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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 (S) 240.14a-11(c) or (S) 240.14a-12
Hewlett-Packard Company
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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:
Notes:
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------------------------------------------
[LOGO OF HEWLETT-PACKARD
-------- HEWLETT-PACKARD COMPANY APPEARS HERE]
3000 Hanover Street
Palo Alto, California 94304
-------------------------
LEWIS E. PLATT
Chairman, President and
Chief Executive Officer
To the Shareholders:
I am pleased to invite you to attend the annual meeting of the
shareholders of Hewlett-Packard Company to be held on Tuesday,
February 25, 1997 at 2 o'clock in the afternoon at the Scottish Rite
Center located at 2455 Masonic Drive, San Jose, California. The
meeting this year will focus on the election of directors,
appointment of independent accountants as well as adoption of a new
compensation plan under which our outside directors will be required
to take at least half of their annual retainer fee in the form of HP
stock or equivalent stock option. We will also discuss the Company's
financial performance and respond to questions from shareholders.
Please note that this year we have moved the location of the annual
meeting from our company offices in Cupertino, California to a larger
meeting room located at the Scottish Rite Center in San Jose. A map
showing the location is included in these proxy materials on the
inside back cover. In order to facilitate check-in, we will require
admission tickets for shareholders who wish to attend the meeting in
person. Details on the process for obtaining tickets are included in
the following proxy materials. If you are unable to attend the
meeting in person, you may listen to meeting highlights using the
Internet. Within a few days following the meeting, we will post audio
copies of key presentations on the Internet at our investor relations
Web site located at: http://www.hp.com/go/financials
I am delighted you have chosen to invest in Hewlett-Packard Company
and hope that whether or not you plan to attend the annual meeting,
you will complete, sign and return the enclosed proxy as soon as
possible in the envelope provided. Your vote is important to us.
Returning the signed proxy card will ensure your representation at
the annual meeting if you do not attend in person.
Sincerely,
/s/ Lewis E. Platt
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HEWLETT-PACKARD COMPANY
3000 HANOVER STREET, PALO ALTO, CALIFORNIA 94304 (415) 857-1501
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS--FEBRUARY 25, 1997
To the Shareholders:
The annual meeting of the shareholders of Hewlett-Packard Company, a
California corporation (the "Company"), will be held, as provided in the
Company's Amended By-Laws, on Tuesday, February 25, 1997, at 2 o'clock in the
afternoon at the Scottish Rite Center located at 2455 Masonic Drive, San Jose,
California, for the following purposes:
1. To elect a Board of 13 Directors to serve for the ensuing year.
2. To consider and act upon a proposal that the shareholders approve the
adoption of the Company's 1997 Director Stock Plan.
3. To consider and act upon a proposal that the shareholders approve the
appointment of Price Waterhouse LLP as the Company's independent
accountants for the 1997 fiscal year.
4. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
Nominees for directors are set forth in the enclosed Proxy Statement.
Only shareholders of record at the close of business on Friday, December 27,
1996, will be entitled to vote at this meeting. IF YOU PLAN TO ATTEND THE
MEETING IN PERSON, PLEASE MARK THE APPROPRIATE BOX ON THE ENCLOSED PROXY CARD.
IF YOU ARE A SHAREHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME AND
YOU PLAN TO ATTEND THE MEETING, PLEASE SEND A WRITTEN REQUEST FOR AN ADMISSION
TICKET, TOGETHER WITH A COPY OF THE VOTING FORM SENT TO YOU BY YOUR BROKER
WITH THIS NOTICE OF ANNUAL MEETING AND PROXY STATEMENT OR OTHER EVIDENCE OF
YOUR STOCK OWNERSHIP, TO D. CRAIG NORDLUND, SECRETARY, HEWLETT-PACKARD
COMPANY, 3000 HANOVER STREET, MS 20 BQ, PALO ALTO, CALIFORNIA 94304. BECAUSE
SPACE IS LIMITED, NO MORE THAN TWO TICKETS WILL BE ISSUED TO EACH SHAREHOLDER.
The doors will open at 1 o'clock and the meeting will begin promptly at 2
o'clock. In order to avoid disruption, shareholders who arrive after the
meeting has begun will not be admitted.
By Order of the Board of
Directors
/s/ D. Craig Nordlund
D. Craig Nordlund
Associate General Counsel and
Secretary
Palo Alto, California
January 13, 1997
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PROXY STATEMENT
------------------
SOLICITATION OF PROXY, REVOCABILITY AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of Hewlett-Packard Company, a California corporation (the "Company"
or "HP"), for use at the 1997 annual meeting of shareholders to be held on
February 25, 1997. Only shareholders of record on December 27, 1996 will be
entitled to vote at that meeting. On December 27, 1996, the Company had
approximately 1.017 billion shares of Common Stock issued and outstanding.
The Company's principal executive offices are located at 3000 Hanover
Street, Palo Alto, California 94304. The approximate date on which the Proxy
Statement and the accompanying proxy are first being sent to shareholders is
January 13, 1997.
VOTING
Each share of Common Stock outstanding on the record date is entitled to one
vote. In addition, each shareholder, or his proxy, entitled to vote upon the
election of directors may cumulate his votes and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the
number of votes to which his shares are entitled, or distribute his votes
calculated on the same principle among as many candidates as he thinks fit.
Cumulative voting is not permitted unless the candidate or candidates have
been nominated prior to the voting and the shareholder has given notice at the
meeting prior to the voting of his intention to cast votes on a cumulative
basis. If any one shareholder gives such notice, all shareholders may cumulate
their votes for candidates in nomination. An affirmative vote of a majority of
the shares present and voting at the meeting is required for approval of all
items being submitted to the shareholders for their consideration. An
automated system administered by the Company's transfer agent tabulates the
votes. Both abstentions and broker non-votes are included in the determination
of the number of shares present and voting. Each is tabulated separately.
Abstentions are counted in tabulations of the votes cast on proposals
presented to shareholders, whereas broker non-votes are not counted for
purposes of determining whether a proposal has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy in the form accompanying this Proxy Statement has
the power to revoke it at any time before its exercise. It may be revoked by
filing with the Secretary of the Company an instrument of revocation or by the
presentation at the meeting of a duly executed proxy bearing a later date. It
also may be revoked by attendance at the meeting and election to vote in
person.
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SOLICITATION
The Company will bear the entire cost of preparing, assembling, printing and
mailing this Proxy Statement, the accompanying proxy and any additional
material which may be furnished to shareholders. Copies of solicitation
material will be furnished to brokerage houses, fiduciaries and custodians to
forward to beneficial owners of stock held in the names of such nominees. The
solicitation of proxies will be made by the use of the mails and through
direct communication with certain shareholders or their representatives by
officers, directors and employees of the Company, who will receive no
additional compensation therefor. The Company has engaged Corporate Investor
Communications, Inc. ("CIC") to solicit proxies and distribute materials to
brokerage houses, banks, custodians and other nominee holders. The Company
will pay CIC $12,000 for these services, plus expenses.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD
COMPENSATION OF DIRECTORS--STANDARD ARRANGEMENTS. Directors who were not
otherwise employed by the Company were paid an annual retainer of $30,000
during fiscal 1996. Non-employee directors also receive fees of $1,500 for
attendance at each meeting of the Board of Directors, $1,200 for attendance at
each meeting of a committee of the Board and, if serving as a committee
chairman, an additional $3,000 per year. Directors who are employed by the
Company received a fee of $1,500 for attendance at each meeting of the Board
of Directors during fiscal 1996 held prior to May 15, 1996 but were not
compensated for attendance at meetings of committees of the Board. Effective
May 15, 1996, directors who are employed by the Company do not receive any
fees for attendance at meetings of the Board. Directors are reimbursed for any
expenses attendant to Board membership. Effective March 1, 1997, the annual
retainer for non-employee directors will increase to $45,000.
For fiscal 1996, non-employee directors could elect to receive stock options
in place of the $30,000 annual retainer fee pursuant to the Company's 1987
Director Option Plan. The 1987 Director Option Plan will terminate this year.
The shareholders are being asked at the annual meeting to approve the 1997
Director Stock Plan. If the 1997 Director Stock Plan is approved at the annual
meeting, then effective as of February 25, 1997, non-employee directors must
take payment for a minimum of 50% of their annual retainer in either Common
Stock of the Company or an option to purchase Common Stock of the Company. For
a more detailed description of the 1997 Director Stock Plan, see Proposal to
Adopt the 1997 Director Stock Plan on pages 26 to 31 and the text of the 1997
Director Stock Plan on pages A-1 to A-7.
COMPENSATION OF DIRECTORS--OTHER ARRANGEMENTS. In addition to the standard
arrangements described above, in fiscal 1996 each non-employee director
received $5,000 in deferred compensation under the Company's Independent
Director Deferred Compensation Program (the "Independent
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Director Program"). Under the Independent Director Program, the Company
credited the deferred compensation amount to a reserve fund for each non-
employee director. The money allocated is credited with interest compounded
semi-annually. Effective March 1, 1997, the Independent Director Program will
terminate. Existing balances will continue to be deferred and credited with
interest. Upon termination of an independent director's services with the
Company, the entire amount then allocated to the reserve fund for such
director, including all accrued interest, will be paid in a lump sum to the
director, or a designated beneficiary if termination of services is due to
death.
BOARD OF DIRECTORS--During fiscal 1996 there were six meetings of the Board
of Directors.
AUDIT COMMITTEE--The Company's Audit Committee consists of six non-employee
directors: Donald E. Petersen (Chair), Richard A. Hackborn, Walter B. Hewlett,
George A. Keyworth II, David M. Lawrence and Paul F. Miller, Jr. The Audit
Committee met three times in fiscal 1996. The Audit Committee meets
independently with the internal auditing staff, with representatives of the
Company's independent accountants and with representatives of senior
management. The committee reviews the general scope of the Company's
accounting, reporting, annual audit and internal audit program, matters
relating to internal control systems and the fee charged by the independent
accountants. In addition, the Audit Committee is responsible for reviewing and
monitoring the performance of non-audit services by the Company's independent
accountants and for recommending the engagement or discharge of the Company's
independent accountants. The committee is also responsible for monitoring the
Company's compliance with the principles of the Defense Industry Initiative.
COMPENSATION COMMITTEE--The Company's Compensation Committee consists of
five non-employee directors: Susan P. Orr (Chair), Thomas E. Everhart, John B.
Fery, Sam Ginn and Donald E. Petersen. The committee met five times in fiscal
1996. The committee is responsible for approving and reporting to the Board on
the annual compensation for all officers, including salary, stock options,
stock appreciation rights and restricted stock, including performance-based
restricted stock, and other nonqualified benefits. The committee is also
responsible for granting stock awards, stock options, stock appreciation
rights and other awards to be made under the Company's existing incentive
compensation plans and for reviewing the Company's nonqualified benefit
programs.
EXECUTIVE COMMITTEE--The Company also has an Executive Committee, which
consisted of two directors in fiscal 1996: Lewis E. Platt (Chair) and Robert
P. Wayman. Pursuant to the Company's Amended By-Laws, the Executive Committee
has all the powers and authority of the Board of Directors in the management
of the business and affairs of the Company, except those powers that, by law,
cannot be delegated by the Board of Directors. The Executive Committee met
three times during fiscal 1996.
FINANCE AND INVESTMENT COMMITTEE--The Company's Finance and Investment
Committee was composed of five directors in fiscal 1996: Paul F. Miller, Jr.
(Chair), Thomas E. Everhart, Jean-Paul G. Gimon, David W. Packard and Robert
P. Wayman. The Finance and Investment Committee, which met
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five times in fiscal 1996, is responsible for the supervision of the
investment of all assets held by the Company's Retirement Plan, Deferred
Profit-Sharing Plan and other employee benefit funds, for reviewing the
investment results of pension plans of the Company's international
subsidiaries and for establishing and reviewing policies regarding the
investment of general corporate assets, the issuance of debt and the use of
derivative instruments to manage currency and interest rate exposure.
ORGANIZATION REVIEW AND NOMINATING COMMITTEE--In fiscal 1996, the Company's
Organization Review and Nominating Committee consisted of seven directors:
John B. Fery (Chair), Richard A. Hackborn, Walter B. Hewlett, George A.
Keyworth II, David W. Packard, Donald E. Petersen and Lewis E. Platt. The
committee met four times in fiscal 1996. The committee is responsible for
proposing a slate of directors for election by the shareholders at each annual
meeting and for proposing candidates to fill any vacancies on the Board. The
committee will consider candidates for Board membership proposed by
shareholders who have complied with the procedures described beginning on this
page. Any shareholder wishing to recommend or nominate a candidate for
director must follow such procedures. The committee is also responsible for
reviewing management succession plans as well as addressing board
organizational and governance issues.
In fiscal 1996, all directors attended at least 75% of the meetings of the
Board and all committees of the Board of which they were members.
ELECTION OF DIRECTORS
The directors of the Company are elected annually to serve until the next
annual meeting of the shareholders and until their respective successors are
elected. All of the nominees have served as directors since the last annual
meeting. Proxies may be voted for 13 directors.
If a shareholder entitled to vote for the election of directors at a meeting
wishes to propose a candidate for consideration by the Organization Review and
Nominating Committee as a possible nominee for management's proposed slate of
directors, or such shareholder wishes to make a director nomination at a
shareholder meeting, then such shareholder must give written notice of his or
her intent to make such nomination, either by personal delivery or by United
States mail, postage prepaid, to D. Craig Nordlund, Secretary, Hewlett-Packard
Company, 3000 Hanover Street, Palo Alto, California 94304, not later than: (i)
with respect to the election to be held at an annual meeting of shareholders,
90 days in advance of such meeting, and (ii) with respect to any election to
be held at a special meeting of shareholders for the election of directors,
the close of business on the seventh day following the date on which notice of
such meeting is first given to shareholders. Each such notice must set forth:
(a) the name and address of the shareholder who intends to make the nomination
and of the person or persons to be nominated, (b) a representation that such
shareholder is a holder of record of stock of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice, (c) a description of
all arrangements or understandings
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between such shareholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by such shareholder, (d) such other information
regarding each nominee proposed by such shareholder as would have been
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission (the "Commission") if such nominee
had been nominated, or intended to be nominated by the Board of Directors, and
(e) the consent of each nominee to serve as a director of the Company if
elected. The chairman of a shareholder meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
Biographical summaries and ages as of December 27, 1996 of individuals
nominated by the Board of Directors for election as directors appear on pages
5 through 8 of this Proxy Statement. Data with respect to the number of shares
of the Company's Common Stock beneficially owned by all current directors,
directly or indirectly, as of that date, appears on pages 9 through 12 of this
Proxy Statement.
THOMAS E. EVERHART; AGE 64; PRESIDENT, CALIFORNIA INSTITUTE OF TECHNOLOGY
Dr. Everhart was elected a director of the Company in 1991. He has been
President of the California Institute of Technology since 1987. Dr. Everhart
is a director of General Motors Corporation, Saint-Gobain Corporation and
Reveo, Inc. He also is a director of KCET, a public television station in Los
Angeles, and the Corporation for National Research Initiatives.
JOHN B. FERY; AGE 66; RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER, BOISE CASCADE CORPORATION
Mr. Fery was elected a director of the Company in 1982. He became Chairman
of the Board and Chief Executive Officer of Boise Cascade Corporation in 1978.
He retired as Chief Executive Officer of Boise Cascade Corporation in 1994 and
as Chairman of the Board in 1995. Mr. Fery has been Chairman of the Board of F
& C Corporation, a private investment firm, since 1995. He currently serves as
a director of Albertson's Inc., U.S. Bancorp and The Boeing Company.
JEAN-PAUL G. GIMON; AGE 60; HONORARY GENERAL REPRESENTATIVE IN NORTH AMERICA,
CREDIT LYONNAIS S.A.
Dr. Gimon was elected a director of the Company in 1993. He served as the
General Representative in North America with Credit Lyonnais S.A., a major
global banking institution based in France, from 1984 until his retirement in
1996. Dr. Gimon is the son-in-law of Company co-founder William R. Hewlett and
is a brother-in-law of director Walter B. Hewlett. Dr. Gimon also serves on
the Board of Directors of Belle Haven Land Company, R.V.I. America Corporation
and BCCORP LLC.
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SAM GINN; AGE 59; CHAIRMAN AND CHIEF EXECUTIVE OFFICER, AIRTOUCH
COMMUNICATIONS
Mr. Ginn was elected a director of the Company in February 1996. He has been
Chairman and Chief Executive Officer of AirTouch Communications (formerly
known as PacTel Corporation) since December 1993. He was Chairman and Chief
Executive Officer of the Pacific Telesis Group from 1988 until December 1993.
Mr. Ginn currently serves as a director of Transamerica Corporation, Chevron
Corporation and Safeway Inc.
RICHARD A. HACKBORN; AGE 59; RETIRED EXECUTIVE VICE PRESIDENT, HEWLETT-PACKARD
COMPANY
Mr. Hackborn has been a director of the Company since 1992. He retired as a
Company officer in November 1993 after a 33-year career with the Company. He
was Executive Vice President, Computer Products Organization from 1990 until
his retirement. Mr. Hackborn currently serves as a director of Microsoft
Corporation and The William and Flora Hewlett Foundation.
WALTER B. HEWLETT; AGE 52; INDEPENDENT RESEARCHER AND DIRECTOR, CENTER FOR
COMPUTER ASSISTED RESEARCH IN THE HUMANITIES
Mr. Hewlett has been a director of the Company since 1987. He is an
independent software developer involved with computer applications in the
humanities. In 1994, Mr. Hewlett participated in the formation of Vermont
Telephone Company of Springfield, Vermont. He currently serves as Chairman of
that company. In 1990, Mr. Hewlett founded Merit Software Corporation, of
which he is President and a director. Merit Software develops software for
research in the humanities. In 1984, Mr. Hewlett founded the Center for
Computer Assisted Research in the Humanities, for which he serves as 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
is the son of Company co-founder William R. Hewlett and is a brother-in-law of
director Jean-Paul G. Gimon.
GEORGE A. KEYWORTH II; AGE 57; CHAIRMAN AND SENIOR FELLOW, THE PROGRESS &
FREEDOM FOUNDATION
Dr. Keyworth became a director of the Company in 1986. Prior to assuming his
current position with The Progress & Freedom Foundation, a public policy
research institute, in 1995, he had been a Distinguished Fellow of the Hudson
Institute since 1988. He was Science Advisor to the President and Director of
the White House Office of Science and Technology Policy from 1981 through
1985, and prior to that time was the Director of the Experimental Physics
Division at the Los Alamos Scientific Laboratory. He also served as a member
of the President's Commission on Industrial Competitiveness from 1984 to 1985
and the National Commission on Superconductivity from 1989 to 1990.
Dr. Keyworth is also a director of Flat Connections, Inc. and General Atomics.
He holds various honorary degrees and is an honorary professor at Fudan
University in Shanghai, People's Republic of China.
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DAVID M. LAWRENCE, M.D.; AGE 56; CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER, KAISER FOUNDATION HEALTH PLAN, INC. AND KAISER FOUNDATION HOSPITALS
Dr. Lawrence became a director of the Company in 1995. He has been 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 also is a director of Pacific Gas and Electric Company.
PAUL F. MILLER, JR.; AGE 69; RETIRED PARTNER, MILLER, ANDERSON & SHERRERD, LLP
Mr. Miller was elected a director in 1984. In 1995, he retired as a limited
partner of the investment management firm of Miller, Anderson & Sherrerd, LLP.
He was a general partner of Miller, Anderson & Sherrerd, LLP from 1969 to 1991
and a limited partner of that firm from 1991 to 1995. Mr. Miller is a director
of The Mead Corporation, Rohm and Haas Company, SPS Technologies and LTCB-MAS,
a joint venture of Miller, Anderson & Sherrerd and Long-Term Credit Bank of
Japan. He also serves as a trustee of the University of Pennsylvania, a member
of the Board of Overseers of the Wharton School, a trustee of the Colonial
Williamsburg Foundation and director of the World Wildlife Fund.
SUSAN PACKARD ORR; AGE 50; PRESIDENT, TECHNOLOGY RESOURCE ASSISTANCE CENTER
Ms. Orr became a director of the Company in 1993. Since 1986 she has been
President and owner of the Technology Resource Assistance Center, which
provides computer consulting and software development services to non-profit
organizations. She was formerly an economist at the National Institutes of
Health and a senior programmer and project leader in Health Computer Services
at the University of Minnesota. Ms. Orr also serves as President and a
director of The David and Lucile Packard Foundation, and as Vice President and
director of The Packard Humanities Institute. She is a sister of director
David W. Packard.
DAVID WOODLEY PACKARD; AGE 56; PRESIDENT, THE PACKARD HUMANITIES INSTITUTE AND
THE STANFORD THEATRE FOUNDATION
Dr. Packard became a director of the Company in 1987. He also founded The
Packard Humanities Institute in that year for the development of technology to
support basic research in the humanities. In 1984, Dr. Packard founded the
Ibycus Corporation, which sold computer systems specially designed for work
with ancient languages. Prior to founding Ibycus, he was a professor of
ancient Greek. He also serves on the boards of other non-profit organizations,
including The David and Lucile Packard Foundation. Dr. Packard is the brother
of director Susan P. Orr.
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LEWIS E. PLATT; AGE 55; CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AND CHAIRMAN OF THE EXECUTIVE COMMITTEE, HEWLETT-PACKARD COMPANY
Mr. Platt has served as a director of the Company, President and Chief
Executive Officer since November 1992 and has served as Chairman since
September 1993. He was an Executive Vice President from 1987 to 1992. Mr.
Platt held a number of management positions in the Company prior to becoming
its President, including managing the Computer Systems Organization from 1990
to 1992. He is a director of Pacific Telesis. He also serves on the Wharton
School Board of Overseers.
ROBERT P. WAYMAN; AGE 51; EXECUTIVE VICE PRESIDENT, FINANCE AND ADMINISTRATION
AND CHIEF FINANCIAL OFFICER, HEWLETT-PACKARD COMPANY
Mr. Wayman has served as a director of the Company since December 1993. He
has been an Executive Vice President responsible for finance and
administration since 1992. He has held a number of financial management
positions in the Company and was elected a Vice President and Chief Financial
Officer in 1984. He is a director of CNF Transportation, Inc. and Sybase Inc.
He also serves as a member of the Kellogg Advisory Board, Northwestern
University School of Business, and is Chairman of the Private Sector Council.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The Company is not aware of any person who, on December 27, 1996, was the
beneficial owner of 5% or more of the Company's outstanding Common Stock,
except for The David and Lucile Packard Trust dated 4/20/87, as amended,
William R. Hewlett, Susan P. Orr, David W. Packard, Nancy P. Burnett and Julie
Packard. The following table sets forth information concerning such ownership
as of December 27, 1996. It begins with ownership of the families of the
Company's founders and their related entities: (a) the family of the late Mr.
David Packard and its trust and charitable institutions, and (b) Mr. William
R. Hewlett, certain members of his family and the family foundation. The table
also shows information concerning beneficial ownership by all other directors,
by each of the executive officers named in the Summary Compensation Table (the
"Named Officers") beginning on page 13 (the "Summary Compensation Table") and
by all directors and executive officers as a group.
The number of shares beneficially owned by each entity, director or
executive officer is determined under rules of the 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 25, 1997 (60 days after the record date of December 27, 1996) 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.
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<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNERSHIP/(1)//(2)/ CLASS
------------------------------ ----------
<S> <C> <C>
FAMILY OF THE LATE DAVID PACKARD AND
ITS TRUST AND FOUNDATIONS:
THE DAVID AND LUCILE PACKARD TRUST
DATED 4/20/87, AS AMENDED (THE
"PACKARD TRUST"), of which the four
children of Mr. David Packard are
co-trustees, the first two of whom
are also directors of the Company:
Dr. David W. Packard, Ms. Susan P.
Orr, Ms. Nancy P. Burnett and Ms.
Julie Packard (the "Packard
Children")
P. O. Box 1330
Los Altos, CA 94023............... 90,653,228 8.9%
THE DAVID AND LUCILE PACKARD
FOUNDATION (THE "PACKARD
FOUNDATION"), of which the Packard
Children are directors............. 49,340,800 4.9%
MONTEREY BAY AQUARIUM FOUNDATION
(THE "AQUARIUM FOUNDATION"), of
which the Packard Children are
directors.......................... 178,479 *
As co-trustees of the Packard Trust
and as directors of the Packard
Foundation and the Aquarium
Foundation, the Packard Children
share voting and investment power
with each other over the Packard
Trust shares and with other
directors over the Packard
Foundation shares and the Aquarium
Foundation shares. Accordingly, the
Packard Children are considered
beneficial owners of these shares.
The Packard Children disclaim any
beneficial interest in all shares
held by the Packard Trust, the
Packard Foundation and the Aquarium
Foundation because they have no
economic interest in any of these
shares.
SUSAN P. ORR, Co-Trustee of the
Packard Trust, Director of the
Packard Foundation and the Aquarium
Foundation and Company director.... 2,496,306 Direct *
586,900 Indirect/(3)/
DAVID WOODLEY PACKARD, Co-Trustee of
the Packard Trust,
Director of the Packard Foundation
and the Aquarium Foundation and
Company director................... 1,886,648 Direct *
664,180 Indirect/(4)/
NANCY P. BURNETT, Co-Trustee of the
Packard Trust and Director of the
Packard Foundation and the Aquarium
Foundation......................... 2,408,405 Direct *
913,388 Indirect/(5)/
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNERSHIP/(1)(2)/ CLASS
------------------------------ ----------
<S> <C> <C>
JULIE PACKARD, Co-Trustee of the
Packard Trust and Director of the
Packard Foundation and the Aquarium
Foundation.......................... 2,744,927 Direct *
560,488 Indirect/(6)/
WILLIAM R. HEWLETT, CERTAIN HEWLETT
FAMILY MEMBERS AND THEIR RELATED
CHARITABLE INSTITUTION:
WILLIAM R. HEWLETT, Co-Founder,
Director Emeritus
1501 Page Mill Rd.
Palo Alto, CA 94304................. 63,882,178 Direct 6.4%
1,140,320 Indirect/(7)/
THE WILLIAM AND FLORA HEWLETT
FOUNDATION (THE "HEWLETT FOUNDATION"),
of which Mr. William R. Hewlett,
Mr. Walter B. Hewlett, son of
Mr. Hewlett and a Company director,
and Ms. Eleanor H. Gimon, daughter of
Mr. William R. Hewlett and the wife
of Dr. Jean-Paul G. Gimon, a Company
director, are directors. ........... 5,256,000 *
As directors of the Hewlett
Foundation, Mr. William R. Hewlett,
Mr. Walter B. Hewlett and Ms.
Eleanor H. Gimon share voting and
investment power over these shares
with the other Hewlett Foundation
directors and, accordingly, are
considered beneficial owners of
these shares, but they disclaim any
beneficial interest in all shares
held by the Hewlett Foundation
because they have no economic
interest in any of these shares.
WALTER B. HEWLETT, Director of the
Hewlett Foundation and Company
director............................ 463,560 Direct
14,860 Indirect/(8)/ *
JEAN-PAUL G. GIMON, son-in-law of
William R. Hewlett and Company
director............................ 200 Direct *
1,129,632 Indirect/(9)/
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
ALL OTHER DIRECTORS AND NAMED OFFICERS: BENEFICIAL PERCENT OF
OWNERSHIP/(1)(2)/ CLASS
-------------------- ----------
<S> <C> <C>
Edward W. Barnholt...... 149,972 Direct *
172,288 Vested Options
3,640 Indirect/(10)/
Richard E. Belluzzo..... 179,249 Direct *
95,000 Vested Options
Joel S. Birnbaum........ 112,822 Direct *
134,956 Vested Options
Thomas E. Everhart...... 2,400 Direct *
3,820 Vested Options
27,900 Indirect/(11)/
John B. Fery............ 4,000 Direct *
10,964 Vested Options
Sam Ginn................ 1,000 *
Richard A. Hackborn..... 15,484 *
George A. Keyworth II... 4,040 Direct *
4,000 Indirect/(12)/
David M. Lawrence....... 223 *
Paul F. Miller, Jr...... 64,000 Direct *
14,800 Vested Options
Donald E. Petersen...... 18,020 *
Lewis E. Platt.......... 396,420 Direct *
509,928 Vested Options
Robert P. Wayman........ 142,359 Direct *
335,248 Vested Options
All Directors and
Executive Officers
as a Group (22
persons)............... 155,582,648/(13)(14)/ 15.3%
</TABLE>
- ---------
* Represents holdings of less than one percent.
(1) Except for Ms. Susan P. Orr and Dr. David W. Packard, no current director
beneficially owns more than 1% of the Company's outstanding shares.
(2) "Vested Options" are options which may be exercised as of February 25,
1997.
(3) Includes 1,176 shares held by Ms. Orr's son, 14,216 shares held by Ms.
Orr as custodian for her daughter, 22,000 shares held by her husband,
32,324 shares held in a family trust and 517,184 shares held in trusts
for her children, of which trusts she is trustee. Ms. Orr disclaims any
beneficial interest in all of these shares.
11
<PAGE>
(4) Includes 95,976 shares held by Dr. Packard's wife, 18,696 shares held by
Dr. Packard as custodian for his child, 517,184 shares held in trust for
his children and 32,324 shares held in trust for his family, of which
trusts he is trustee. Dr. Packard disclaims any beneficial interest in
all of these shares.
(5) Includes 39,424 shares held by Ms. Burnett's spouse, 28,128 shares held
by her son, 37,736 shares held by Ms. Burnett as custodian for her
children, 32,324 shares held in a trust for her family, and 775,776
shares held in trusts for her children, of which trusts she is trustee.
Ms. Burnett disclaims any beneficial interest in all of these shares.
(6) Includes 10,980 shares held by Ms. Packard as custodian for her niece and
nephews, 32,324 shares held in a trust for her family, and 517,184 shares
held in trusts for her children, of which trusts she is trustee. Ms.
Packard disclaims any beneficial interest in all of these shares.
(7) Includes 1,140,320 shares held in a trust for Mr. William R. Hewlett's
grandchildren, of which trust Mr. Hewlett is a co-trustee. Mr. Hewlett
disclaims any beneficial interest in all shares owned by the trust.
(8) Includes 13,280 shares held by Mr. Walter B. Hewlett as custodian for his
children, 300 shares held by his son and 1,280 shares held by his wife,
Esther B. Hewlett. Mr. Hewlett disclaims any beneficial interest in all
of these shares.
(9) Includes 1,129,632 shares held by Dr. Gimon's wife.
(10) Includes 3,640 shares held by Mr. Barnholt as custodian for his children.
(11) Includes 27,900 shares held in the endowment of the California Institute
of Technology, over which shares Dr. Everhart shares voting and
investment power with other members of the University's Investment
Committee.
(12) Includes 4,000 shares held by Dr. Keyworth's wife.
(13) Includes an aggregate of 1,526,014 shares which the directors and
executive officers have the right to acquire as of February 25, 1997
through the exercise of options.
(14) Includes an aggregate of 146,537,703 shares held by directors and
executive officers in fiduciary capacities.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock to file with the
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. The Company believes
that during the fiscal year ended October 31, 1996, its officers, directors
and holders of more than 10% of the Company's Common Stock complied with all
Section 16(a) filing requirements, with the following exception: Edward W.
Barnholt, an executive officer of the Company, reported late in June 1996 on
an amended Form 4, a sale on May 29, 1996 by his daughter of 400 shares. In
making these statements, the Company has relied upon the written
representations of its directors and officers.
12
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received by the Company's Chief
Executive Officer and the four remaining most highly paid executive officers
for the three fiscal years ended October 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------
ANNUAL
COMPENSATION AWARDS
------------------ -----------------------------
(A) (B) (C) (D) (E) (F) (G)
SECURITIES
UNDERLYING
NAME AND PRINCIPAL SALARY BONUS RESTRICTED STOCK OPTIONS/ ALL OTHER
POSITION YEAR ($) ($)/(1)/ AWARD(S)($)/(2)/ SARS(#)/(3)/ COMPENSATION ($)/(4)/
------------------ ---- --------- -------- ---------------- ------------ ---------------------
<S> <C> <C> <C> <C> <C> <C>
Lewis E. Platt......... 1996 1,637,500 184,121 3,178,520 140,000 10,111
Chairman, President 1995 1,375,000 155,755 2,071,046 160,000 17,604
and Chief Executive 1994 1,087,500 91,888 1,670,404 140,000 17,246
Officer, Chairman of
the Executive
Committee
Robert P. Wayman....... 1996 843,750 95,097 924,868 40,000 10,583
Executive Vice Presi- 1995 725,000 82,105 635,288 70,000 18,083
dent, Chief Financial 1994 632,292 53,127 836,356 60,000 16,046
Officer and Director
Richard E. Belluzzo.... 1996 677,500 72,960 1,137,582 40,000 104,235
Executive Vice Presi- 1995 517,500 58,612 524,041 50,000 6,083
dent 1994 431,250 36,439 424,132 40,000 4,703
Edward W. Barnholt..... 1996 595,000 66,362 735,156 30,000 6,083
Executive Vice Presi- 1995 503,750 57,047 523,199 50,000 6,083
dent 1994 442,500 37,390 422,452 50,000 8,846
Joel S. Birnbaum....... 1996 558,750 64,024 379,389 20,000 5,991
Senior Vice President 1995 500,000 56,614 424,881 30,000 5,070
1994 461,250 36,975 424,287 32,000 8,846
</TABLE>
(See footnotes on following pages)
13
<PAGE>
FOOTNOTES TO SUMMARY COMPENSATION TABLE
(1) The amounts shown in this column reflect payments under the Company's cash
profit-sharing plan in which all employees of the Company participate.
(2) The amounts disclosed in this column represent the dollar values of (i)
the Company's Common Stock which HP contributed in fiscal 1996, 1995 and
1994 under its Employee Stock Purchase Plan (the "Stock Purchase Plan") as
a match for every two shares purchased by the named executive officers,
and (ii) for fiscal 1996, 1995 and 1994, performance-based restricted
shares of Common Stock which the Company granted to the named executive
officers in November 1995, November 1994 and May 1994, respectively.
The Stock Purchase Plan is a broad-based plan which is available to all
regular full-time or part-time employees after one year of Company service.
The matching shares vest two years after the date of the Company'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 1996, 1995 and 1994, the Company granted performance-based
restricted stock to the named executive officers in the following amounts
and values based upon the grant date closing prices of $44.25, $25.00 and
$20.22 per share, respectively (share numbers and per share prices have been
adjusted to reflect the two-for-one stock splits which occurred in June 1996
and March 1995): Mr. Platt, 70,000 shares ($3,097,500), 80,000 shares
($2,000,000) and 80,000 shares ($1,617,600); Mr. Wayman, 20,000 shares
($885,000), 24,000 shares ($600,000) and 40,000 shares ($808,800); Mr.
Belluzzo, 25,000 shares ($1,106,250), 20,000 shares ($500,000) and 20,000
shares ($404,400); Mr. Barnholt, 16,000 shares ($708,000), 20,000 shares
($500,000) and 20,000 shares ($404,400) and Dr. Birnbaum, 8,000 shares
($354,000), 16,000 shares ($400,000) and 20,000 shares ($404,400). The
restricted stock will vest only to the extent that the Company achieves
certain performance goals over a three-year period ending October 31, 1998
and 1997, for restricted stock granted in fiscal 1996 and 1995,
respectively. Restricted stock granted in fiscal 1994 vested based on
achievement of performance goals for the three-year period ended October 31,
1996. The named officers receive non-preferential dividends on these shares.
At October 31, 1996, the named executive officers held restricted stock in
the following aggregate numbers and values, based on the October 31, 1996
closing price of $44.125 per share: Mr. Platt, 233,749 shares, $10,314,175;
Mr. Wayman, 85,854 shares, $3,788,308; Mr. Belluzzo, 166,348 shares,
$7,340,106; Mr. Barnholt, 57,235 shares, $2,525,494; and Dr. Birnbaum,
45,231 shares, $1,995,818.
(3) Option numbers for fiscal 1996 have been restated to reflect the two-for-
one stock split which occurred in June 1996. Option numbers for fiscal
1995 and 1994 have been restated to reflect the two-for-one stock splits
which occurred in June 1996 and March 1995.
14
<PAGE>
(4) The amounts disclosed in this column include:
(a) Company contributions under HP's Tax Saving Capital Accumulation Plan, a
defined contribution plan, in fiscal 1996, of $5,528 for Mr. Platt,
$6,000 for each of Mr. Wayman, Mr. Belluzzo and Mr. Barnholt and $5,908
for Dr. Birnbaum; in fiscal 1995, of $5,521 for Mr. Platt and $6,000 for
each of Mr. Wayman, Mr. Belluzzo and Mr. Barnholt and $4,987 for Dr.
Birnbaum; and in fiscal 1994, of $8,763 for each of Mr. Platt, Mr.
Wayman, Mr. Barnholt and Dr. Birnbaum and $4,620 for Mr. Belluzzo.
(b) Payment of $83 by the Company in each of fiscal 1996, 1995 and 1994, for
term life insurance on behalf of each of the named executive officers.
(c) Aggregate fees for attendance at Board of Directors meetings in fiscal
1996 of $4,500 for each of Mr. Platt and Mr. Wayman, in fiscal 1995 of
$12,000 for each of Mr. Platt and Mr. Wayman and in fiscal 1994 of
$8,400 for Mr. Platt and $7,200 for Mr. Wayman.
(d) Payments of a relocation allowance and benefits under the Company's
mortgage assistance program in an aggregate of $98,152 to Mr. Belluzzo
in fiscal 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR/(1)/
The following table provides information on option grants in fiscal 1996 to
the named executive officers.
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
----------------------------------------------------- ----------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE
GRANTED EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME (#)/(2)/ FISCAL YEAR/(3)/ ($/SHARE)/(4)/ DATE PRESENT VALUE ($)/(5)/
---- ---------- ---------------- -------------- ---------- ----------------------
<S> <C> <C> <C> <C> <C>
Lewis E.
Platt... 140,000 1.8% $44.97 Nov. 2005 $2,093,000
Robert P.
Wayman.. 40,000 0.5% $44.97 Nov. 2005 $ 598,000
Richard
E.
Belluzzo
........ 40,000 0.5% $44.97 Nov. 2005 $ 598,000
Edward W.
Barnholt. 30,000 0.4% $44.97 Nov. 2005 $ 448,500
Joel S.
Birnbaum. 20,000 0.3% $44.97 Nov. 2005 $ 299,000
</TABLE>
FOOTNOTES TO OPTION GRANT TABLE
(1) No stock appreciation rights were granted to executive officers in fiscal
1996.
(2) The options granted in 1996 are exercisable 25% after the first year from
the grant date, 50% after the second year, 75% after the third year, and
100% after the fourth year. Under the terms of the
15
<PAGE>
option plan, the Compensation Committee retains discretion, subject to plan
limits, to modify the terms of outstanding options. Option numbers have been
restated to reflect the two-for-one stock split which occurred in June 1996.
(3) The Company granted options representing 7,876,242 shares to employees in
fiscal 1996.
(4) The Company may, but need not, permit the payment of applicable
withholding taxes due upon exercise of an option by the withholding of
shares otherwise issuable upon exercise of the option. Option exercise
prices have been adjusted to reflect the two-for-one stock split which
occurred in June 1996.
(5) The Company used a modified Black-Scholes model of option valuation to
determine grant date present value. The Company does not advocate or
necessarily agree that the Black-Scholes model can properly determine the
value of an option. Calculations for the named executive officers are
based on a six-year term which reflects the Company's experience that its
options, on average, are exercised within six years of grant. Other
assumptions used for the valuations are: Interest rate of 6.29%; annual
dividend yield of 1.0%; and volatility of 30%. The resulting values are
reduced by 12% to reflect the Company's experience with forfeitures.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES/(1)/
The following table provides information on option exercises in fiscal 1996
by the named executive officers and the values of such officers' unexercised
options at October 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES YEAR-END(#) FISCAL YEAR-END($)/(2)/
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lewis E. Platt.......... 42,000 $1,716,060 326,000 643,928 $9,851,940 $14,468,250
Robert P. Wayman........ 50,000 $1,819,720 197,500 297,748 $6,226,550 $ 7,619,658
Richard E. Belluzzo..... 0 $ 0 32,500 167,500 $ 742,250 $ 3,567,850
Edward W. Barnholt...... 16,000 $ 648,560 100,300 157,988 $3,039,484 $ 3,533,950
Joel S. Birnbaum........ 32,000 $1,188,060 101,500 95,456 $3,200,190 $ 2,031,688
</TABLE>
- --------
(1) No stock appreciation rights are held by any of the named executive
officers.
(2) 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 31, 1996 of $43.88. The numbers shown reflect the value of options
accumulated over a ten-year period.
16
<PAGE>
PENSION PLANS
The table that follows shows the estimated annual benefits payable upon
retirement to Company employees in the United States under the Company's
Deferred Profit-Sharing Plan (the "Deferred Plan") and the Company's
Retirement Plan (the "Retirement Plan"), as well as the Company's Excess
Benefit Retirement Plan (the "Excess Benefit Plan").
ESTIMATED ANNUAL RETIREMENT BENEFITS/(1)(2)/
<TABLE>
<CAPTION>
HIGHEST
FIVE-YEAR 15 20 25 30
AVERAGE YEARS OF YEARS OF YEARS OF YEARS OF
COMPENSATION SERVICE SERVICE SERVICE SERVICE
- ------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 400,000 $ 87,522 $116,697 $145,871 $175,045
500,000 110,022 146,697 183,371 220,045
600,000 132,522 176,697 220,871 265,045
700,000 155,022 206,697 258,371 310,045
800,000 177,522 236,697 295,871 355,045
900,000 200,022 266,697 333,371 400,045
1,000,000 222,522 296,697 370,871 445,045
1,100,000 245,022 326,697 408,371 490,045
1,200,000 267,522 356,697 445,871 535,045
1,300,000 290,022 386,697 483,371 580,045
1,400,000 312,522 416,697 520,871 625,045
1,500,000 335,022 446,697 558,371 670,045
1,600,000 357,522 476,697 595,871 715,045
1,700,000 380,022 506,697 633,371 760,045
1,800,000 402,522 536,697 670,871 805,045
1,900,000 425,022 566,697 708,371 850,045
2,000,000 447,522 596,697 745,871 895,045
</TABLE>
- ---------
(1) Amounts exceeding $125,000 would be paid pursuant to the Excess Benefit
Plan.
(2) Effective November 1, 1994, no more than $150,000, and effective November
1, 1997, no more than $160,000 (as adjusted from time to time by the
Internal Revenue Service) of cash compensation may be taken into account
in calculating benefits payable under the Retirement Plan.
The compensation covered by the 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 of the amounts shown in the "Salary" column of that table.
For each of these named executive officers, the current compensation covered
by the plans is at least 10% less than the aggregate compensation set forth in
the Summary Compensation Table.
17
<PAGE>
Officers named in the Summary Compensation Table have been credited with the
following years of service: Mr. Platt, 30 years; Mr. Wayman, 27 years; Mr.
Belluzzo, 21 years; Mr. Barnholt, 30 years and Dr. Birnbaum, 16 years.
Retirement benefits shown are payable at age 65 in the form of a single life
annuity 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
(the "Internal Revenue Code"), to compute the offset for such benefits under
the plans. For purposes of calculating the benefit, an employee may not be
credited with more than 30 years of service.
OFFICERS EARLY RETIREMENT PLAN/(1)/
The following table shows the fully vested estimated annual benefits payable
upon retirement to HP officers in the United States under the Company's
Officers Early Retirement Plan (the "Officers Plan"). Effective for officers
elected on or after November 1, 1993, an officer must work five years after
becoming an officer to be fully vested under the Officers Plan unless the
Board approves a shorter period.
<TABLE>
<CAPTION>
15 20 25 30 35
FINAL YEARS OF YEARS OF YEARS OF YEARS OF YEARS OF
COMPENSATION SERVICE SERVICE SERVICE SERVICE SERVICE
- ------------ -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
$ 400,000 $120,000 $140,000 $160,000 $180,000 $ 200,000
500,000 150,000 175,000 200,000 225,000 250,000
600,000 180,000 210,000 240,000 270,000 300,000
700,000 210,000 245,000 280,000 315,000 350,000
800,000 240,000 280,000 320,000 360,000 400,000
900,000 270,000 315,000 360,000 405,000 450,000
1,000,000 300,000 350,000 400,000 450,000 500,000
1,100,000 330,000 385,000 440,000 495,000 550,000
1,200,000 360,000 420,000 480,000 540,000 600,000
1,300,000 390,000 455,000 520,000 585,000 650,000
1,400,000 420,000 490,000 560,000 630,000 700,000
1,500,000 450,000 525,000 600,000 675,000 750,000
1,600,000 480,000 560,000 640,000 720,000 800,000
1,700,000 510,000 595,000 680,000 765,000 850,000
1,800,000 540,000 630,000 720,000 810,000 900,000
1,900,000 570,000 665,000 760,000 855,000 950,000
2,000,000 600,000 700,000 800,000 900,000 1,000,000
</TABLE>
- ---------
(1) Benefits start no earlier than age 60, unless earlier benefits are
approved by the Board, and end upon reaching age 65. Annual benefits shown
in the table assume retirement at age 60. Benefits which start before age
60 are reduced.
18
<PAGE>
Under the Officers Plan, officers may retire at age 60, or earlier if
approved by the Company's Board of Directors. A retiring officer receives
under the Officers Plan a percentage of his annual salary at retirement until
age 65, at which time any benefits under the Officers Plan terminate and
standard retirement benefits begin. The benefits are not subject to deduction
for any offset amounts other than Company-funded disability benefits. The
percentage of salary received by an officer retiring before age 65 is based on
a formula that includes age, date of election as an officer and years of
service as factors.
The compensation covered by the Officers Plan is the retiring officer's base
rate of pay (the "Rate of Pay") averaged over the last four fiscal quarters of
active employment with the Company. The Rate of Pay for a retiring officer
would equal the rate used to determine the amount in the "Salary" column of
the Company's Summary Compensation Table.
The estimated credited years of service for each of the named executive
officers as of October 31, 1996, are as follows: Mr. Platt, 30 years; Mr.
Wayman, 27 years; Mr. Belluzzo, 21 years; Mr. Barnholt, 29 years; and Dr.
Birnbaum, 15 years.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, that might incorporate future filings, including
this Proxy Statement, in whole or in part, the following report and the
Performance Graph on page 25 shall not be incorporated by reference into any
such filings, nor shall they be deemed to be soliciting material or deemed
filed with the Securities and Exchange Commission under the Securities Act or
the Exchange Act.
REPORT OF THE COMPENSATION COMMITTEE
The Company applies a consistent philosophy to compensation for all
employees, including senior management. This philosophy is based on the
premise that the achievements of the Company result from the coordinated
efforts of all individuals working toward common objectives. The Company
strives to achieve those objectives through teamwork that is focused on
meeting the expectations of customers and shareholders.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with
business objectives and performance, and to enable the Company to attract,
retain and reward executive officers whose contributions are critical to the
long-term success of the Company. The Company's compensation program for
executive officers is based on the same four principles applicable worldwide
to compensation decisions for all employees of the Company:
.The Company pays competitively.
The Company is committed to maintaining a pay program that helps
attract and retain the best people in the industry. To ensure that pay
is competitive, the Company regularly
19
<PAGE>
compares its pay practices with those of other leading companies and
sets its pay parameters based on this review.
.The Company pays for sustained performance.
Executive officers are rewarded based upon corporate performance,
business unit performance and individual performance. Corporate
performance and business unit performance are evaluated by reviewing
the extent to which strategic and business plan goals are met,
including such factors as profitability, performance relative to
competitors and timely new product introductions. Individual
performance is evaluated by reviewing organizational and management
development progress against set objectives and the degree to which
teamwork and Company values are fostered.
.The Company strives for fairness in the administration of pay.
The Company strives to compensate a particular individual equitably
compared to other executives at similar levels both inside the Company
and at comparable companies.
.The Company believes that employees should understand the performance
evaluation and pay administration process.
The process of assessing performance is as follows:
1. At the beginning of the performance cycle, the evaluating manager and
the employee set and agree upon objectives and key goals.
2. The evaluating manager gives the employee ongoing feedback on
performance.
3. At the end of the performance cycle, the manager evaluates the
accomplishment of objectives and key goals.
4. The manager compares the results to the results of peers within the
Company.
5. The evaluating manager communicates the comparative results to the
employee.
6. The comparative results affect decisions on salary and, if applicable,
stock options.
COMPENSATION VEHICLES
The Company has had a long and successful history of using a simple total
compensation program that consists of cash- and equity-based compensation.
Having a compensation program that allows the Company to attract and retain
key employees permits it to provide useful products and services to customers,
enhance shareholder value, motivate technological innovation, foster teamwork,
and adequately reward employees. The vehicles are:
CASH-BASED COMPENSATION
Salary
The Company establishes salary ranges for employees by reviewing the
aggregate of base salary and annual bonus for competitive positions in the
market. The Company surveys
20
<PAGE>
approximately fifty companies, 50% of which are in the S&P High Technology
Composite Index (the "S&P High Tech Index"). The remaining 50% are other
"Fortune 100" companies which are included within the S&P 500 Index.
Generally, the Company sets its competitive salary midpoint for an
executive officer position at the median level compared to those companies
it surveys. The Company then creates a salary range based on this midpoint.
The range is designed to place an executive officer above or below the
midpoint, according to that officer's overall individual performance. As
described above, overall individual performance is measured against the
following factors: long-term strategic goals, short-term business goals,
profitability, the development of employees and the fostering of teamwork
and other Company values. In both setting goals and measuring an executive
officer's performance against those goals, the Company takes into account
the performance of its competitors and general economic and market
conditions. None of the factors included in the Company's strategic and
business goals is assigned a specific weight. Instead, the Company
recognizes that these factors may change in order to adapt to specific
business challenges and to changing economic and marketplace conditions.
The Company does not have a bonus plan.
Cash Profit-Sharing
The Company has a worldwide profit-sharing plan under which it
distributes a portion of the Company's profits to all employees, including
executive officers, who have been employed continuously for at least six
months. The Company believes that all employees share the responsibility of
achieving profits. The same profit-sharing percentage applies to each
employee worldwide, with the payment determined by applying this percentage
to the individual's salary level. During fiscal 1996, the profit-sharing
percentage was determined by dividing twelve percent of the Company's
profits before taxes and other adjustments by all HP employee eligible
earnings. Beginning in fiscal 1997, the profit sharing percentage will be
determined using a formula which combines a percentage of the Company's
return on assets with a percentage of the Company's revenue growth in order
to better align profit-sharing with the way the Company measures its own
performance.
EQUITY-BASED COMPENSATION
Stock Incentive Program
The purpose of this program is to provide additional incentives to
employees to work to maximize shareholder value. The Company also
recognizes that a stock incentive program is a necessary element of a
competitive compensation package for its employees. The program utilizes
vesting periods to encourage key employees to continue in the employ of the
Company and thereby acts as a retention device for key employees. The
Company believes that the program encourages employees to maintain a long-
term perspective. The Company grants stock options annually to a broad-
based group representing approximately fifteen percent of the total
employee population.
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<PAGE>
In determining the size of an option award for an executive officer, the
Compensation Committee's primary considerations are the "grant value" of
the award and the performance of the officer measured against the same
performance criteria described above under "Cash-based Compensation" which
is used to determine salary. To determine the grant value guidelines for
option awards, the Company surveys the same group of companies it surveys
for salary purposes. The Company compares an option's market value, as
determined annually by calculating a two-year rolling average of the
Company's stock price, to the cash component of compensation -- salary --
for a given executive position. Because the Company does not have a bonus
plan, it compares salary for an officer of the Company to a combination of
salary and bonus for an officer of a competitor. Based upon a survey of the
cash and equity components of compensation for comparable positions in the
market, the Company then determines what percentage of this competitive
compensation it believes should be represented by the value of an option
grant. In addition to considering the grant value and the officer's
performance, the Compensation Committee also considers the number of
outstanding unvested options which the officer holds and the size of
previous option awards to that officer. The Compensation Committee does not
assign specific weights to these items.
The Company also periodically grants restricted stock to certain key
employees the Company wishes to retain. The Compensation Committee may
structure this restricted stock to vest upon the satisfaction of specified
performance goals or upon the lapse of certain time periods. During fiscal
1996, the Company granted performance-based restricted stock to certain key
executives. Any entitlement to delivery of these restricted shares after
the three-year performance period ending October 31, 1998 will depend on
whether the Company meets certain goals with respect to earnings per share
and return on assets.
During fiscal 1996, the Compensation Committee established stock
ownership guidelines for members of the Company's top management.
Corporate Tax Deduction on Compensation in Excess of $1 Million a Year
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1
million paid to the Company's Chief Executive Officer or any of the four
other most highly compensated executive officers. Certain performance-based
compensation, however, is specifically exempt from the deduction limit. The
Company does not have a policy that requires or encourages the Compensation
Committee to qualify stock options or restricted stock awarded to executive
officers for deductibility under Section 162(m) of the Internal Revenue
Code. However, the Compensation Committee does consider the net cost to the
Company in making all compensation decisions.
CEO COMPENSATION
Lewis E. Platt has been President and Chief Executive Officer ("CEO") of the
Company since November 1, 1992 and Chairman of the Board since September 1993.
The Compensation Committee
22
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used the same compensation policy described above for all employees to
determine Mr. Platt's fiscal 1996 compensation.
In setting both the cash-based and the equity-based elements of Mr. Platt's
compensation, the Compensation Committee made an overall assessment of Mr.
Platt's leadership in achieving the Company's long-term strategic and business
goals.
SALARY
Mr. Platt's base salary reflects a consideration of both competitive
forces and the Company's performance. The Compensation Committee does not
assign specific weights to these categories.
Competitive Forces
The Company surveys total cash compensation for chief executive officers
at the same group of companies described under "Cash-based Compensation"
above. When setting CEO compensation, the Company believes that it is
especially relevant to survey additional companies that are not a part of
the S&P High Tech Index because of the possibility of a company outside one
industry recruiting a CEO from another industry. Based upon its survey, the
Company then determines a median around which it builds a competitive range
of compensation for the CEO. As a result of this review, the Compensation
Committee concluded that Mr. Platt's salary was in the low end of the
competitive market for CEOs. In addition, the Compensation Committee is
keenly aware that other companies within its industry look to HP as a prime
place to recruit managerial talent.
Performance
Through the first quarter of fiscal 1996, Mr. Platt's annual salary was
$1,450,000, the amount the Compensation Committee set in January 1995. In
January 1996, the Compensation Committee reviewed Mr. Platt's salary. It
considered the Company's financial results as compared to other companies
within the high-technology industry, HP's financial performance for fiscal
1995 as compared to fiscal 1994, the Company's progress in the promotion of
women and minorities, the fact that since the Company does not have a Chief
Operating Officer ("COO"), Mr. Platt assumes additional responsibilities of
a COO, and Mr. Platt's salary history, performance ranking and total
compensation history. Following a review of the foregoing factors, the
Compensation Committee increased Mr. Platt's salary from $1,450,000 to
$1,700,000.
STOCK OPTIONS; PERFORMANCE-BASED RESTRICTED STOCK
The Company follows the same policy described above to determine Mr.
Platt's stock incentive awards as it does for other executive officers.
Stock options and performance based-restricted stock are granted to
encourage and facilitate personal stock ownership by the executive officers
and thus strengthen both their personal commitment to the Company and a
longer term perspective in their managerial responsibilities. This
component of an executive officer's compensation directly links the
officers' interests with those of the Company's other shareholders.
23
<PAGE>
In November 1995, the Compensation Committee granted Mr. Platt an option
to purchase 140,000 shares (adjusted to reflect the two-for-one stock split
which occurred in June 1996) with an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant. In
granting the option to Mr. Platt, the Compensation Committee reviewed the
grant value guidelines described above under "Equity-based Compensation,"
evaluated his performance against the performance criteria described above
under the "Performance" section of "Salary" and considered competitive data
showing total compensation for Mr. Platt and comparable chief executive
officers.
In November 1995, the Compensation Committee also granted Mr. Platt
70,000 shares (adjusted to reflect the two-for-one stock split which
occurred in June 1996) of performance-based restricted stock. Any
entitlement to delivery of shares after the three-year performance period
ending October 31, 1998 will depend on whether the Company meets certain
goals with respect to earnings per share and return on assets. To the
extent the Company exceeds these goals, Mr. Platt will receive additional
shares. In determining this award, the Compensation Committee considered
Mr. Platt's performance and the size of the proposed grant to Mr. Platt as
compared to the size of grants to Mr. Platt's senior staff members. Working
within these parameters, the Compensation Committee made an assessment that
an award of 70,000 performance-based restricted shares to Mr. Platt was
appropriate.
COMPENSATION COMMITTEE
Susan P. Orr, Chair
Thomas E. Everhart
John B. Fery
Sam Ginn
Donald E. Petersen
24
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PERFORMANCE GRAPH
Note: The stock price performance shown on the graph below is not necessarily
indicative of future price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN/*/
AMONG HEWLETT-PACKARD COMPANY, THE S&P 500 INDEX
AND THE S&P TECHNOLOGY SECTOR INDEX
<TABLE>
<CAPTION>
HEWLETT PACKARD S&P TECHNOLOGY
COMPANY S&P 500 SECTOR
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
10/91 $100 $100 $100
10/92 $114 $110 $101
10/93 $150 $126 $125
10/94 $202 $131 $152
10/95 $386 $166 $231
10/96 $371 $206 $279
- --------------------------------------------------------------------------------
</TABLE>
/*/ $100 INVESTED ON 10/31/91 IN STOCK OR INDEX, INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING 10/31.
25
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no "interlocks" as defined by the Commission, with respect to any
director who serves or for any part of fiscal 1996 served as a member of the
Compensation Committee. The following non-employee directors currently serve
on the Compensation Committee: Susan P. Orr (Chair), Thomas E. Everhart, John
B. Fery, Sam Ginn and Donald E. Petersen. In addition, Harold J. Haynes served
on the Compensation Committee for part of fiscal 1996.
TRANSACTIONS WITH MANAGEMENT
During fiscal 1996, there were no transactions between the Company and its
directors, executive officers or known holders of greater than five percent of
the Company's Common Stock in which the amount involved exceeded $60,000 and
in which any of the foregoing persons had or will have a material interest.
PROPOSAL TO ADOPT THE 1997 DIRECTOR STOCK PLAN
On November 22, 1996, the Board of Directors adopted the Hewlett-Packard
Company 1997 Director Stock Plan (the "Plan"), subject to shareholder
approval. Accordingly, at the annual meeting shareholders will be asked to
approve the Plan. For the reasons set forth below, the Board recommends that
shareholders approve the Plan.
The purpose of the Plan is to promote the best interests of the Company and
its shareholders by providing a compensation arrangement which will help to
attract and retain non-employee directors whose services are considered
essential to the Company's continued progress by providing them with long-term
financial incentives to increase the value of the Company.
PRINCIPAL FEATURES OF THE PLAN
The full text of the Plan is set forth as Appendix A hereto, and readers are
urged to refer to it for a complete description of the proposed Plan. The
summary of the principal features of the Plan which follows is qualified
entirely by such reference.
ELIGIBLE PARTICIPANTS
Under the proposed Plan, directors of the Company who are not employees of
the Company or any subsidiary of the Company would be eligible to participate
in the Plan in fiscal 1997. Should the proposed slate of directors be approved
by the shareholders, eleven directors will be eligible to participate in the
Plan.
26
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ADMINISTRATION
The Board of Directors or a committee (the "Committee") consisting of two or
more non-employee directors, each of whom is a "non-employee director" as
defined in Rule 16b-3 of the Exchange Act, shall supervise and administer the
Plan. Currently, the Committee's members are the same as the Compensation
Committee's members. Members of the Board of Directors receive no additional
compensation for their services in connection with the administration of the
Plan.
NUMBER OF SHARES SUBJECT TO THE PLAN
A total of 1,000,000 shares of Common Stock are to be reserved for issuance
pursuant to the Plan. The Company expects to register the shares with the
Commission in early 1997.
FORM OF AWARDS
Under the Plan a non-employee director must receive at least fifty percent
(50%) of the value of his annual retainer in the form of either an option
grant ("Stock Option") or a Common Stock payment ("Common Stock Payment").
"Annual retainer" under the Plan means the amount which a non-employee
director will be entitled to receive for serving as a director in a relevant
plan year beginning March 1 and ending February 28 (or February 29, as the
case may be) (a "Plan Year"), but shall not include reimbursement for
expenses, fees associated with service on any committee of the Board of
Directors or fees with respect to any other services to be provided to the
Company.
DATE OF PAYMENT
The Stock Option or the Common Stock Payment will be granted or paid, as the
case may be, automatically on March 1 (or if March 1 is not a business day, on
the next succeeding business day) of any Plan Year to any non-employee
director who elects prior to February 1 (or February 15, 1997 for the Plan
Year commencing March 1, 1997) to receive all or at least fifty percent (50%)
of his annual retainer for the following Plan Year in the form of a Stock
Option or a Common Stock Payment. If any non-employee director fails to make
an election prior to February 1 (or February 15, 1997 for the Plan Year
commencing March 1, 1997), then he shall be deemed to have elected to receive
a Stock Option for fifty percent of the value of the annual retainer. Any such
election, or any modification or termination of such an election, shall be
filed with the Company on a form prescribed by the Committee for this purpose.
Any remaining balance of the annual retainer will be paid in cash. The annual
retainer for the 1997 Plan Year will be $45,000.
COMMON STOCK PAYMENT
Number of Shares Subject to Common Stock Payment. The total number of shares
of Common Stock included in each Common Stock Payment shall be determined by
dividing the amount of the
27
<PAGE>
annual retainer that is to be paid in stock by the fair market value of a
share of Common Stock on the date of payment. It shall be equal to the largest
number of whole shares determined as follows:
50% or more, if applicable, of annual retainer Number of
---------------------------------------------- =
Fair market value on March 1 Shares
Any payment for a fractional share automatically shall be paid in cash based
upon the fair market value of such fractional share. For purposes of the Plan,
"fair market value" is the mean of the highest and lowest prices of the
Company's Common Stock on the New York Stock Exchange Composite Tape on the
date in question, or if no sales of such stock were made on that date, the
mean of the highest and lowest prices of the Common Stock on the next
preceding day on which sales were made.
For example, if the fair market value of the Common Stock on March 1, 1997
is $53.00 and if a participating non-employee director has elected by that
date to receive a Common Stock Payment representing seventy-five percent (75%)
of the value of his annual retainer, then he will receive a Common Stock
Payment in the amount of the product of 0.75 multiplied by the annual retainer
($45,000), divided by $53.00, which equals 636 whole shares. The fractional
share, as well as the remaining balance of the annual retainer, equal in this
example to the product of 0.25 times the annual retainer, will be paid in cash
in the aggregate amount of $11,292. The actual number of shares and any
remaining cash payment will, of course, depend on the non-employee director's
election and the actual fair market value on the relevant March 1.
Holding Period for Common Stock Payment Shares. The shares of Common Stock
included in each Common Stock Payment shall be deposited in certificate or
book entry form in escrow with the Company's Secretary until the six-month
anniversary of the date of issuance. The non-employee director shall retain
all rights in the shares while they are held in escrow, including, but not
limited to, voting rights and the right to receive dividends; provided,
however, that the non-employee director shall not have the right to pledge,
sell or otherwise assign such shares until all restrictions pertaining to such
shares are terminated. Promptly after the six-month anniversary of the
issuance date, the Company's Secretary shall release the shares from escrow
and deliver any applicable stock certificates to the non-employee director or
release any applicable restrictions on the non-employee director's book entry
account.
STOCK OPTION
Exercise of Stock Option. No Stock Option may be exercised prior to the
first anniversary of the date the option was granted, at which time it vests
in full. A Stock Option may be exercised only by written notice to the Company
at its head office accompanied by payment in cash of the full consideration
for the shares as to which it is exercised. No Stock Option can be exercised
after the expiration of ten years from the date the option was granted.
28
<PAGE>
Price of Stock Option. The exercise price of a Stock Option will be the fair
market value of the Common Stock on the date of grant.
Number of Shares Subject to Stock Option. The number of shares to be subject
to a Stock Option shall be an amount necessary to make the option equal in
value, using a modified Black-Scholes option valuation model, to that portion
of the annual retainer that the non-employee director elected to receive in
the form of an option. The value of the option will be calculated by assuming
that an option to purchase one share of Common Stock equals the product of (i)
a fraction determined by dividing 1 by a multiplier determined using a
modified Black-Scholes option valuation method (the "Multiplier"), and (ii)
the fair market value of a share of Common Stock on the date of grant. For the
Plan Year commencing March 1, 1997, the Board or the Committee shall calculate
the Multiplier by March 1, 1997. The Board or the Committee shall consider the
following factors in determining the Multiplier: (i) the fair market value of
the Common Stock on the date the Multiplier is determined; (ii) the average
length of time that Company stock options are held by optionees prior to
exercise; (iii) the risk-free rate of return based on the term determined in
(ii) above and U.S. government securities rates; (iv) the dividend yield of
the Common Stock; and (v) the volatility of the Common Stock over the previous
ten-year period. The number of shares to be subject to the option shall be
equal to the largest number of whole shares determined as follows:
50% or more, if applicable, of annual retainer Number of
---------------------------------------------- x Multiplier =
Fair market value on March 1 Shares
For example, if the fair market value of the Common Stock on March 1, 1997
is $53.00 and if a participating non-employee director has elected to receive
a Stock Option representing seventy-five percent (75%) of the value of his
annual retainer, then he will receive a Stock Option determined as follows:
Multiply 0.75 by the annual retainer ($45,000) and divide by $53.00. Take that
number, 636.79, and multiply by the Multiplier. For instance, the Multiplier,
which is determined by using a modified Black-Scholes model of option
valuation, would be 2.66 if the following assumptions were employed: (i) the
fair market value of the Common Stock on the date the Multiplier was
determined was $53.00; (ii) the average length of time that Company stock
options are held by optionees prior to exercise was determined to be 6 years;
(iii) the risk-free rate of return was determined to be 6.2%; (iv) the
dividend yield of the Common Stock was 1%; and (v) the volatility of the
Common Stock over the previous ten-year period was determined to be 30%. If
the Multiplier is 2.66, then the total number of whole shares subject to the
Stock Option is 1,693 shares. The fractional share (0.86), as well as the
remaining balance of the annual retainer, equal in this example to the product
of 0.25 multiplied by the annual retainer, will be paid in cash in the
aggregate amount of $11,295.58. The actual number of shares underlying the
Stock Option and any remaining cash payment will, of course, depend on the
non-employee director's election, the Multiplier and the actual fair market
value on the grant date.
29
<PAGE>
Stock Option Nontransferable. Each Stock Option granted under the Plan by
its terms shall not be transferable by the optionee otherwise than by will, or
by the laws of descent and distribution, and shall be exercised during the
lifetime of the optionee only by him. No Stock Option or interest therein may
be transferred, assigned, pledged or hypothecated by the optionee during his
lifetime, whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process.
CASH PAYMENT
Any cash payment shall be made in equal quarterly installments commencing
March 1 (or if March 1 is not a business day, on the next succeeding business
day) of each Plan Year, with the first cash payment, if any, to be made on
March 1, 1997.
EFFECTIVE DATE AND DURATION
The effective date of the Plan shall be February 25, 1997. The Plan shall
terminate on February 24, 2007, unless earlier terminated by the Board of
Directors or the Committee. No Stock Options shall be granted, and no Common
Stock Payments shall be made, after the date on which this Plan terminates.
The applicable terms of this Plan, and any terms and conditions applicable to
the Stock Options granted or Common Stock Payments made prior to such date,
shall survive the termination of the Plan and continue to apply to such Stock
Options or Common Stock Payments. The Plan is the successor plan to the
Hewlett-Packard Company 1987 Director Option Plan. Upon approval of the Plan
by shareholders, no future awards will be made under the Hewlett-Packard
Company 1987 Director Option Plan.
AMENDMENTS
The Board of Directors shall have the right to amend, modify, suspend or
terminate the Plan at any time for any purpose; provided, that following
approval of the Plan by the Company's shareholders, the Company will seek
shareholder approval for any change to the extent required by applicable law,
regulation or rule.
ADJUSTMENTS
In the event of any merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, or other change in the corporate structure or
capitalization affecting the Company's present Common Stock, at the time of
such event the Board or the Committee shall make appropriate adjustments to
the number (including the aggregate number of shares that may be issued under
the Plan) and kind of shares to be issued under the Plan and the price of any
Stock Option or Common Stock Payment.
30
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FEDERAL INCOME TAX CONSEQUENCES
The rules governing the tax treatment of Stock Options and Common Stock
Payments are quite technical. Therefore, the description of the federal income
tax consequences set forth below is necessarily general in nature and does not
purport to be complete. Moreover, statutory provisions are subject to change,
as are their interpretations, and their applications may vary in individual
circumstances. Finally, the tax consequences under applicable state and local
income tax laws may not be the same as under the federal income tax laws.
STOCK OPTIONS
All options to be granted under the Plan are nonstatutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue
Code. The grant of a Stock Option does not result in taxable income to the
recipient. Upon the exercise of an option, the recipient recognizes ordinary
income in an amount equal to the difference between the option price and the
fair market value of the shares on the date of exercise. The Company is not
entitled to an income tax deduction with respect to the grant of a Stock
Option or the sale of stock acquired pursuant thereto. The Company is
permitted a deduction equal to the amount of ordinary income the recipient is
required to recognize as a result of the exercise of a Stock Option. The non-
employee director recognizes as a capital gain or loss any subsequent profit
or loss realized on the sale or exchange of any shares disposed of or sold.
COMMON STOCK PAYMENT
A non-employee director who elects to receive his compensation in the form
of a Common Stock Payment recognizes ordinary income and the Company receives
a deduction in an amount equal to the fair market value of the shares of
Common Stock as and when they become payable.
BOARD RECOMMENDATION
The Board of Directors believes that the Company's grant of a Stock Option
or making of a Common Stock Payment will provide significant incentives to
non-employee directors who contribute and are expected to contribute
materially to the continued success of the Company. The Board of Directors
therefore recommends a vote FOR approval of the Plan by the shareholders.
The favorable vote of a majority of shares present and voting at the Annual
Meeting is required for approval of the Plan.
31
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SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
From time to time certain shareholders of the Company submit proposals that
they believe should be voted upon by the shareholders. The Commission has
adopted regulations that govern the inclusion of such proposals in the
Company's annual proxy materials. All such proposals must be submitted to the
Secretary of the Company no later than September 15, 1997 in order to be
considered for inclusion in the Company's 1998 proxy materials.
APPROVAL OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of the Company's current
Audit Committee consisting of six non-employee directors, Donald E. Petersen
(Chair), Richard A. Hackborn, Walter B. Hewlett, George A. Keyworth II, David
M. Lawrence and Paul F. Miller, Jr. has appointed Price Waterhouse LLP as the
Company's independent accountants to audit the consolidated financial
statements of the Company for the 1997 fiscal year. Price Waterhouse LLP
served as the Company's independent accountants for the fiscal year ended
October 31, 1996, and during the course of that fiscal year they were also
engaged by the Company to provide certain tax and consulting services.
The Board of Directors recommends that the shareholders vote FOR approval of
the appointment of Price Waterhouse LLP as the Company's independent
accountants for the succeeding year. If the appointment is not approved, the
Board will select other independent accountants. Representatives of Price
Waterhouse LLP will be present at the meeting to respond to appropriate
questions from the shareholders and will be given the opportunity to make a
statement should they desire to do so.
MATTERS NOT DETERMINED AT THE TIME OF SOLICITATION
The Board is not aware of any matters to come before the meeting other than
the election of directors, the proposed adoption of the 1997 Director Stock
Plan and the proposal to approve the appointment of Price Waterhouse LLP as
the Company's independent accountants for the succeeding year. If any other
matter should come before the meeting, then the persons named in the enclosed
form of proxy will have discretionary authority to vote all proxies with
respect thereto in accordance with their judgment.
INCORPORATION BY REFERENCE
As stated on page 26, the Company's 1997 Director Stock Plan is incorporated
by reference into this proxy statement.
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VOTE OF PROXIES
All shares represented by duly executed proxies will be voted for the
election of the nominees named above as directors unless authority to vote for
the proposed slate of directors or any individual director has been withheld.
If for any unforeseen reason any of such nominees should not be available as a
candidate for director, the proxies will be voted in accordance with the
authority conferred in the proxy for such other candidate or candidates as may
be nominated by the Board of Directors. With respect to the proposals to
approve the adoption of the 1997 Director Stock Plan and the appointment of
Price Waterhouse LLP as the Company's independent accountants, all such shares
will be voted for or against, or not voted, as specified on each proxy. If no
choice is indicated, a proxy will be voted for the proposals to adopt the 1997
Director Stock Plan and to approve Price Waterhouse LLP as the Company's
independent accountants.
By Order of the Board of
Directors
/s/ D. Craig Nordlund
D. Craig Nordlund
Associate General Counsel and
Secretary
Dated: January 13, 1997
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<PAGE>
APPENDIX A
HEWLETT-PACKARD COMPANY
1997 DIRECTOR STOCK PLAN
PART 1. PLAN ADMINISTRATION AND ELIGIBILITY
I. PURPOSE
The purpose of this 1997 Director Stock Plan (the "Plan") of Hewlett-Packard
Company (the "Company") is to encourage ownership in the Company by outside
directors of the Company (each, a "Non-Employee Director," or collectively,
the "Non-Employee Directors") whose continued services are considered
essential to the Company's continued progress and thus to provide them with a
further incentive to remain as directors of the Company.
II. ADMINISTRATION
The Board of Directors (the "Board") of the Company or any committee (the
"Committee") of the Board that will satisfy Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any regulations
promulgated thereunder, as from time to time in effect, including any
successor rule ("Rule 16b-3"), shall supervise and administer the Plan. The
Committee shall consist solely of two or more non-employee directors of the
Company, who shall be appointed by the Board. A member of the Board shall be
deemed to be a "non-employee director" only if he satisfies such requirements
as the Securities and Exchange Commission may establish for non-employee
directors under Rule 16b-3. Members of the Board receive no additional
compensation for their services in connection with the administration of the
Plan.
The Board or the Committee may adopt such rules or guidelines as it deems
appropriate to implement the Plan. All questions of interpretation of the Plan
or of any shares issued under it shall be determined by the Board or the
Committee and such determination shall be final and binding upon all persons
having an interest in the Plan. Any or all powers and discretion vested in the
Board or the Committee under this Plan may be exercised by any subcommittee so
authorized by the Board or the Committee and satisfying the requirements of
Rule 16b-3.
III. PARTICIPATION IN THE PLAN
Each member of the Board who is not an employee of the Company or any of its
subsidiaries or affiliates shall be eligible to receive payment for his Annual
Retainer (as defined in Section XII below) under the Plan.
A-1
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IV. STOCK SUBJECT TO THE PLAN
The maximum number of shares of the Company's $1 par value Common Stock
("Common Stock") which may be issued under the Plan shall be One Million
(1,000,000). The limitation on the number of shares which may be issued under
the Plan shall be subject to adjustment as provided in Section X of the Plan.
If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares allocable to the
unexercised portion of such option shall again become available for grant
pursuant to the Plan.
PART 2. TERMS OF THE PLAN
V. EFFECTIVE DATE OF THE PLAN
The Plan shall take effect on the date of adoption by the shareholders of
the Company. The Plan shall terminate on February 24, 2007, unless earlier
terminated by the Board of Directors or the Committee.
VI. TIME FOR GRANTING OPTIONS AND ISSUING SHARES
No options shall be granted, and no Common Stock Payments (as defined in
Section VII below) shall be made, after the date on which this Plan
terminates. The applicable terms of this Plan, and any terms and conditions
applicable to the options granted or the shares issued prior to such date,
shall survive the termination of the Plan and continue to apply to such
options and shares.
VII. TERMS AND CONDITIONS
A. Compensation Alternatives.
1. Beginning with the 1997 Plan Year (as defined in Section XII below), each
Non-Employee Director will be entitled to select one of the following
alternative means of payment for the value of his Annual Retainer:
(i) A minimum of fifty percent of the value of his Annual Retainer in
the form of a Common Stock payment (a "Common Stock Payment") and
the balance in cash (a "Cash Payment"); or
(ii) A minimum of fifty percent of the value of his Annual Retainer in
the form of an option to purchase shares of Common Stock (an
"Option Payment") and a Cash Payment.
A-2
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2. If any Non-Employee Director fails to notify the Secretary of the Company
in writing by February 1 of the preceding Plan Year (or by February 15, 1997
for the Plan Year commencing March 1, 1997) of his desired means to receive
payment of the Annual Retainer for the next Plan Year, then he shall be deemed
to have elected an Option Payment for fifty percent of the value of his Annual
Retainer, with the remaining fifty percent in cash. Any such election, or any
modification or termination of such an election, shall be filed with the
Company on a form prescribed by the Board or the Committee for this purpose.
B. Common Stock Payment.
1. Date of Payment. The shares constituting any Common Stock Payment shall
be issued automatically on March 1 of each Plan Year (or, if March 1 is not a
business day, on the next succeeding business day), commencing March 1, 1997.
Each award of a Common Stock Payment shall be evidenced by an agreement which
shall reflect the terms and conditions of the Common Stock Payment and such
additional terms and conditions as may be determined by the Board or the
Committee.
2. Number of Shares Subject to Common Stock Payment. The total number of
shares of Common Stock included in each Common Stock Payment shall be
determined by dividing the amount of the Annual Retainer that is to be paid in
stock by the Fair Market Value (as defined in Section XII below) of a share of
Common Stock on March 1 (or, if March 1 is not a business day, on the next
succeeding business day). It shall be equal to the largest number of whole
shares determined as follows:
50% or more, if applicable, of Annual Retainer Number of
---------------------------------------------- =
Fair Market Value on March 1 Shares
Any payment for a fractional share automatically shall be paid in cash based
upon the Fair Market Value on March 1 of such fractional share.
3. Holding Period for Common Stock Payment Shares. The shares of Common
Stock included in each Common Stock Payment shall be deposited in certificate
or book entry form in escrow with the Company's Secretary until the six-month
anniversary of the date of issuance. The Non-Employee Director shall retain
all rights in the shares while they are held in escrow, including, but not
limited to, voting rights and the right to receive dividends; provided,
however, that the Non-Employee Director shall not have the right to pledge,
sell or otherwise assign such shares until all restrictions pertaining to such
shares are terminated. Promptly after the six-month anniversary of the
issuance date, the Company's Secretary shall release the shares from escrow
and deliver any applicable stock certificates to the Non-Employee Director or
release any applicable restrictions on the Non-Employee Director's book entry
account.
C. Option Payment.
Subject to Section VII.A. above, each Non-Employee Director may specify the
amount of his Annual Retainer to be received in the form of a non-statutory
option not entitled to special tax treatment
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under Section 422 of the Internal Revenue Code of 1986, as amended. Each
option granted under this Plan shall be evidenced by a written agreement in
such form as the Board or Committee shall from time to time approve, which
Agreements shall comply with and be subject to the following terms and
conditions and such additional terms and conditions as may be determined by
the Board or Committee:
1. Date of Payment. The option constituting any Option Payment shall be
granted automatically on March 1 of each Plan Year (or, if March 1 is not a
business day, on the next succeeding business day), commencing March 1, 1997.
2. Number of Shares Subject to Option. The number of shares to be subject to
any option granted pursuant to the Plan shall be an amount necessary to make
such option equal in value, using a modified Black-Scholes option valuation
model, to that portion of the Annual Retainer that the Non-Employee Director
elected to receive in the form of an option. The value of the option will be
calculated by assuming that the value of an option to purchase one share of
Common Stock equals the product of (i) a fraction determined by dividing 1 by
the Multiplier, as defined below, and (ii) the Fair Market Value of a share of
Common Stock on the date of grant.
The number of shares represented by an option granted pursuant to the Plan
shall be determined by multiplying the number of shares determined in Section
VII.B.2 above by a multiplier determined using a modified Black-Scholes option
valuation method (the "Multiplier"). The Board or the Committee shall
determine the Multiplier by March 1 of the immediately preceding Plan Year by
considering the following factors: (i) the Fair Market Value of the Common
Stock on the date the Multiplier is determined; (ii) the average length of
time that Company stock options are held by optionees prior to exercise; (iii)
the risk-free rate of return based on the term determined in (ii) above and
U.S. government securities rates; (iv) the annual dividend yield for the
Common Stock; and (v) the volatility of the Common Stock over the previous
ten-year period. For the Plan Year commencing March 1, 1997, the Board or the
Committee shall calculate the Multiplier by March 1, 1997. The number of
shares to be subject to the option shall be equal to the largest number of
whole shares determined as follows:
50% or more, if applicable, of Annual Retainer Number of
---------------------------------------------- x Multiplier =
Fair Market Value on March 1 Shares
3. Price of Options. The exercise price of the option will be the Fair
Market Value of the Common Stock on the date of grant.
4. Exercise of Options. Options may be exercised only by written notice to
the Company at its head office accompanied by payment in cash of the full
consideration for the shares as to which they are exercised.
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5. Period of Option. The option will not be exercisable until the one-year
anniversary of the grant date, at which time it shall be vested as to all the
shares represented by the option. No option shall be exercisable after the
expiration of ten (10) years from the date upon which such option is granted.
6. Exercise by Representative Following Death of Director. A Non-Employee
Director, by written notice to the Company, may designate one or more persons
(and from time to time change such designation) including his legal
representative, who, by reason of his death, shall acquire the right to
exercise all or a portion of the option. If the person or persons so
designated wish to exercise any portion of the option, they must do so within
the term of the option as provided in Section VII.C.5. Any exercise by a
representative shall be subject to the provisions of this Plan.
7. Options Nontransferable. Each option granted under the Plan by its terms
shall not be transferable by the optionee otherwise than by will, or by the
laws of descent and distribution, and shall be exercised during the lifetime
of the optionee only by him. No option or interest therein may be transferred,
assigned, pledged or hypothecated by the optionee during his lifetime, whether
by operation of law or otherwise, or be made subject to execution, attachment
or similar process.
D. Cash Payment
Each Cash Payment shall be made in equal quarterly installments commencing
March 1 of each Plan Year (or, if March 1 is not a business day, on the next
succeeding business day), with the first Cash Payment, if any, to be made on
March 1, 1997.
E. Form of Issuance of Shares
Shares issued under the Plan shall be in either book entry form or in
certificate form pursuant to the instructions given by the Non-Employee
Director to the Company's transfer agent.
F. Transferability
In the event of a Non-Employee Director's death, all of such person's rights
to receive any accrued but unpaid Common Stock Payment or Option Payment will
transfer to the maximum extent permitted by law to such person's beneficiary.
Each Non-Employee Director may name, from time to time, any beneficiary or
beneficiaries (which may be named contingently or successively) as his
beneficiary for purposes of this Plan. Each designation shall be on a form
prescribed by the Committee, will be effective only when delivered to the
Company and when effective will revoke all prior designations by the Non-
Employee Director. If a Non-Employee Director dies with no such beneficiary
designation in effect, such person's beneficiary shall be his estate and such
person's payments will be transferable by will or pursuant to laws of descent
and distribution applicable to such person.
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<PAGE>
PART 3. GENERAL PROVISIONS
VIII. ASSIGNMENTS
The rights and benefits under this Plan may not be assigned except for the
designation of a beneficiary as provided in Section VII.
IX. LIMITATION OF RIGHTS
No Right to Continue as a Director. Neither the Plan, nor the issuance of
shares of Common Stock nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or
implied, that the Company will retain a director for any period of time, or at
any particular rate of compensation.
No Stockholders' Rights for Options. An optionee shall have no rights as a
stockholder with respect to the shares covered by his options until the date
of the issuance to him of a stock certificate therefor or the making of a book
entry with the Company's transfer agent, and no adjustment will be made for
dividends or other rights for which the record date is prior to the date such
certificate is issued.
X. CHANGES IN PRESENT STOCK
In the event of any merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, or other change in the corporate structure or
capitalization affecting the Company's present Common Stock, at the time of
such event the Board or the Committee shall make appropriate adjustments to
the number (including the aggregate numbers specified in Section IV) and kind
of shares to be issued under the Plan and the price of any Stock Option or
Common Stock Payment.
XI. AMENDMENT OF THE PLAN
The Board shall have the right to amend, modify, suspend or terminate the
Plan at any time for any purpose; provided, that following the approval of the
Plan by the Company's shareholders, the Company will seek shareholder approval
for any change to the extent required by applicable law, regulation or rule.
XII. DEFINITIONS
"Annual Retainer" shall mean the amount to which a Non-Employee Director
will be entitled to receive for serving as a director in a relevant Plan Year,
but shall not include reimbursement for expenses, fees associated with service
on any committee of the Board or fees with respect to any other services to be
provided to the Company.
A-6
<PAGE>
"Fair Market Value" shall be the mean of the highest and lowest quoted
selling prices for the Common Stock as reported on the New York Stock Exchange
Composite Tape on the date in question, or if no sales of such stock were made
on that date, the mean of the highest and lowest prices of the Common Stock on
the next preceding day on which sales were made.
"Plan Year" shall mean the year beginning March 1 and ending February 28, or
February 29, as the case may be, for any relevant year.
XIII. COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
It is the Company's intent that the Plan comply in all respects with Rule
16b-3. If any provision of this Plan is found not to be in compliance with
such rule and regulations, the provision shall be deemed null and void, and
the remaining provisions of the Plan shall continue in full force and effect.
All transactions under this Plan shall be executed in accordance with the
requirements of Section 16 of the Exchange Act and regulations promulgated
thereunder. The Board or the Committee may, in its sole discretion, modify the
terms and conditions of this Plan in response to and consistent with any
changes in applicable law, rule or regulation.
XIV. NOTICE
Any written notice to the Company required by any of the provisions of this
Plan shall be addressed to the Secretary of the Company and shall become
effective when it is received.
XV. GOVERNING LAW
This Plan and all determinations made and actions taken pursuant hereto
shall be governed by the law of the State of California and construed
accordingly.
A-7
<PAGE>
MAP TO THE SCOTTISH RITE CENTER
[MAP APPEARS HERE]
<PAGE>
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[LOGO OF HEWLETT-PACKARD(R) APPEARS HERE]
5965-6549EUS
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<PAGE>
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PROXY HEWLETT-PACKARD COMPANY PROXY
Annual Meeting of Shareholders - February 25, 1997
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints Lewis E. Platt 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 Hewlett-Packard Company held of record
by the undersigned on December 27, 1996, at the annual meeting of shareholders
to be held on Tuesday, February 25, 1997, or any adjournment thereof.
IMPORTANT-This Proxy must be signed and dated on the reverse side.
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<PAGE>
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HEWLETT-PACKARD COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY (X)
[ ]
Withheld For All
1. Election of Directors--- For All Except those whose
T.E. Everhart, J.B. Fery, J.P.G. Gimon, name(s) appear below.
S. Ginn, R.A. Hackborn, W.B. Hewlett,
G.A. Keyworth II, D.M. Lawrence,
P.F. Miller, Jr., S.P. Orr, D.W. (_) (_) (_)
Packard, L.E. Platt, and R.P. Wayman
(INSTRUCTION: To withhold authority to
vote for any individual nominees write
that nominee's name in the space provided.)
________________________________
For Against Abstain
2. Proposal to Approve the Adoption of the
1997 Director Stock Plan. (_) (_) (_)
For Against Abstain
3. Proposal to Approve the Appointment of
Price Waterhouse LLP as Independent (_) (_) (_)
Accountants.
4. In their discretion the Proxies are
authorized to vote upon such other
business as may properly come before
the meeting.
Please mark in oval if you plan to
attend the annual meeting:
I plan to attend the annual meeting.
Please send me an admission ticket. (_)
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ITEMS 1,2 AND 3.
Dated:______________________________________, 1997
__________________________________________________________________________
Signature
__________________________________________________________________________
Signature
Please sign exactly as your name or names appear on the reverse side. For joint
accounts, each owner should sign. When signing as executor, administrator,
attorney, trustee or guardian, etc., please give your full title.
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