,414
1,200,000 267,207 356,276 445,345 534,414
1,400,000 312,207 416,276 520,345 624,414
1,600,000 357,207 476,276 595,345 714,414
1,800,000 402,207 536,276 670,345 804,414
2,000,000 447,207 596,276 745,345 894,414
2,200,000 492,207 656,276 820,345 984,414
2,400,000 537,207 716,276 895,345 1,074,414
</TABLE>
- ------------------------
(1) Amounts exceeding $130,000 would be paid pursuant to the Excess Benefit
Plan.
(2) No more than $160,000 (as adjusted from time to time by the IRS) of eligible
compensation may be taken into account in calculating benefits payable under
the Retirement Plan.
The compensation covered by the pension plans whose benefits are summarized
in the table above equals base pay. The covered compensation for each of the
executive officers named in the Summary Compensation Table is the highest
five-year average for such executive officer. The compensation covered by the
pension plans for the executive officers named in the Summary Compensation Table
shall be the "total targeted cash compensation" as defined under
Hewlett-Packard's 1999 Variable Pay Plan.
Agilent Technologies' new defined benefit plans will be comparable to the
corresponding Hewlett-Packard plans, and Agilent Technologies employees will
receive credit under those plans for their years of service with
Hewlett-Packard. Officers named in the Summary Compensation Table have been
credited with the following years of service: Mr. Barnholt, 30 years,
Mr. Anderson, 29 years, Mr. Kniss, 30 years, Mr. Scruggs, 26.8 years and
Mr. Sullivan, 22.8 years. Retirement benefits shown are payable at age 65 in the
form of a qualified joint and survivor annuity or single life annuity, as
applicable to the employee and reflect the maximum offset allowance currently in
effect under Section 401(1) of the Internal Revenue Code of 1986, as amended, to
compute the offset for such benefits under the pension plans. For purposes of
calculating the benefit, an employee cannot be credited with more than 30 years
of service.
16
<PAGE>
ARRANGEMENTS BETWEEN AGILENT TECHNOLOGIES AND HEWLETT-PACKARD
WE HAVE PROVIDED BELOW A SUMMARY DESCRIPTION OF THE MASTER SEPARATION AND
DISTRIBUTION AGREEMENT, EFFECTIVE AS OF AUGUST 12, 1999, OR THE SEPARATION
AGREEMENT, AND THE KEY RELATED AGREEMENTS. THIS DESCRIPTION IS MERELY A SUMMARY
OF THE MATERIAL TERMS OF SUCH AGREEMENTS AND ACCORDINGLY, IS NOT COMPLETE. IF
YOU WISH TO READ THE FULL TEXT OF THESE AGREEMENTS, THEY HAVE BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION AS EXHIBITS TO AGILENT TECHNOLOGIES'
REGISTRATION STATEMENT ON FORM S-1 AND MAY BE FOUND ON THE SECURITIES AND
EXCHANGE COMMISSION'S WEB SITE LOCATED AT WWW.SEC.GOV.
MASTER SEPARATION AND DISTRIBUTION AGREEMENT
The master separation and distribution agreement contains the key provisions
relating to the separation, the initial public offering and the distribution.
THE SEPARATION. The separation was completed in November 1999. The general
assignment and assumption agreement governed the terms of the transfer to us of
assets and liabilities from Hewlett-Packard. Hewlett-Packard transferred to us
ownership of specified subsidiaries. Hewlett-Packard also delivered additional
agreements governing various interim and ongoing relationships between
Hewlett-Packard and us following the separation date. The ancillary agreements
include:
- a general assignment and assumption agreement;
- master technology, patent, and trademark ownership agreements;
- an employee matters agreement;
- a tax sharing agreement;
- a master information technology service level agreement;
- a real estate matters agreement;
- an environmental matters agreement;
- a master confidential disclosure agreement; and
- an indemnification and insurance matters agreement.
To the extent that the terms of any of these ancillary agreements conflict with
the separation agreement, the terms of these agreements govern. These agreements
are described more fully below.
CASH TO BE TRANSFERRED TO AGILENT TECHNOLOGIES. Hewlett-Packard has provided us
sufficient cash to satisfy the following obligations or requirements (as
adjusted with mutual agreement):
- the obligations of Hewlett-Packard, which will be assumed by Agilent
Technologies, and the obligations of our Japanese subsidiary under
Hewlett-Packard's agreement with Yokogawa to buy out Yokogawa's interest
in this subsidiary;
- taxes specified in the tax sharing agreement incurred in connection with
Hewlett-Packard's restructuring of its operations in Japan;
- working capital and acquisition requirements of $250 million; and
- an amount, as of October 31, 1999, equal to:
(A) the difference between specified assets and liabilities related to our
business that will be retained by Hewlett-Packard, plus or minus
(B) specified assets, net of specified liabilities, retained by our Japanese
subsidiary related to Hewlett-Packard's business.
Hewlett-Packard and its subsidiaries made interim cash payments to us in
November 1999 amounting to $1.08 billion. On December 15, 1999, Hewlett-Packard
and we recalculated these cash payments based on our October 31, 1999 balance
sheet as $1.26 billion. As a result of such recalculations, Hewlett-Packard paid
an additional $0.18 billion. Additional cash will be held by some of our
subsidiaries on the separation date.
THE INITIAL PUBLIC OFFERING. Under the terms of the separation agreement we
offered approximately 15.9% of our outstanding common stock in our initial
public offering on November 18, 1999.
17
<PAGE>
The net proceeds from such offering was approximately $2.1 billion and was paid
to Hewlett-Packard as a dividend.
THE DISTRIBUTION. By the middle of calendar year 2000, Hewlett-Packard intends
to distribute the remaining shares of our common stock Hewlett-Packard holds to
Hewlett-Packard stockholders on a pro rata basis. We will prepare an information
statement with Hewlett-Packard and send it to Hewlett-Packard stockholders
before the distribution becomes effective. The information statement will inform
the stockholders of the distribution and its specifics. Hewlett-Packard may, in
its sole discretion, change the distribution date. Hewlett-Packard intends to
consummate the distribution only if the following conditions are met (any of
which may be waived by Hewlett-Packard):
- the Internal Revenue Service must issue a favorable tax ruling on the
tax-free status of the transaction and the transaction qualifies as a
tax-free reorganization under Sections 368(a)(1)(D) and 355 of the
Internal Revenue Code of 1986;
- all required government approvals must be in effect;
- no legal restraints must exist preventing this distribution; and
- nothing must have happened in the intervening time between the initial
public offering and the distribution that makes the distribution harmful
to Hewlett-Packard or its stockholders.
COVENANTS BETWEEN HEWLETT-PACKARD AND AGILENT TECHNOLOGIES. In addition to
signing documents that transfer control and ownership of various assets and
liabilities of Hewlett-Packard relating to our business, we have agreed with
Hewlett-Packard to enter into additional service level agreements, exchange
information, engage in certain auditing practices and resolve disputes in
particular ways.
ADDITIONAL SERVICE LEVEL AGREEMENTS. Hewlett-Packard has entered into interim
service level agreements covering the provision of various interim services,
including financial, accounting, building services, legal and other services by
Hewlett-Packard to us or, in certain circumstances, vice versa. These services
will generally be provided for a fee equal to the actual direct and indirect
costs of providing the services plus 5%. The interim service level agreements
generally have a term of two years or less from the date of separation. However,
some interim service level agreements, including those for building services and
information technology services, may be extended beyond the initial two-year
period. If these agreements are extended, their terms will change so that the
lessor will receive fair market rental value for the rental component of the
building services and the costs plus 10% for information technology and other
services and non-rental components of building services.
INFORMATION EXCHANGE. Both Hewlett-Packard and we have agreed to share
information with each other, at no cost to the requesting party, for the
following purposes, unless the sharing would be commercially detrimental:
- Each party has agreed to maintain adequate internal accounting to allow
the other party to satisfy its own reporting obligations and prepare its
own financial statements.
- Each party will retain records that may be beneficial to the other party
for a specified period of time. If the records are going to be destroyed,
the destroying party will give the other party an opportunity to retrieve
all relevant information from the records.
- Each party will do its best to provide the other party with personnel,
directors, officers or agents who may be used as witnesses in legal
proceedings.
AUDITING PRACTICES. So long as Hewlett-Packard is required to consolidate our
results of operations and financial position, we have agreed to:
- not change independent accounting firms without Hewlett-Packard's consent;
- use reasonable commercial efforts to cause our auditors to date their
opinion on our audited annual financial statements on the same date as
Hewlett-Packard's auditors' date their opinion on Hewlett-Packard's
financial statements;
18
<PAGE>
- provide Hewlett-Packard all relevant information to enable Hewlett-Packard
to prepare their financial statements (and Hewlett-Packard has agreed to
provide us all relevant information to enable us to prepare our financial
statements);
- grant each other's internal auditors access to our records; and
- notify each other of any change in our accounting principles.
DISPUTE RESOLUTION. If problems arise between us and Hewlett-Packard, we have
agreed to the following procedures:
- The parties will make a good faith effort to first resolve the dispute
through negotiation.
- If negotiations fail, the parties agree to attempt to resolve the dispute
through non-binding mediation.
- If mediation fails, the parties can resort to litigation. In addition,
nothing prevents either party acting in good faith from initiating
litigation at any time if failure to do so would substantially
disadvantage the party.
NO REPRESENTATIONS AND WARRANTIES. Neither party is making any promises to the
other regarding:
- the value of any asset that Hewlett-Packard is transferring;
- whether there is a lien or encumbrance on the asset Hewlett-Packard is
transferring; or
- the legal sufficiency of any conveyance of title to any asset
Hewlett-Packard is transferring.
NO SOLICITATION. Both parties have agreed not to directly recruit employees of
the other party for two years after the distribution date if the recruiting
would be damaging to the other party. However, general advertising and
employee-initiated solicitations are permissible.
EXPENSES. Hewlett-Packard will pay all of our costs and expenses related to the
initial public offering and the distribution and a portion of our costs and
expenses related to the separation.
TERMINATION OF THE AGREEMENT. Both Hewlett-Packard and Agilent Technologies
must agree to terminate the separation agreement and all ancillary agreements.
GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT
The general assignment and assumption agreement identifies the assets
Hewlett-Packard transferred to us and the liabilities we assumed from
Hewlett-Packard in the separation. The agreement also describes when and how
these transfers and assumptions will occur.
ASSET TRANSFER. Effective on the separation date, Hewlett-Packard transferred
the following assets to us, except as provided in an ancillary agreement or
other agreement:
- all assets reflected on our balance sheet as of July 31, 1999, minus any
assets disposed of after July 31, 1999;
- all written off, expensed or fully depreciated assets that would have
appeared on our balance sheet as of July 31, 1999 if we had not written
off, expensed or fully depreciated them;
- all assets that Hewlett-Packard acquired after July 31, 1999 that would
have appeared in our financial statements as of the separation date if we
prepared such financial statements using the same principles we used in
preparing our balance sheet dated July 31, 1999;
- all assets that our business primarily uses as of the separation date but
are not reflected in our balance sheet as of July 31, 1999 due to mistake
or omission;
- all contingent gains related primarily to our business;
- all supply, vendor, capital, equipment lease or other contracts that
relate primarily to our business, including contracts representing
obligations reflected on our balance sheet as of July 31, 1999;
19
<PAGE>
- all outstanding stock, investments or similar interests of specified
Hewlett-Packard subsidiaries;
- all computers, desks, equipment and other assets used primarily by
employees of Hewlett-Packard who will become our employees due to the
separation;
- specified rights under existing insurance policies; and
- other specified assets.
EXCLUDED ASSETS. The general assignment and assumption agreement also provides
that Hewlett-Packard will not transfer certain assets to us, including most
accounts receivable.
ASSUMPTION OF LIABILITIES. Effective on the separation date, we assumed the
following liabilities from Hewlett-Packard, except as provided in an ancillary
agreement or other agreement:
- all liabilities reflected as liabilities on our balance sheet as of
July 31, 1999, minus any liabilities that were discharged after such date
of the balance sheet;
- all liabilities of Hewlett-Packard that arise after July 31, 1999, that
would have appeared in our financial statements as of the separation date
if we prepared such financial statements using the same principles we used
in preparing our balance sheet of Agilent Technologies as of July 31,
1999;
- all liabilities that are primarily related to or primarily arise out of
our business at the separation date but are not reflected in our balance
sheet as of July 31, 1999 due to mistake or omission;
- all contingent liabilities primarily related to our business;
- all liabilities (other than taxes) primarily resulting from the operation
of our business, or resulting from any asset that Hewlett-Packard
transferred to us;
- all liabilities arising out of specified terminated, divested or
discontinued businesses and operations; and
- other specified liabilities.
EXCLUDED LIABILITIES. The general assignment and assumption agreement provides
that we will not assume specified liabilities, including:
- most accounts payable;
- any liabilities that would otherwise be allocated to us but which are
covered by Hewlett-Packard's insurance policies, unless we are a named
insured under such policies; and
- specified third party environmental actions.
THE NON-UNITED STATES PLAN. The transfer of international assets and assumption
of international liabilities was governed by agreements entered into between
international subsidiaries and was completed in November 1999. According to the
general assignment and assumption agreement, Hewlett-Packard transferred its
ownership of all outstanding capital stock of the holding company that owns all
of the subsidiaries holding the international assets and liabilities related to
our business.
DELAYED TRANSFERS. If it is not practicable to transfer specified assets and
liabilities on the separation date, the agreement provides that these assets and
liabilities will be transferred after the separation date.
TERMS OF OTHER ANCILLARY AGREEMENTS GOVERN. To the extent that another
ancillary agreement expressly provides for the transfer of an asset or an
assumption of a liability, the terms of such other ancillary agreement will
determine the manner of the transfer and assumption.
OBTAINING APPROVALS AND CONSENTS. The parties agree to use all reasonable
efforts to obtain any required consents, substitutions or amendments required to
novate or assign all rights and obligations under any contracts that will be
transferred in the separation.
NONRECURRING COSTS AND EXPENSES. Any nonrecurring costs and expenses that are
not allocated in the separation agreement or any other ancillary agreement shall
be the responsibility of the party that incurs the costs and expenses.
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
GENERAL RELEASE OF PRE-SEPARATION CLAIMS. Effective as of the separation date,
we have released
20
<PAGE>
Hewlett-Packard and its affiliates, agents, successors and assigns, and
Hewlett-Packard has released us, and our affiliates, agents, successors and
assigns, from any liabilities arising from events occurring on or before the
separation date, including events occurring in connection with the activities to
implement the separation, the initial public offering and the distribution. This
provision will not impair a party from enforcing the separation agreement, any
ancillary agreement or any arrangement specified in any of these agreements.
INDEMNIFICATION. The indemnification and insurance matters agreement also
contains provisions governing indemnification. In general, we have agreed to
indemnify Hewlett-Packard and its affiliates, agents, successors and assigns
from all liabilities arising from:
- our business, any of our liabilities or any of our contracts; and
- any breach by us of the separation agreement or any ancillary agreement.
Hewlett-Packard has agreed to indemnify us and our affiliates, agents,
successors and assigns from all liabilities arising from:
- Hewlett-Packard's business other than the businesses transferred to us
pursuant to the separation; and
- any breach by Hewlett-Packard of the separation agreement or any ancillary
agreement.
The indemnifying party will make all indemnification payments net of insurance
proceeds that the indemnified party receives. The agreement also contains
provisions governing notice and indemnification procedures.
LIABILITY ARISING FROM THE INITIAL PUBLIC OFFERING PROSPECTUS. We and
Hewlett-Packard have agreed to share any liability arising from any untrue
statement of a material fact or any omission of a material fact in the initial
public offering prospectus. Hewlett-Packard will bear 82% of any such liability,
and we will bear 18% of any such liability.
AGILENT TECHNOLOGIES CONTINGENT LIABILITIES IN EXCESS OF $50 MILLION. To the
extent we incur any contingent liability or group of related contingent
liabilities with a value of more than $50 million, after deducting related
insurance proceeds and amounts recovered from third parties, Hewlett-Packard has
agreed to share the liability relating to this excess portion. Hewlett-Packard
will bear 82% of any such liability, and we will bear 18% of any such liability.
This provision only applies to Agilent Technologies contingent liabilities
arising from written demands made or suits or similar proceedings filed within
four years following the separation date that seek or demand monetary damages,
services or non-monetary relief. An Agilent Technologies contingent liability is
a liability that primarily relates to our business that arises out of events,
acts or omissions occurring prior to the separation date, where the existence or
scope of the obligation of Hewlett-Packard or Agilent Technologies as of the
separation date with respect to such liability was not acknowledged, fixed or
determined in any material respect. We may not assign our rights under this
provision, and this provision terminates upon a change of control of Agilent
Technologies (other than as a result of the distribution).
INSURANCE MATTERS. The agreement also contains provisions governing our
insurance coverage from the separation date until the distribution date. In
general, we agree to reimburse Hewlett-Packard for premium expenses related to
insurance coverage during this period. Prior to the distribution,
Hewlett-Packard will maintain insurance policies on our behalf that are
generally comparable to those maintained at Hewlett-Packard.
ENVIRONMENTAL MATTERS. Under the general assignment and assumption agreement,
we have generally assumed environmental liabilities associated with the historic
operations of the businesses transferred to us. This would include, for example,
liabilities associated with non-compliance with environmental laws prior to
separation. However, under the indemnification and insurance matters agreement
and general assignment and assumption agreement, there are exceptions to our
assumption of liabilities for environmental contamination associated with the
historic operations of those businesses. They include the following:
- Hewlett-Packard will generally retain and indemnify us for all liabilities
for environmental contamination, whether or not arising out of the
businesses transferred to us,
21
<PAGE>
on any property (including third party disposal sites) other than the
properties that are to be transferred to us upon separation.
- Hewlett-Packard will also retain and indemnify us for liabilities
associated with any contamination existing prior to the separation date on
those properties to be transferred to us which are currently undergoing
investigation and remediation by Hewlett-Packard and for which Hewlett-
Packard has accrued a reserve.
We will indemnify Hewlett-Packard for liabilities associated with environmental
contamination at those sites that are to be transferred to us (other than
specifically listed properties which are undergoing investigation and
remediation by Hewlett-Packard) regardless of whether the contamination was
caused by historic operations of the business transferred to us or a business
retained by Hewlett-Packard. We will have limited access to Hewlett-Packard's
historic insurance policies for coverage of liabilities associated with
pre-separation contamination assumed by us. Each party will be responsible for
all liabilities associated with any environmental contamination caused by that
party post-separation.
CERTAIN LOSSES AND LIABILITIES NOT COVERED BY HEWLETT-PACKARD'S INSURANCE
POLICIES. Hewlett-Packard has agreed to reimburse us for any losses or
liabilities aggregating in excess of $20 million, exclusive of amounts covered
by insurance policies, that we incur between the separation date and the
distribution date of the following nature:
- specified categories of losses resulting from an earthquake;
- property losses of a type that is covered by Hewlett-Packard's insurance
policies or that is covered by standard form insurance policies; or
- events, acts or omissions occur that give rise to one or more third party
claims that result in a liability to Agilent Technologies of a type that
is covered by Hewlett-Packard's insurance policies or that is covered by
standard form insurance policies, but only to the extent that suits or
similar proceedings are filed or written demands are made in connection
with such claims within four years following the distribution date that
seek or demand monetary damages, services or non-monetary relief.
- releases occur that give rise to one or more environmental actions that
result in a liability to Agilent Technologies, but only to the extent that
suits or similar proceedings are filed, orders or decrees are issued,
written notice that the environmental action will be commenced is received
by us or Hewlett-Packard, or written demands are made in connection with
the environmental action within four years following the distribution date
that seek or demand monetary damages, services or non-monetary relief.
ASSIGNMENT. The indemnification and insurance matters agreement is not
assignable by either party without prior written consent.
MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT
The master patent ownership and license agreement, or the master patent
agreement, allocates rights relating to patents, patent applications and
invention disclosures. Under the master patent agreement, Hewlett-Packard will
assign to us ownership of listed patents, patent applications and invention
disclosures and joint ownership of a small number of listed patents and patent
applications. Hewlett-Packard will not restrict our right to practice the
assigned patents, and neither party will restrict the other's right to practice
the joint patents except for a small number of joint patents that will be
subject to field-of-use limitations.
In addition, each party will grant the other a non-exclusive, royalty-free
patent cross-license to make, have made, use, lease, sell, offer for sale, and
import any and all products and services of the businesses in which the licensed
company and its subsidiaries, including specified affiliated companies are, as
of or after the separation date, engaged, except in specific excluded
fields-of-use. The fields that are excluded from the license granted by us to
Hewlett-Packard are, with some exceptions, products for the measurement or
analysis of biological, genetic or chemical materials and health care products.
The fields that are excluded from the license granted by Hewlett-Packard to us
are, with some exceptions, inkjet products, printer products (including printer
supplies, accessories and components), document scanners and computing products.
The cross-
22
<PAGE>
licenses between Hewlett-Packard and us will cover all of each company's patents
issued on patent applications with first effective filing dates before the
separation date or within five years after, and will include rights to
sublicense to subsidiaries and specified affiliated companies as well as certain
rights to sublicense a small number of patents to third parties. The licenses
continue for the life of the patent.
The master patent agreement also will provide that Hewlett-Packard and we will
assist each other in specified ways for a period of five years after the
separation date in the event either party is subject to patent litigation.
Under the master patent agreement, Hewlett-Packard and we will have the right to
require, subject to some restrictions, that the other party license its patents,
subject to the same field-of-use restrictions, to (A) a subsidiary or one of the
specified affiliated companies valued at $10 million or more that has been
spun-off or sold and (B) a third party that acquires a business from it valued
at $10 million or more. These licenses will be limited to the products, services
and processes that are in the subsidiary, affiliated company or business at the
time of transfer and minor extensions to those products, services and processes
and will be limited to patents issued on patent applications with first
effective filing dates on or before the effective date of the spin-off or
acquisition. As a condition of these licenses, the transferee of the subsidiary,
affiliated company or business must grant a patent license back to the
non-transferring party.
In the event of an acquisition of all or substantially all of the assets of
either party, the party whose assets are acquired may assign the master patent
agreement to the person who acquires the assets. In that event, the license
granted to the acquired party will be limited to the products, services and
processes of the acquired party as of the date of the acquisition and minor
extensions to those products, services and processes. The license granted to the
acquired party will not include patents issued on patent applications with first
effective filing dates after the date of acquisition.
MASTER TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT
The master technology ownership and license agreement, or the master technology
agreement, allocates rights in technology other than the integrated circuit
technology covered by the ICBD technology ownership and license agreement
(discussed below) and other than patents, patent applications and invention
disclosures. In the master technology agreement, Hewlett-Packard will assign to
us technology related to our products and developments. Hewlett-Packard will not
restrict our right to use the assigned technology. In addition, each party will
license its technology to the other party for unrestricted use (except for
commercially released software, which is subject to narrower rights), to the
extent that its technology has been disclosed to or is in the possession of the
other party as of the separation date, with the right to sublicense to
subsidiaries and specified affiliated companies. The licenses are perpetual.
Under the master technology agreement, subject to some restrictions, each party
may also sublicense the technology that it licenses from the other party to
(A) a subsidiary or one of the specified affiliated companies valued at
$10 million or more that has been spun-off or sold and (B) a third party that
acquires a business from it valued at $10 million or more.
The master technology agreement does not obligate either party to provide to the
other party improvements that it makes, whether to its own technology or to the
other party's technology licensed to it under the agreement.
In the event of an acquisition of all or substantially all of the assets of
either party, the party whose assets are acquired may assign the master
technology agreement to the person who acquires the assets.
ICBD TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT
The ICBD technology ownership and license agreement, or the ICBD technology
agreement, assigns to us listed technology relating to the design, development
and manufacture of integrated circuits that is used by the Integrated Circuits
Business Division (ICBD), or integrated circuit technology, (other than patents,
patent
23
<PAGE>
applications and invention disclosures). The ICBD technology agreement also
provides that Hewlett-Packard will retain ownership of other integrated circuit
technology. In the ICBD technology agreement, Hewlett-Packard will assign to us
joint ownership of other listed integrated circuit technology and both parties
will have unrestricted rights to use the jointly owned integrated circuit
technology. The integrated circuit technology that is covered by the ICBD
technology agreement encompasses the majority of the integrated circuit
technology within Hewlett-Packard. The covered integrated circuit technology
generally includes the integrated circuit technology that was developed jointly
with or for the benefit of the imaging and computing businesses of
Hewlett-Packard.
In addition, under the ICBD technology agreement, each party will license the
listed integrated circuit technology to the other party, with the right to
sublicense to subsidiaries and specified affiliated companies. The licenses are
perpetual. We will be restricted from using both the integrated circuit
technology that Hewlett-Packard will assign to us and that Hewlett-Packard will
license to us within the fields of, with some exceptions, inkjet products,
printer products (including printer supplies, accessories and components),
document scanners and computing products, other than to supply Hewlett-Packard.
This restriction expires ten years after the separation date for certain
printing, scanning and computing technology considered fundamental or of long
term value and three years after the separation date for the rest of the
technology.
Under the ICBD technology agreement, subject to some restrictions, each party
may sublicense the integrated circuit technology that it licenses from the other
party to (A) a subsidiary or one of the specified affiliated companies valued at
$10 million or more that has been spun-off or sold and (B) a third party that
acquires a business from it valued at $10 million or more.
The ICBD technology agreement does not obligate either party to provide to the
other party improvements that it makes, whether to its own technology or to the
other party's technology licensed to it under the agreement. Each party, upon
request, will notify the other party of improvements that it may have made in a
particular defined technical area and will negotiate in good faith disclosing
and licensing those improvements to the other party.
In the event of an acquisition of all or substantially all of the assets of
either party, the party whose assets are acquired may assign the ICBD technology
agreement to the person who acquires the assets.
MASTER TRADEMARK OWNERSHIP AND LICENSE AGREEMENT
The master trademark ownership and license agreement, or the master trademark
agreement, will allocate rights relating to trademarks, service marks and trade
names. Under the master trademark agreement, Hewlett-Packard will assign to us
its rights in listed trademarks, service marks and trade names that it uses in
connection with the businesses transferred to us. In addition, Hewlett-Packard
will grant us a perpetual license to mark our products shipping as of the
distribution date with, and advertise and promote these products using, listed
Hewlett-Packard trademarks and service marks. After five years, our use will be
subject to royalty payments. We may sublicense these rights to subsidiaries and
specified affiliated companies, and we and our subsidiaries and the specified
affiliated companies may allow authorized dealers to use the trademarks and
service marks in the advertisement and promotion of these products.
During the first three years from the separation date, Hewlett-Packard will
agree not to license the trademarks and service marks it licenses to us to third
parties for use in connection with products or services that compete with our
products shipping as of the distribution date (other than in connection with
co-branding activities and other than any licenses that may have previously been
granted).
Hewlett-Packard may terminate the license under the master trademark agreement
only with regard to products that fail to meet required quality standards,
subject to a notice and cure period.
In the event of an acquisition of all or substantially all of the assets of
either party, the party whose assets are acquired may assign the master
trademark agreement to the person who acquires the assets.
24
<PAGE>
MASTER CONFIDENTIAL DISCLOSURE AGREEMENT
The master confidential disclosure agreement provides that both parties agree
not to disclose confidential information of the other party except in specific
circumstances. Hewlett-Packard and we also agree not to use this information in
violation of any use restrictions in one of the other written agreements between
us.
MASTER IT SERVICE LEVEL AGREEMENT
The master IT service level agreement governs the provision of information
technology services by Hewlett-Packard and us to each other, on an interim
basis, until November 1, 2001, unless extended for specific services or
otherwise indicated in the agreement. The services include data processing and
telecommunications services, such as voice telecommunications and data
transmission, and information technology support services, for functions
including accounting, financial management, tax, payroll, stockholder and public
relations, legal, human resources administration, procurement, real estate
management and other administrative functions. Specified charges for such
services are generally intended to allow the providing company to recover the
direct and indirect costs of providing the services, plus 5% until November 1,
2001 and such costs plus 10% thereafter. The master IT service level agreement
also covers the provision of certain additional information technology services
identified from time to time after the separation date that were inadvertently
or unintentionally omitted from the specified services, or that are essential to
effectuate an orderly transition under the separation agreement, so long as the
provision of such services would not significantly disrupt the providing
company's operations or significantly increase the scope of the agreement.
In addition, the master IT service level agreement will provide for the
replication of some computer systems, including hardware, software, data storage
or maintenance and support components. Generally, the party needing the
replicated system will bear the costs and expenses of replication. Generally,
the party purchasing new hardware or licensing new software will bear the costs
and expenses of purchasing the new hardware or obtaining the new software
licenses.
EMPLOYEE MATTERS AGREEMENT
We will enter into an employee matters agreement with Hewlett-Packard to
allocate assets, liabilities, and responsibilities relating to current and
former United States employees of Agilent Technologies and their participation
in the benefit plans, including stock plans, that Hewlett-Packard currently
sponsors and maintains.
In general, separate agreements will address similar issues relating to foreign
employment and benefit matters.
All eligible United States Agilent Technologies employees will continue to
participate in the Hewlett-Packard benefit plans on comparable terms and
conditions to those for Hewlett-Packard employees until we establish comparable
benefit plans for our current and former employees. We intend to establish these
plans no later than the time of the distribution.
On November 1, 1999, all United States Agilent Technologies employees were
transferred to Agilent Technologies' United States payroll. At that time, we
adopted specified plans associated with our United States payroll system, such
as the Agilent Technologies stock plans, the Agilent Technologies executive
deferred compensation plan and the Agilent Technologies leave of absence
programs. We will adopt benefit plans that reflect our more permanent separation
from Hewlett-Packard, such as the Agilent Technologies health and welfare plans,
the Agilent Technologies pension plans, the Agilent Technologies Excess Benefit
Plan and the Agilent Technologies fringe benefit plans. Each Agilent
Technologies benefit plan will be comparable to the corresponding
Hewlett-Packard benefit plan.
Once we establish our own corresponding benefit plans, we may modify or
terminate that plan in accordance with the terms of that plan and our policies.
No Agilent Technologies benefit plan will provide benefits that overlap benefits
under the corresponding Hewlett-Packard benefit plan at the time of the
distribution. Each Agilent Technologies benefit plan will provide that all
service, compensation and other benefit determinations that, as of the
distribution, were recognized under the corresponding Hewlett-Packard benefit
plan will be taken into account under that Agilent Technologies benefit plan.
25
<PAGE>
Each Agilent Technologies benefit plan will assume any liabilities under the
corresponding Hewlett-Packard benefit plan for Agilent Technologies employees.
Assets relating to the employee liabilities will also be transferred to Agilent
Technologies or the related Agilent Technologies plans and trusts from trusts
and other funding vehicles associated with Hewlett-Packard's benefit plans.
OPTIONS AND STOCK APPRECIATION RIGHTS. Under the existing terms of the
Hewlett-Packard stock option plans, the separation will result in accelerated
vesting of substantially all of the unvested portion of Hewlett-Packard options
held by our employees on the distribution date. All Hewlett-Packard options held
by our employees on the distribution date that are not exercised will expire
three months after the distribution date. Alternatively, in most countries our
employees may elect in January 2000 to amend their Hewlett-Packard options to
waive the vesting acceleration. We will assume the amended options, as well as
certain options held by our non-employee directors, which will convert at the
distribution into options to purchase our common stock. The number of shares and
the exercise price of Hewlett-Packard options that convert into Agilent
Technologies options will be adjusted using a conversion formula. The conversion
formula will be based on the opening per-share price of our common stock on the
first trading day after the distribution relative to the closing per-share price
of Hewlett-Packard common stock on the last trading day before the distribution.
The resulting Agilent Technologies options will maintain the original vesting
provisions and option period. At the distribution, Agilent Technologies will
assume each Hewlett-Packard stock appreciation right held by Agilent
Technologies employees.
RESTRICTED STOCK. On or before the distribution, Hewlett-Packard restricted
stock granted under incentive stock plans and held by Agilent Technologies
employees is expected to be forfeited. Each Agilent Technologies employee who
forfeits Hewlett-Packard restricted stock has elected to receive as replacement
either Agilent Technologies options or Agilent Technologies restricted shares.
STOCK PURCHASE PLAN. We anticipate that Agilent Technologies employees will
continue to participate in the Hewlett-Packard stock purchase plan through
January 31, 2000. Beginning February 1, 2000, we will sponsor a stock purchase
plan for the benefit of Agilent Technologies employees that is comparable to the
Hewlett-Packard stock purchase plan. The Agilent Technologies stock purchase
plan will provide for the replacement of unvested Hewlett-Packard shares and
Agilent Technologies shares that are forfeited by our employees at the
distribution date.
TAX SHARING AGREEMENT
Hewlett-Packard and we have entered into a tax sharing agreement providing for
each of the party's obligations concerning various tax liabilities. The tax
sharing agreement provides that Hewlett-Packard generally will pay, and
indemnify us if necessary, with respect to all federal, state, local and foreign
taxes relating to our business for any taxable period ending prior to the
initial public offering. In addition, the tax sharing agreement provides that
Hewlett-Packard and we will make payments between us so that, with respect to
tax returns for any taxable period in which we or any of our subsidiaries are
included in Hewlett-Packard's consolidated group for U.S. federal income tax
purposes, or in any consolidated, combined or unitary group which includes
Hewlett-Packard or any of its subsidiaries for state, local or foreign income
tax purposes the amount of taxes to be paid by us will be determined, subject to
specified adjustments, as if we and each of our subsidiaries filed our own
consolidated, combined or unitary tax return. Each member of a consolidated
group for U.S. federal income tax purposes is jointly and severally liable for
the federal income tax liability of each other member of the consolidated group.
Accordingly, although the tax sharing agreement allocates tax liabilities
between Hewlett-Packard and us, for any period in which we were included in
Hewlett-Packard's consolidated group we could be liable in the event that any
federal tax liability was incurred, but not discharged, by any other member of
the group.
The tax sharing agreement allocates responsibility for various taxes arising
from restructurings related to the spinoff between Hewlett-Packard and Agilent
Technologies. In addition, Agilent Technologies will bear 18% of unanticipated
taxes related to the spinoff where neither party is at fault.
26
<PAGE>
In addition, the tax sharing agreement provides that we shall indemnify
Hewlett-Packard for any taxes arising out of the failure of the spin-off or some
of the transactions related to it to qualify as tax free as a result of actions
taken, or the failure to take required actions, by us or any of our
subsidiaries. Specifically, we are required under the tax sharing agreement to
comply with the representations made to the Internal Revenue Service in
connection with the private letter ruling that has been issued to
Hewlett-Packard by the Internal Revenue Service regarding the tax-free nature of
the spin-off of our stock by Hewlett-Packard to Hewlett-Packard's stockholders.
The tax sharing agreement further provides for cooperation with respect to tax
matters, the exchange of information and the retention of records which may
affect the income tax liability of either party.
REAL ESTATE MATTERS AGREEMENT
The real estate matters agreement addresses real estate matters relating to the
Hewlett-Packard leased and owned properties that Hewlett-Packard will transfer
to or share with us. The agreement describes the manner in which Hewlett-Packard
will transfer to or share with us various leased and owned properties, including
the following types of transactions:
- conveyances to us of specified properties that Hewlett-Packard owns;
- leases back to Hewlett-Packard of specified owned properties that
Hewlett-Packard will convey to us;
- leases to us of portions of specified properties that Hewlett-Packard
owns;
- assignments to us of Hewlett-Packard's leases for specified leased
properties;
- subleases back to Hewlett-Packard of specified leased properties to be
assigned to us; and
- subleases to us of portions of specified leased properties.
The real estate matters agreement includes a description of each material
property to be transferred to or shared with us for each type of transaction.
The standard forms of the proposed transfer documents (e.g., lease and sublease)
are contained in schedules.
The real estate matters agreement also requires both parties to use reasonable
efforts to obtain any landlord consents required for the proposed transfers of
leased sites, including Hewlett-Packard paying commercially reasonable consent
fees and negotiating other commercially reasonable amendments to the leases, if
required by the landlords, and us agreeing to provide the security required
under the applicable leases.
The real estate matters agreement further provides that we will be required to
accept the transfer of all sites allocated to us, even if a site has been
damaged by a casualty before the separation date. Transfers with respect to
leased sites where the underlying lease is terminated due to casualty or action
by the landlord prior to the separation date will not be made, and neither party
will have any liability related thereto.
The real estate matters agreement also gives the parties the right to change the
allocation and terms of specified sites by mutual agreement based on changes in
the requirements of the parties.
The real estate matters agreement provides that all reasonable costs required to
effect the transfers (including landlord consent fees, landlord attorneys' fees,
title insurance fees and transfer taxes) will be paid by Hewlett-Packard.
ENVIRONMENTAL MATTERS AGREEMENT
Hewlett-Packard has agreed to retain and indemnify us for liabilities associated
with properties transferred to us which are undergoing environmental
investigation and remediation and for which Hewlett-Packard has accrued a
reserve. The purpose of the environmental matters agreement is to address, in a
general way, Hewlett-Packard's rights and obligations with respect to
remediation of contamination at those properties. The agreement also sets forth
our rights and obligations with respect to that remediation.
Among other things, we are required to cooperate with Hewlett-Packard in
providing access to and use of the property for the performance of the remedial
activities by Hewlett-Packard and make reasonable efforts to avoid interference
with the remedial activities. Hewlett-Packard agrees to minimize, to the extent
feasible, the impact of remedial activities on the use and operation on or at
the relevant properties.
Hewlett-Packard and Agilent Technologies will designate liaisons for each
property who will work together and attend regular meetings with respect to the
remedial activities.
27
<PAGE>
ADDITIONAL QUESTIONS AND INFORMATION REGARDING
THE ANNUAL MEETING AND STOCKHOLDER PROPOSALS
<TABLE>
<S> <C>
Q: WHAT HAPPENS IF ADDITIONAL PROPOSALS
ARE PRESENTED AT THE MEETING?
A: Other than the 3 proposals described in
this proxy statement, we do not expect
any matters to be presented for a vote
at the annual meeting. If you grant a
proxy, the persons named as proxy
holders, Edward W. Barnholt, Agilent
Technologies' President and Chief
Executive Officer, and D. Craig
Nordlund, Agilent Technologies' Senior
Vice President, General Counsel and
Secretary, will have the discretion to
vote your shares on any additional
matters properly presented for a vote
at the meeting. If for any unforeseen
reason any of our nominees is not
available as a candidate for director,
the persons named as proxy holders will
vote your proxy for such other
candidate or candidates as may be
nominated by the board of directors.
Q: WHAT CLASS OF SHARES ARE ENTITLED TO BE
VOTED?
A: Each share of our common stock
outstanding as of the close of business
on December 31, 1999, the RECORD DATE,
is entitled to one vote at the annual
meeting. On the RECORD DATE, we had
approximately 452,000,000 shares of
common stock issued and outstanding.
Q: WHAT IS THE QUORUM REQUIREMENT FOR THE
MEETING?
A: The quorum requirement for holding the
meeting and transacting business is a
majority of the outstanding shares
entitled to be voted. The shares may be
present in person or represented by
proxy at the meeting. Both abstentions
and broker non-votes are counted as
present for the purpose of determining
the presence of a quorum. Generally,
broker non-votes occur when shares held
by a broker for a beneficial owner are
not voted with respect to a particular
proposal because (1) the broker has not
received voting instructions from the
beneficial owner and (2) the broker
lacks discretionary voting power to
vote such shares.
Q: WHO WILL COUNT THE VOTE?
A: A representative of Harris Trust and
Savings Bank, Agilent Technologies'
transfer agent, will tabulate the votes
and act as the inspector of election.
Q: IS MY VOTE CONFIDENTIAL?
A: Proxy instructions, ballots and voting
tabulations that identify individual
stockholders are handled in a manner
that protects your voting privacy. Your
vote will not be disclosed either
within Agilent Technologies or to third
parties except (1) as necessary to
meet applicable legal requirements,
(2) to allow for the tabulation of
votes and certification of the vote, or
(3) to facilitate a successful proxy
solicitation by our board.
Occasionally, stockholders provide
written comments on their proxy card
which are then forwarded to Agilent
Technologies management.
Q: WHO WILL BEAR THE COST OF SOLICITING
VOTES FOR THE MEETING?
A: Agilent Technologies will pay the
entire cost of preparing, assembling,
printing, mailing and distributing
these proxy materials. In addition to
the mailing of these proxy materials,
the solicitation of proxies or votes
may be made in person, by telephone or
by electronic communication by our
directors, officers, and employees, who
will not receive any additional
compensation for such solicitation
activities.
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
Q: MAY I PROPOSE ACTIONS FOR CONSIDERATION
AT NEXT YEAR'S ANNUAL MEETING OF
STOCKHOLDERS OR NOMINATE INDIVIDUALS TO
SERVE AS DIRECTORS?
A: You may submit proposals for
consideration at future stockholder
meetings, including director
nominations.
STOCKHOLDER PROPOSALS: In order for a
stockholder proposal to be considered
for inclusion in Agilent Technologies'
proxy statement for next year's annual
meeting, the written proposal must be
received by Agilent Technologies no
later than September 15, 2000. Such
proposals also will need to comply with
Securities and Exchange Commission
regulations regarding the inclusion of
stockholder proposals in company
sponsored proxy materials. In order for
a stockholder proposal to be raised
from the floor during next year's
annual meeting, written notice must be
received by Agilent Technologies no
later than October 31, 2000 and should
contain such information as required
under our bylaws.
NOMINATION OF DIRECTOR CANDIDATES: You
may propose director candidates for
consideration by our board's nominating
committee. In addition, our bylaws
permit stockholders to nominate
directors at a stockholder meeting. In
order to make a director nomination at
a stockholder meeting it is necessary
that you notify Agilent Technologies
not fewer than 120 days in advance of
the date of the prior year's annual
meeting of stockholders. Thus, since
this year's annual meeting is
February 29, in order for any such
nomination notice to be timely for next
year's annual meeting, it must be
received by Agilent Technologies not
later than October 31, 2000 (i.e.,
120 days prior to March 1). In
addition, the notice must meet all
other requirements contained in our
bylaws.
COPY OF BYLAW PROVISIONS: You may
contact the Agilent Technologies
Corporate Secretary at our corporate
headquarters for a copy of the relevant
bylaw provisions regarding the
requirements for making stockholder
proposals and nominating director
candidates.
By Order of the Board of Directors
/s/ D. CRAIG NORDLUND
D. CRAIG NORDLUND
Senior Vice President, General Counsel
and Secretary
Dated: January 13, 2000
</TABLE>
29
<PAGE>
APPENDIX A
AGILENT TECHNOLOGIES, INC. PAY-FOR-RESULTS PLAN
(VARIABLE PAY)
EFFECTIVE NOVEMBER 1, 1999
1. PURPOSE. The purpose of the Agilent Technologies, Inc. Pay-For-Results
Plan is to provide certain employees of Agilent Technologies, Inc. and its
subsidiaries with incentive compensation based upon the level of achievement of
financial, business and other performance criteria.
2. DEFINITIONS. As used in the Plan, the following terms shall have the
meanings set forth below:
(a) "AFFILIATE" shall mean (i) any entity that, directly or indirectly,
is controlled by the Company and (ii) any entity in which the Company
has a significant equity interest, in either case as determined by
the Committee.
(b) "AFM" shall mean the Company's Accounting and Financial Manual, as
posted from time to time on the Company's internal web site.
(c) "BASE PAY" shall mean the annual base rate of cash compensation,
excluding bonuses, commissions, overtime pay, Bonuses, Target
Bonuses, shift differential, payments under the Agilent Technologies,
Inc. Income Protection Plan (or equivalent Hewlett-Packard Company
plan) and the Agilent Technologies, Inc. Supplemental Income
Protection Plan (or equivalent Hewlett-Packard Company plan), or any
other additional compensation.
(d) "BOARD" shall mean the Board of Directors of the Company.
(e) "BONUS" shall mean a cash payment, which may be an addition to Base
Pay, made pursuant to the Plan with respect to a particular
Performance Period. The amount of a Bonus may be less than, equal to
or greater than the Target Bonus; PROVIDED, HOWEVER, that a Bonus
shall not be greater than an amount equal to two hundred percent
(200%) of the Target Bonus.
(f) "CODE" shall mean the Internal Revenue Code of 1986 and the
regulations promulgated thereunder, all as amended from time to time
and any successors thereto.
(g) "COMMITTEE" shall mean the Committee designated pursuant to Section 4
of the Plan.
(h) "COMPANY" shall mean Agilent Technologies, Inc., a Delaware
corporation.
(i) "COVERED OFFICER" shall mean at any date (i) any individual who with
respect to the previous taxable year of the Company, was a "covered
employee" of the Company within the meaning of Section 162(m);
PROVIDED, HOWEVER that the term "Covered Officer" shall not include
any such individual who is designated by the Committee, in its sole
discretion, at the time of any Bonus or at any subsequent time, as
reasonably expected not to be such a "covered employee" with respect
to the then current taxable year of the Company, and (ii) any
individual who is designated by the Committee, in its sole
discretion, at the time of any Bonus or at any subsequent time, as
reasonably expected to be such a "covered employee" with respect to
the then current taxable year of the Company or with respect to the
taxable year of the Company in which any applicable Bonus will be
paid.
(j) "FISCAL YEAR" shall mean the twelve-month period from November 1
through October 31.
(k) "NET ORDER DOLLARS" shall be as defined in the Company's Corporate
Marketing Policy, as posted on the Company's internal web site at the
start of the Performance Period.
(l) "NET PROFIT DOLLARS" shall be as defined in the AFM at the start of
the Performance Period.
A-1
<PAGE>
(m) "NET PROFIT GROWTH" shall be defined with respect to any Performance
Period as determined by the Committee, in its sole discretion.
(n) "NET REVENUE DOLLARS" shall be as defined in the AFM at the start of
the Performance Period.
(o) "PARTICIPANT" shall mean each salaried employee of the Company or its
Affiliates in active service whose position is designated by the
Committee as eligible for participation in the Plan; provided,
however, that Participants must be selected prior to the
Predetermination Date.
(p) "PERFORMANCE MEASURE" shall mean any measurable criteria tied to the
Company's success that the Committee may determine, including Net
Order Dollars, Net Profit Dollars, Net Profit Growth, Net Revenue
Dollars, Revenue Growth, individual performance, earnings per share,
return on assets, return on equity, other Company and business unit
financial objectives, customer satisfaction indicators and
operational efficiency measures.
(q) "PERFORMANCE PERIOD" shall mean a six-month period of time based upon
the halves of the Company's Fiscal Year, or such other time period as
shall be determined by the Committee.
(r) "PLAN" shall mean the Agilent Technologies, Inc. Pay-For-Results Plan
as amended from time to time.
(s) "PREDETERMINATION DATE" shall mean (i) the earlier of, a date 90 days
after the commencement of the Performance Period, or a date not later
than the expiration of 25% of the Performance Period, provided that
the satisfaction of selected Performance Measures is substantially
uncertain at such time, or (ii) such other date on which a
performance goal is considered to be pre-established pursuant to
Section 162(m).
(t) "REVENUE GROWTH" shall be defined with respect to any Performance
Period as determined by the Committee, in its sole discretion.
(u) "SECTION 162(M)" shall mean Section 162(m) of the Code.
(v) "TARGET BONUS" shall mean a Bonus amount that may be paid if 100% of
all applicable Performance Measures are achieved in the Performance
Period. The Target Bonus shall be equal to a fixed percentage of the
Participant's Base Pay for such Performance Period. The Committee
shall determine such percentage prior to the Predetermination Date.
(w) "THRESHOLD BONUS PERCENTAGE" shall mean the minimum level
(percentage) of applicable Performance Measures for a Performance
Period that a Participant must achieve in order for the Participant
to be eligible to receive any Bonus for such Performance Period.
3. ELIGIBILITY. Persons employed by the Company or any of its Affiliates
during a Performance Period and in active service are eligible to be
Participants under the Plan for such Performance Period (whether or not so
employed or living at the date a Bonus is paid) and may be considered by the
Committee for a Bonus. A Participant is not rendered ineligible to be a
Participant by reason of being a member of the Board. Notwithstanding anything
herein to the contrary, the Committee shall have sole discretion to designate or
approve the Participants for any given Performance Period.
4. ADMINISTRATION.
(a) Unless otherwise designated by the Board, the Compensation Committee
of the Board shall be the Committee under the Plan. A director may
serve as a member or an alternate member of the Committee only during
periods in which the director is an "outside director" as described
in Section 162(m). The Committee shall have full power and authority
to construe, interpret and administer the Plan. It may issue
rules and regulations for administration of the Plan and shall meet
at such times and places as it may determine. A majority of
A-2
<PAGE>
the members of the Committee shall constitute a quorum and all
decisions of the Committee shall be final, conclusive and binding
upon all parties, including the Company, its stockholders, employees
and Participants.
(b) In the case of Participants who are not Covered Officers, the
Committee may delegate certain person(s) or a committee to administer
the Plan and make adjustments in accordance with Sections 6(b) and
7(b) below, whose decisions shall similarly be final, conclusive and
binding upon all parties.
(c) The expenses of the administration of the Plan shall be borne by the
Company.
5. TERM. Subject to Section 10(l), the Plan shall be effective as of
November 1, 1999 and shall be applicable for future Fiscal Years of the Company
unless amended or terminated by the Board or the Committee pursuant to Section
10(e).
6. DETERMINATION OF PLAN PARTICIPANTS, BONUS FACTORS AND PERFORMANCE
MEASURES.
(a) IN GENERAL. Prior to the Predetermination Date, the Committee shall
designate or approve (i) the employees who will be Participants for a
Performance Period, (ii) the applicable Performance Measures, the
Threshold Bonus Percentage, the Target Bonuses, and the maximum
Bonuses for each Participant, (iii) the percentages allocated to each
Participant for each Performance Measure, and (iv) the Performance
Period. Notwithstanding the foregoing, all Performance Measures
pertaining to any Covered Officer shall be of such a nature that an
objective third party having knowledge of all the relevant facts
could determine at the end of the Performance Period whether
performance results with respect to such Performance Measures have
been achieved.
(b) PERFORMANCE MEASURE ADJUSTMENT. In its sole discretion, the Committee
(or the person(s) or committee empowered by the Committee to
administer the Plan with respect to Participants who are not Covered
Officers) may, but is not required to, make an adjustment to a
Participant's Performance Measures for a Performance Period to take
into account (i) administrative errors associated with determining or
recording the applicable Performance Measures for such Performance
Period (ii) a product line reorganization not taken into account when
the applicable Performance Measures for such Performance Period were
initially designated or approved or (iii) such other factors as the
Committee (or the person(s) or committee empowered by the Committee
to administer the Plan with respect to Participants who are not
Covered Officers) may deem desirable and/or necessary.
(c) NO ADJUSTMENT FOR COVERED OFFICERS. Notwithstanding the provisions of
Section 6(b) above, any adjustments made in accordance with or for
the purposes of Section 6(b) shall be disregarded for purposes of
calculating the Bonus to any Covered Officer to the extent that such
adjustment would have the effect of increasing such Bonus.
7. AMOUNT OF BONUS.
(a) CALCULATION. Within 30 days after the end of the relevant Performance
Period, the Committee, or, in the case of a Bonus to a Participant
who is not a Covered Officer, the person(s) or committee empowered by
the Committee or the Board, shall determine the amount of the Bonus
for each Participant by:
(i) Determining the actual performance results for each Performance
Measure;
(ii) Determining the amount to which each Participant is entitled
based on the percentage allocated by the Committee to each
Performance Measure against the Target Bonus for each
Participant; and
A-3
<PAGE>
(iii) Certifying by resolution duly adopted by the Committee (or by
the person(s) or committee empowered by the Committee in the
case of Participants who are not Covered Officers) the value of
the Bonus for each Participant so determined.
(b) ADJUSTMENTS TO BONUSES. In its sole discretion, the Committee may,
but is not required to, make an adjustment to a Participant's Bonus
to take into account: (i) unplanned acquisitions, divestitures, and
investments that (A) started and closed in the applicable Performance
Period, (B) were not taken into account already in the Participant's
Performance Measures for such period, and (C) exceeded ten percent
(10%) of the division/organization's Net Profit Dollars for the
applicable Performance Period; (ii) the effect of any major change in
accounting principles and/or policies in the applicable Performance
Period; (iii) unforeseen flow-through charges (as determined by the
Committee) during the applicable Performance Period, as defined and
approved by the Committee in its sole discretion; and/or (iv)
administrative and/or clerical errors.
(c) NO ADJUSTMENTS FOR COVERED OFFICERS. Notwithstanding the provisions
of Section 7(b) above, any adjustments made in accordance with or for
the purposes of Section 7(b) shall be disregarded for purposes of
calculating the Bonus to any Covered Officer to the extent that such
adjustments would have the effect of increasing such Bonus.
(d) COMMITTEE DISCRETION. Notwithstanding any other provision of this
Plan, the Committee may, in the exercise of its sole discretion and
based on any factors the Committee deems appropriate, reduce or
eliminate to zero the amount of a Bonus to a Participant otherwise
calculated in accordance with the provisions of Section 7(a) prior to
payment thereof. The Committee shall make a determination of whether
and to what extent to reduce Bonuses under the Plan for each
Performance Period at such time or times following the close of the
Performance Period as the Committee shall deem appropriate. The
reduction in the amount of a Bonus to a Participant for a Performance
Period shall have no effect on the amount of the Bonus to any other
Participant for such period.
(e) MAXIMUM. Notwithstanding any other provision of this Plan, the
maximum Bonus that may be paid to a Covered Officer under the Plan
with respect to a particular Performance Period is $1 million. To the
extent the period of time defining a Performance Period is changed by
the Committee, then the maximum Bonus that may be paid to a Covered
Officer under the Plan is an amount that bears the same pro rata
relationship to the new period of time as the above amount does to
the current six-month Performance Period as set by the Committee.
8. PAYMENT OF BONUSES.
(a) Payment of a Bonus to a Participant shall be made in a single,
lump-sum cash payment as soon as practicable after determination of
the amount of the Bonus under Section 7 above, except to the extent a
Participant has made a timely election to defer the payment of all or
any part of such Bonus under the Agilent Technologies, Inc. Executive
Deferred Compensation Plan.
(b) The payment of a Bonus with respect to a specific Performance Period
requires that the employee be on the Company's payroll as of the end
of such Performance Period. The Committee may make exceptions to this
requirement in the case of retirement, death or disability, as
determined by the Committee in its sole discretion.
(c) Payments of Bonuses to Participants who are on the payroll of
Affiliates of the Company shall be paid directly by such entities.
A-4
<PAGE>
9. CHANGES IN STATUS.
(a) If during a Performance Period a person is promoted into a position
previously designated by the Committee for participation under the
Plan, that person will be able to commence participation in the Plan
at the beginning of the next Performance Period.
(b) If a Participant transfers from one eligible position to another
during a Performance Period, any Bonus will be prorated based on the
performance of the Participant in each position.
(c) If during a Performance Period a Participant transfers into a
position that is not eligible for participation under the Plan, any
Bonus will be prorated based upon the employee's time spent in the
eligible position.
(d) A Participant will forfeit any Bonus for a Performance Period during
which a Participant is involuntarily terminated for cause or
voluntarily terminates his employment with the Company for reasons
other than death, permanent and total disability or retirement, at
the age and service-year level set by the Company or the local law
requirements where the Participant is employed.
10. MISCELLANEOUS.
(a) NO ASSIGNMENT. No portion of any Bonus under the Plan may be assigned
or transferred otherwise than by will or the laws of descent and
distribution prior to the payment thereof.
(b) TAX REQUIREMENTS. All payments made pursuant to the Plan or deferred
pursuant to Section 8(a) shall be subject to all applicable taxes or
contributions required by U.S. federal or state law or by non-U.S.
local law to be withheld, in accordance with the procedures to be
established by the Committee.
(c) NO ADDITIONAL PARTICIPANT RIGHTS. The selection of an individual for
participation in the Plan shall not give such Participant any right
to be retained in the employ of the Company or any of its Affiliates,
and the right of the Company and any such Affiliate to dismiss such
Participant or to terminate any arrangement pursuant to which any
such Participant provides services to the Company, with or without
cause, is specifically reserved. No person shall have claim to a
Bonus under the Plan, except as otherwise provided for herein, or to
continued participation under the Plan. There is no obligation for
uniformity of treatment of Participants under the Plan. The benefits
provided for Participants under the Plan shall be in addition to and
shall in no way preclude other forms of compensation to or in respect
of such Participants. It is expressly agreed and understood that the
employment is terminable at the will of either party and, if such
Participant is a party to an employment contract with the Company or
one of its Affiliates, in accordance with the terms and conditions of
the Participant's employment contract.
(d) LIABILITY. The Board and the Committee shall be entitled to rely on
the advice of counsel and other experts, including the independent
auditors for the Company. No member of the Board or of the Committee,
any officers of the Company or its Affiliates or any of their
designees shall be liable for any act or failure to act under the
Plan, except in circumstances involving bad faith on the part of such
member, officer or designee.
(e) AMENDMENT; SUSPENSION; TERMINATION. The Board or Committee may, at
any time and from time to time, amend, suspend or terminate the Plan
or any part of the Plan as it may deem proper and in the best
interests of the Company. In the case of Participants employed
outside the United States, the Board, the Committee or their
designees may vary the provisions of the Plan as deemed appropriate
to conform with local laws, practices and procedures. In addition,
the Executive Committee of the Board or any of the General Counsel,
Secretary or Assistant Secretary of the Company is authorized to make
certain
A-5
<PAGE>
minor or administrative changes required by or made desirable by
government regulation. Any modification of the Plan may affect
present and future Participants and the amount of any Bonus
hereunder.
(f) OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the Plan shall
prevent the Company or any Affiliate of the Company from adopting or
continuing in effect other compensation arrangements, which
arrangements may be either generally applicable or applicable only in
specific cases.
(g) GOVERNING LAW. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable
federal law.
(h) NO TRUST. Neither the Plan nor any Bonus shall create or be construed
to create a trust or separate fund of any kind or a fiduciary
relationship between the Company and any Participant. To the extent
that the Participant acquires a right to receive payments from the
Company in respect of any Bonus, such right shall be no greater than
the right of any unsecured general creditor of the Company.
(i) SECTION 162(M). All payments under this Plan are designed to satisfy
the special requirements for performance-based compensation set forth
in Section 162(m)(4)(C) of the Code, and the Plan shall be so
construed. Furthermore, if a provision of the Plan causes a payment
to fail to satisfy these special requirements, it shall be deemed
amended to satisfy the requirements to the extent permitted by law
and subject to Committee approval.
(j) DESIGNATION OF BENEFICIARIES. A Participant may, if the Committee
permits, designate a beneficiary or beneficiaries to receive all or
part of the Bonuses which may be paid to the Participant, or may be
payable, after such Participant's death. A designation of beneficiary
shall be made in accordance with procedures specified by the Company
and may be replaced by a new designation or may be revoked by the
Participant at any time. In case of the Participant's death, a Bonus
with respect to which a designation of beneficiary has been made (to
the extent it is valid and enforceable under applicable law) shall be
paid to the designated beneficiary or beneficiaries. Any Bonus
granted or payable to a Participant who is deceased and not subject
to such a designation shall be distributed to the Participant's
estate. If there shall be any question as to the legal right of any
beneficiary to receive a Bonus under the Plan, the amount in question
may be paid to the estate of the Participant, in which event the
Company or its Affiliates shall have no further liability to anyone
with respect to such amount.
(k) EFFECT ON COMPANY BENEFIT PLANS. With the exception of the Agilent
Technologies, Inc. Executive Deferred Compensation Plan and the
Agilent Technologies, Inc. Excess Benefit Plan, it is the intent of
the Company that Company benefits payable or accruable to
Participants, to the extent such benefits are based on earnings or
compensation level, shall be based on Base Pay. Notwithstanding the
foregoing, this paragraph (k) shall apply to Participants outside of
the United States to the extent permissible under applicable local
laws.
(l) STOCKHOLDER APPROVAL. Shareholders of the Company will be asked to
approve the Plan only to the extent necessary to allow the Company
under Section 162(m) to preserve the tax deductibility of payments
for performance-based compensation made under the plan to Covered
Officers. Plan amendments shall require stockholder approval only if
and to the extent required by applicable law or the applicable
rules of any stock exchange.
A-6
<PAGE>
DIRECTIONS TO THE FLINT CENTER
FROM SAN FRANCISCO:
Take 280 to 85 South towards Gilroy.
Exit at Stevens Creek Blvd. (1st off-ramp).
Turn East (left) onto Stevens Creek Blvd. (over freeway),
then turn right onto Mary Ave. (2nd light). [MAP]
Upon entering De Anza College campus, bear right and follow signs to parking.
At stop sign turn left.
Parking is available in the parking structure on your right.
FROM SAN JOSE:
Take 280 to the De Anza Blvd. exit.
Turn South (left) onto De Anza Blvd. and proceed to Stevens Creek Blvd., turn
right onto Stevens Creek then left onto Mary Ave.
Upon entering De Anza College campus, bear right and follow signs to parking.
At stop sign turn left.
Parking is available in the parking structure on your right.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
[LOGO] [LOGO]
ANNUAL MEETING OF STOCKHOLDERS ANNUAL MEETING OF STOCKHOLDERS
Flint Center for the Performing Arts Flint Center for the Performing Arts
21250 Stevens Creek Boulevard 21250 Stevens Creek Boulevard
Cupertino, California Cupertino, California
February 29, 2000 February 29, 2000
10:00 A.M. 10:00 A.M.
ADMIT ONE ADMIT ONE
</TABLE>
[5968-8944E]
<PAGE>
<TABLE>
<S><C>
AGILENT TECHNOLOGIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR 1-3.
Withhold For All For Against Abstain
1. ELECTION OF DIRECTORS -- 01-Edward W. For All Except 3. Proposal to approve Agilent / / / / / /
Barnholt and 02-Gerald Grinstein / / / / / / Technologies, Inc.
Pay-For-Results Plan.
_______________________________________
(Except nominee(s) written above)
For Against Abstain In their discretion the Proxies are authorized to vote
2. Proposal to ratify PricewaterhouseCoopers / / / / / / upon such other business as may properly come before the
LLP as Independent Accountants. meeting.
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
ITEMS 1 THROUGH 3.
Dated: ____________________, 2000
_________________________________________________________
Signature
_________________________________________________________
Signature
Please sign exactly as your name or names appear above. For joint accounts, each owner should sign. When signing as executor,
administrator, attorney, trustee or guardian, etc., please give your full title.
- ------------------------------------------------------------------------------------------------------------------------------------
^ DETACH PROXY CARD HERE ^
</TABLE>
<PAGE>
[AGILENT LOGO] PROXY
AGILENT TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS -- FEBRUARY 29, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Edward W. Barnholt and D. Craig Nordlund and
each of them as proxies for the undersigned, with full power of substitution,
to act and to vote all the shares of Common Stock of Agilent Technologies,
Inc. held of record by the undersigned on December 31, 1999, at the annual
meeting of stockholders to be held on Tuesday, February 29, 2000, or any
adjournment thereof.
IMPORTANT -- THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
- --------------------------------------------------------------------------------
