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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended October 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to _______________
Commission File Number: 1-4423
Exact name of registrant as specified in its charter:
HEWLETT-PACKARD COMPANY
STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION: California
I.R.S. EMPLOYER
IDENTIFICATION NO.: 94-1081436
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES:
3000 Hanover Street, Palo Alto, California 94304
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 857-1501
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common Stock New York Stock Exchange, Inc.
par value $1 Pacific Stock Exchange, Inc.
per share
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's common stock held by
nonaffiliates as of December 27, 1996 was $40,735,599,574.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of December 27, 1996: 1,017,105,000 shares of $1 par value
common stock.
DOCUMENTS INCORPORATED BY REFERENCE
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DOCUMENT DESCRIPTION 10-K PART
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Pages 29-54 (excluding order data and "Statement of Management
Responsibility") and the inside back cover of the registrant's
1996 Annual Report to Shareholders I, II, IV
Pages 2-19 and 26 of the registrant's Notice of Annual Meeting
of Shareholders and Proxy Statement dated January 13, 1997 III
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PART I
ITEM 1. BUSINESS.
PRODUCTS AND SERVICES
Hewlett-Packard Company was incorporated in 1947 under the laws of the
State of California as the successor to a partnership founded in 1939 by William
R. Hewlett and David Packard.
On a worldwide basis, Hewlett-Packard Company, together with its
consolidated subsidiaries (the "Company"), designs, manufactures and services
equipment and systems for measurement, computation and communications. The
Company offers a wide variety of systems and standalone products, including
computer systems, personal computers ("PCs"), printers and other peripheral
products, calculators and other personal information products, electronic test
equipment and systems, medical electronic equipment, solid state components and
instrumentation for chemical analysis. Services such as systems integration,
selective-outsourcing management, consulting, education, product financing and
rentals, as well as customer support and maintenance, are also an integral part
of the Company's offerings. These products and services are used in industry,
business, engineering, science, medicine and education. A summary of the
Company's net revenue as contributed by its major groupings of similar products
and services is found on page 53 of the Company's 1996 Annual Report to
Shareholders, which page (excluding order data) is incorporated herein by
reference.
The Company's computers, computer systems, personal information products,
personal peripheral products and other peripherals are used in a variety of
applications, including scientific and engineering computation and analysis,
instrument control and business information management. The Company's core
computing products and technologies include its PA-RISC architecture for systems
and workstations, and software infrastructure for open systems. The Company's
general-purpose computers and computer systems include scalable families of PCs,
servers and systems for use in homes, small workgroups, larger departments and
entire enterprises. Key products include the HP 9000 series, which runs HP-UX,
the Company's implementation of the UNIX(R)(1) operating system, and comprises
both workstations with powerful computational and graphics capabilities as well
as multiuser computers for both technical and commercial applications; the HP
NetServer series of PC servers; the HP Pavilion multimedia home PC; and the HP
Vectra series of IBM-compatible PCs for use in business, engineering,
manufacturing and chemical analysis. The Company offers software programming
services, network services, distributed system services and data management
services. Customers of the Company's computers, computer systems and software
infrastructure products include original equipment manufacturers, dealers,
value-added resellers and retailers, as well as end users for a variety of
applications.
In the field of computing during fiscal 1996, the Company introduced new HP
9000 K-Class enterprise servers, which are used primarily as application,
Internet, database, LAN and Network File System and compute-intensive servers;
and new HP 9000 D-Class enterprise servers, which are used primarily as large-
capacity Web servers and in small to medium-sized workgroups or businesses. The
Company also announced its next-generation PA-RISC microprocessor, the PA-8200.
This year the Company introduced new models of the HP Pavilion multimedia home
PC, which has become one of the leading consumer PCs in the United States. Other
key introductions included the HP Vectra 500 series PC for small businesses, the
HP NetServer LX Pro system, which is the first HP NetServer system based on the
Intel Pentium(R) Pro processor, and the HP OmniBook 800 notebook PC line.
In the information-storage business, the Company extended its HP SureStore
family of network-backup solutions by offering tape-based storage that uses
digital linear tape and Travan-based tape developed by Imation Corporation.
During fiscal 1996, the Company also announced that it was exiting the
disk-mechanism manufacturing business.
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(1) UNIX is a registered trademark in the United States and other countries,
licensed exclusively through X/OPEN(TM) Company Limited.
X/OPEN is a trademark of X/OPEN Company Limited in the U.K. and other
countries.
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Key software introductions in fiscal 1996 included a distributed version of
the Company's network-management platform, HP OpenView Network Node Manager; new
HP OpenView solutions designed to enable customers to manage LAN environments
that include Windows NT(R) and Novell NetWare; and HP Software Depot, a Web site
that allows users to access public-domain software and HP beta software for the
Internet.
The Company's peripheral products include a variety of system and desktop
printers, such as the HP LaserJet family; the HP DeskJet family, which is based
on the Company's thermal inkjet technology; large-format printers and page
scanners; video display terminals; and tape drives and related autochangers.
During fiscal 1996, the Company introduced the HP LaserJet 5N printer, which is
a low-cost, network-optimized printer for workgroups, and the HP LaserJet 5Si
printer, which combines printing and copying capabilities enabling users to
create multiple original prints. Other key new products were the HP DeskJet 682C
printer, which enables home users to print cards and banners cost effectively,
and the HP DeskJet 690C, which is the Company's first photo-quality printer. The
Company also brought out the HP ScanJet 4Si network scanner during fiscal 1996.
In addition, the Company introduced the HP DeskJet 820C and 870C printers, which
are designed for use by small businesses. The HP DeskJet 820C is the first
printer to incorporate a new HP printing architecture that allows users of
Microsoft Windows(R) to print at higher speeds with reduced costs. This year the
Company also worked with several partners to develop FlashPix, an
industry-standard photo imaging file format.
The Company also produces measurement systems for use in electronics,
medicine and chemical analysis. Test-and-measurement instruments include
voltmeters and multimeters that measure voltage, current and resistance;
counters that measure the frequency of an electrical signal; oscilloscopes and
logic analyzers that measure electrical changes in relation to time; signal
generators that provide the electrical stimulus for the testing of systems and
components; specialized communications and semiconductor test equipment; and
atomic frequency standards, which are used in accurate time-interval and
timekeeping applications. Instruments for medical applications include
continuous monitoring systems for critical-care patients, fetal monitors,
electrocardiographs, cardiac catheterization laboratory systems, blood gas
measuring instruments and cardiac defibrillators. Instruments for
chemical-analysis applications include gas and liquid chromatographs, mass
spectrometers, laboratory data systems and spectrophotometers. Key introductions
for measurement systems in fiscal 1996 included a new version of the HP Internet
Advisor, which automates network trouble-shooting; the HP NetMetrix system,
which helps users manage networks by extracting LAN data for use in capacity
planning and to improve security; instruments to test communications devices
based on Code Division Multiple Access technology; a mixed-signal oscilloscope
that combines timing analysis with oscilloscope capabilities; and new software
capabilities that help clinicians predict heart attack probability, display 3-D
cardiac images and manage multimedia cardiology data on a PC.
In the Company's chemical-analysis business, the new LC 1100 series liquid
chromatograph enables customers to integrate different modules with their
customized systems to perform specialized tasks, from routine analyses by
less-skilled technicians to sophisticated R&D applications by highly trained
chemists.
The Company also manufactures electronic component products consisting
principally of microwave semiconductor, fiber-optic and optoelectronic devices,
including light-emitting diodes (LEDs). The products are sold primarily to other
manufacturers for incorporation into their electronic products but also are used
in many of the Company's products. In fiscal 1996, the Company introduced a
fiber-optic transceiver with gigabit-per-second speed for transmitting
full-motion video and multimedia. The Company also introduced a SnapLED
assembly, which makes thin, automotive-rear-lighting assemblies.
In addition to services such as systems integration, selective-outsourcing
management, consulting, education, product financing and rentals, the Company
provides service for its equipment, systems and peripherals, including support
and maintenance services, parts and supplies for design and manufacturing
systems, office and information systems, general-purpose instruments, computers
and computer systems, peripherals and network products. In fiscal 1996, the
Company derived 14 percent of its net revenue from such services.
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In all its businesses, the Company strives to promote industry standards
that recognize customer preferences for open systems in which different vendors'
products can work together. The Company often bases its product innovations on
such standards and seeks to make its technology innovations into industry
standards through licensing to other companies and standards-setting groups. For
example, during fiscal 1996 the Company helped lead the development of the
International Cryptography Framework, an industrywide effort to address the
issue of security on the Internet.
MARKETING
Customers. The Company has approximately 600 sales and support offices and
distributorships in more than 120 countries. Sales are made to industrial and
commercial customers, educational and scientific institutions, healthcare
providers (including individual doctors, hospitals, clinics and research
laboratories), and, in the case of its calculators and other personal
information products, computer peripherals and PCs, to individuals for personal
use.
Sales Organization. More than half of the Company's orders are derived
through reseller channels, including retailers, dealers and original equipment
manufacturers. The remaining product orders result from the efforts of its own
sales organization selling to end users. The Company's direct sales operations
are supported by field service engineers, sales representatives, service
personnel and administrative support staff. In fiscal 1996, a higher proportion
of the Company's net revenue than in fiscal 1995 was generated from products
such as personal peripherals, which are primarily sold through resellers. As
more of the Company's products are distributed through resellers, the financial
health of these resellers, and the Company's continuing relationships with them,
become more important to the Company's success. Some of these companies are
thinly capitalized and may be unable to withstand changes in business
conditions. The Company's financial results could be adversely affected if the
financial condition of these resellers substantially weakens or if the Company's
relationships with such resellers deteriorate.
Resellers constantly adjust their ordering patterns in response to the
Company's, and its competitors', supply into the channel and the timing of their
new product introductions and relative feature sets, as well as seasonal
fluctuations in end-user demand such as the back-to-school and holiday selling
periods. Resellers may increase orders during times of shortages, cancel orders
if the channel is filled with currently available products, or delay orders in
anticipation of new products.
International. The Company's total orders originating outside the United
States, as a percentage of total company orders, were approximately 56 percent
in fiscal 1996, 55 percent in fiscal 1995 and 54 percent in fiscal 1994. The
majority of these international orders were from customers other than foreign
governments. Approximately two-thirds of the Company's international orders in
each of the last three fiscal years were derived from Europe, with most of the
balance coming from Japan, other countries in Asia Pacific, Latin America and
Canada.
Most of the Company's sales in international markets are made by foreign
sales subsidiaries. In countries with low sales volume, sales are made through
various representative and distributorship arrangements. Certain sales in
international markets, however, are made directly by the Company from the United
States.
The Company's international business is subject to risks customarily
encountered in foreign operations, including fluctuations in monetary exchange
rates, import and export controls and the economic, political, tax and
regulatory policies of foreign governments. The Company believes that its
international diversification provides stability to its worldwide operations and
reduces the impact on the Company of adverse economic changes in any single
country. A summary of the Company's net revenue, earnings from operations and
identifiable assets by geographic area is found on page 51 of the Company's 1996
Annual Report to Shareholders, which page is incorporated herein by reference.
COMPETITION
The Company encounters aggressive competition in all areas of its business
activity. Its competitors are numerous, ranging from some of the world's largest
corporations to many relatively small and highly
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specialized firms. The Company competes primarily on the basis of technology,
performance, price, quality, reliability, distribution, and customer service and
support. The Company's reputation, the ease of use of its products and the ready
availability of multiple software applications and customer training are also
important competitive factors.
The computer market is characterized by vigorous competition among major
corporations with long-established positions and a large number of new and
rapidly growing firms. Product life cycles are short, and, to remain
competitive, the Company will be required to develop new products, periodically
enhance its existing products and compete effectively in the manner described
above. In particular, the Company anticipates that it will have to continue to
adjust prices to stay competitive and effectively manage growth with
correspondingly reduced gross margins.
While the absence of reliable statistics makes it difficult to state the
Company's relative position, the Company believes that it is the second-largest
U.S.-based manufacturer of general-purpose computers, personal peripherals such
as desktop printers, and calculators and other personal information products,
all for industrial, scientific and business applications. The markets for
test-and-measurement instruments are influenced by special manufacturers that
often have great strength in narrow market segments. In general, however, the
Company believes that it is one of the principal suppliers in these markets.
BACKLOG
The Company believes that backlog is not a meaningful indicator of future
business prospects due to the volume of products delivered from shelf
inventories, the shortening of product delivery schedules and the portion of
revenue related to its service and support business. Therefore, the Company
believes that backlog information is not material to an understanding of its
business.
PATENTS
The Company's general policy has been to seek patent protection for those
inventions and improvements likely to be incorporated into its products or to
give the Company a competitive advantage. While the Company believes that its
patents and applications have value, in general no single patent is in itself
essential. The Company believes that its technological position depends
primarily on the technical competence and creative ability of its research and
development personnel.
MATERIALS
The Company's manufacturing operations employ a wide variety of
semiconductors, electromechanical components and assemblies, and raw materials
such as plastic resins and sheet metal. The Company believes that the materials
and supplies necessary for its manufacturing operations are presently available
in the quantities required. The Company purchases materials, supplies and
product subassemblies from a substantial number of vendors. For many of its
products, the Company has existing alternate sources of supply, or such sources
are readily available. In certain instances, however, the Company enters into
non-cancelable purchase commitments with, or makes advance payments to, certain
suppliers to ensure supply. Portions of the Company's manufacturing operations
are dependent on the ability of suppliers to deliver components, subassemblies
and completed products in time to meet critical manufacturing and distribution
schedules. The failure of suppliers to deliver these components, subassemblies
and products in a timely manner may adversely affect the Company's operating
results until alternate sourcing could be developed. In addition, the Company
periodically experiences constrained supply of certain component parts in some
product lines as a result of strong demand in the industry for those parts. Such
constraints, if persistent, may adversely affect the Company's operating
results. However, the Company believes that alternate suppliers or design
solutions could be arranged within a reasonable time so that material long-term
adverse impacts would be minimized.
RESEARCH AND DEVELOPMENT
The process of developing new high-technology products is inherently
complex and uncertain and requires innovative designs that anticipate customer
needs and technological trends. Without the introduction
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of new products and product enhancements, the Company's products are likely to
become technologically obsolete, in which case revenues would be materially and
adversely affected. There can be no assurance that such new products, if and
when introduced, will achieve market acceptance. After the products are
developed, the Company must quickly manufacture products in sufficient volumes
at acceptable costs to meet demand.
Expenditures for research and development increased 18 percent in fiscal
1996 to $2.7 billion, compared with $2.3 billion and 14 percent growth in fiscal
1995, and $2.0 billion and 15 percent growth in fiscal 1994. In fiscal 1996,
research and development expenditures were 7.1 percent of net revenue, compared
with 7.3 percent in fiscal 1995 and 8.1 percent in fiscal 1994. The Company
anticipates that it will continue to have significant research and development
expenditures in order to maintain its competitive position with a continuing
flow of innovative, high-quality products.
ENVIRONMENT
The operations of the Company involve the use of substances regulated under
various federal, state and international laws governing the environment. It is
the Company's policy to apply strict standards for environmental protection to
sites inside and outside the U.S., even if not subject to regulations imposed by
local governments. The liability for environmental remediation and related costs
is accrued when it is considered probable and the costs can be reasonably
estimated. Environmental costs are presently not material to the Company's
operations or financial position.
EMPLOYEES
The Company had approximately 112,000 employees worldwide at October 31,
1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the executive officers of the Company is set forth in
Part III below.
ITEM 2. PROPERTIES.
The principal executive offices of the Company are located at 3000 Hanover
Street, Palo Alto, California 94304. As of October 31, 1996, the Company owned
or leased a total of approximately 47.2 million square feet of space worldwide.
The Company believes that its existing properties are in good condition and
suitable for the conduct of its business.
The Company's plants are equipped with machinery, most of which is owned by
the Company and is in part developed by it to meet the special requirements for
manufacturing computers, peripherals, precision electronic instruments and
systems. At the end of fiscal year 1996, the Company was productively utilizing
the vast majority of the space in its facilities, while actively disposing of
space determined to be excess.
The Company anticipates that most of the capital necessary for expansion
will continue to be obtained from internally generated funds. Investment in new
property, plant and equipment amounted to $2.2 billion in fiscal 1996, $1.6
billion in fiscal 1995 and $1.3 billion in fiscal 1994.
As of October 31, 1996, the Company's marketing operations occupied
approximately 12.5 million square feet, of which 3.9 million square feet were
located within the United States. The Company owns 53% of the space used for
marketing activities and leases the remaining 47%.
The Company's manufacturing plants, research and development facilities and
warehouse and administrative facilities occupied 34.7 million square feet, of
which 25.6 million square feet were located within the United States. The
Company owns 80% of its manufacturing, research and development, warehouse and
administrative space and leases the remaining 20%. None of the property owned by
the Company is held subject to any major encumbrances.
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The locations of the Company's geographic operations are listed on the
inside back cover of the Company's 1996 Annual Report to Shareholders, which
page is incorporated herein by reference. The locations of the Company's major
product development and manufacturing facilities and the Hewlett-Packard
Laboratories are listed below:
PRODUCT DEVELOPMENT
AND MANUFACTURING
Americas
Cupertino, Folsom, Mountain
View, Newark, Palo Alto,
Rohnert Park, Roseville, San
Diego, San Jose, Santa Clara,
Santa Rosa, Sunnyvale and
Westlake Village, California
Colorado Springs, Fort Collins,
Greeley and Loveland,
Colorado
Wilmington, Delaware
Boise, Idaho
Andover and Chelmsford,
Massachusetts
Exeter, New Hampshire
Rockaway, New Jersey
Corvallis and
McMinnville, Oregon
Aquadilla, Puerto Rico
Richardson, Texas
Lake Stevens, Spokane and
Vancouver, Washington
Brasilia, Brazil
Edmonton, Calgary, and
Waterloo, Canada
Guadalajara, Mexico
Europe
Grenoble and L'Isle d'Abeau,
France
Boblingen and Waldbonn,
Germany
Dublin, Ireland
Bergamo, Italy
Amersfoort, The Netherlands
Barcelona, Spain
Bristol, Ipswich and South
Queensferry, United Kingdom
Asia Pacific
Melbourne, Australia
Beijing, Qingdao and
Shanghai, China
Bangalore, India
Hachioji and Kobe, Japan
Seoul, Korea
Penang, Malaysia
Singapore
HEWLETT-PACKARD
LABORATORIES
Palo Alto, California
Tokyo, Japan
Bristol, United Kingdom
ITEM 3. LEGAL PROCEEDINGS.
There are presently pending no legal proceedings, other than routine
litigation incidental to the Company's business, to which the Company is a party
or to which any of its property is subject.
The Company is a party to, or otherwise involved in, proceedings brought by
federal or state environmental agencies under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), known as "superfund," or
state laws similar to CERCLA. The Company is also conducting environmental
investigations or remediations at several of its current or former operating
sites pursuant to administrative orders or consent agreements with state
environmental agencies. Any liability from such proceedings, in the aggregate,
is not expected to be material to the operations or financial position of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
Information regarding the market prices of the Company's Common Stock and
the markets for that stock may be found on page 54 and the inside back cover,
respectively, of the Company's 1996 Annual Report to
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Shareholders. The number of shareholders and information concerning the
Company's current dividend rate are set forth in the section entitled "Common
Stock and Dividends" found on the inside back cover of that report. Additional
information concerning dividends may be found on pages 29, 38, 39 and 54 of the
Company's 1996 Annual Report to Shareholders. Such pages (excluding order data)
are incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for the Company is set forth on page 29 of the
Company's 1996 Annual Report to Shareholders, which page (excluding order data)
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
A discussion of the Company's financial condition, changes in financial
condition and results of operations appears in the "Financial Review" found on
pages 31-33 and 35-37 of the Company's 1996 Annual Report to Shareholders. Such
pages (excluding order data) are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company, together with the
report thereon of Price Waterhouse LLP, independent accountants, and the
unaudited "Quarterly Summary" are set forth on pages 30, 34, 38-52 and 54 of the
Company's 1996 Annual Report to Shareholders, which pages (excluding order data
and "Statement of Management Responsibility") are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding directors of the Company who are standing for
reelection is set forth under "Election of Directors" on pages 4-8 of the
Company's Notice of Annual Meeting of Shareholders and Proxy Statement, dated
January 13, 1997 (the "Notice and Proxy Statement"), which pages are
incorporated herein by reference.
Information regarding a director of the Company who is retiring on February
25, 1997 is set forth below:
DIRECTOR WHO IS RETIRING:
DONALD E. PETERSEN; AGE 70; RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER, FORD MOTOR COMPANY
Mr. Petersen has served as a director of the Company since 1987. He was
Chairman of the Board of Directors and Chief Executive Officer of Ford Motor
Company from 1985 until his retirement in 1990. Mr. Petersen is also a member of
the Board of Directors of Dow Jones & Company, Inc., The Boeing Company and four
mutual fund boards of the Capital Research & Management Corp. He is a member of
the National Academy of Engineering, the National Research Council Industry
Advisory Board and the Science, Technology and Economic Policy Board. He is also
active in education programs at Stanford University and the University of
Washington in engineering and manufacturing management.
The names of the executive officers of the Company, and their ages, titles
and biographies as of December 27, 1996, are set forth below. All officers are
elected for one-year terms.
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EXECUTIVE OFFICERS:
EDWARD W. BARNHOLT; AGE 53; EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER, TEST
AND MEASUREMENT ORGANIZATION.
Mr. Barnholt was elected an Executive Vice President in 1996 and a Senior
Vice President in 1993. He became Vice President and General Manager, Test and
Measurement Organization, with responsibility for the Company's Electronic
Instrument, Automatic Test, Microwave and Communications and Communications Test
Solutions Groups in 1990. Mr. Barnholt was elected a Vice President of the
Company in 1988. He is a director of KLA Instruments Corporation.
RICHARD E. BELLUZZO; AGE 43; EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER,
COMPUTER ORGANIZATION.
Mr. Belluzzo assumed management responsibility for the newly formed
Computer Organization and was elected an Executive Vice President in 1995. He
was General Manager of the Computer Products Organization from 1993 to August
1995, and he served as General Manager of the InkJet Products Group from 1991 to
1993. He was elected a Vice President in 1992 and a Senior Vice President in
January 1995. He is a director of Specialty Laboratories and Proxima
Corporation.
JOEL S. BIRNBAUM; AGE 59; SENIOR VICE PRESIDENT, RESEARCH AND DEVELOPMENT
DIRECTOR, HP LABORATORIES.
Dr. Birnbaum was elected a Senior Vice President in 1993. He became Vice
President, Research and Development and Director, HP Laboratories in September
1991. Additionally, he served as General Manager, Information Architecture Group
from 1988 until 1991. He was elected a Vice President in 1984. He is a director
of the Corporation for National Research Initiatives.
S.T. JACK BRIGHAM III; AGE 57; SENIOR VICE PRESIDENT, CORPORATE AFFAIRS AND
GENERAL COUNSEL.
Mr. Brigham was elected a Senior Vice President in 1995 and a Vice
President in 1982. He became Vice President, Corporate Affairs in 1992. He has
served as General Counsel since 1976.
DOUGLAS K. CARNAHAN; AGE 55; SENIOR VICE PRESIDENT AND GENERAL MANAGER,
MEASUREMENT SYSTEMS ORGANIZATION.
Mr. Carnahan was elected a Senior Vice President in 1995 and has been in
his current position since 1993. He was General Manager of the Printing Systems
Group from 1991 to 1993, and he was elected a Vice President in 1992.
RAYMOND W. COOKINGHAM; AGE 53; VICE PRESIDENT AND CONTROLLER.
Mr. Cookingham was elected a Vice President in 1993. He has served as
Controller since 1986.
F.E. (PETE) PETERSON; AGE 55; SENIOR VICE PRESIDENT, CORPORATE PERSONNEL.
Mr. Peterson has served as Director of Corporate Personnel since 1990. He
was elected a Vice President in 1992 and a Senior Vice President in 1995.
LEWIS E. PLATT; AGE 55; CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AND CHAIRMAN OF THE EXECUTIVE COMMITTEE.
Mr. Platt has served as a director of the Company, President and Chief
Executive Officer since November 1992 and has served as Chairman since 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.
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LEE S. TING; AGE 54; VICE PRESIDENT AND MANAGING DIRECTOR, GEOGRAPHIC
OPERATIONS.
Mr. Ting assumed his current position as Vice President and Managing
Director, Geographic Operations on November 1, 1996. He had been Managing
Director of the Company's Asia Pacific region since 1993 and a Vice President
since 1995. He was Managing Director of Northeast Asia Operations from 1991 to
1993.
ROBERT P. WAYMAN; AGE 51; EXECUTIVE VICE PRESIDENT, FINANCE AND ADMINISTRATION
AND CHIEF FINANCIAL OFFICER.
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.
Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934 is set forth on page 12 of the Notice and Proxy Statement,
which page is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding the Company's compensation of its named executive
officers is set forth on pages 13-19 of the Notice and Proxy Statement, which
pages are incorporated herein by reference. Information regarding the Company's
compensation of its directors is set forth on pages 2-4 and 26 of the Notice and
Proxy Statement, which pages are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding security ownership of certain beneficial owners and
management is set forth on pages 8-12 of the Notice and Proxy Statement, which
pages are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements:
<TABLE>
<CAPTION>
PAGE IN
ANNUAL REPORT
TO SHAREHOLDERS(*)
------------------
<S> <C>
Report of Independent Accountants........................... 52
Consolidated Statement of Earnings for the three years ended
October 31, 1996.......................................... 30
Consolidated Balance Sheet at October 31, 1996 and 1995..... 34
Consolidated Statement of Cash Flows for the three years
ended October 31, 1996.................................... 38
Consolidated Statement of Shareholders' Equity for the three
years ended October 31, 1996.............................. 39
Notes to Consolidated Financial Statements.................. 40-51
</TABLE>
- ---------------
* Incorporated by reference from the indicated pages of the Company's 1996
Annual Report to Shareholders.
2. Financial Statement Schedules:
None.
9
<PAGE> 11
3. Exhibits:
<TABLE>
<S> <C>
1. Not applicable.
2. None.
3(a). Registrant's Amended and Restated Articles of Incorporation.
3(b). Registrant's Amended By-Laws.
4. None.
5-8. Not applicable.
9. None.
10(a). Registrant's 1979 Incentive Stock Option Plan, which appears as Exhibit
10(a) to Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1983, which Exhibit is incorporated herein by
reference.*
10(b). Registrant's 1979 Incentive Stock Option Plan Agreements, which appear as
Exhibit 10(b) to Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1983, which Exhibit is incorporated herein by
reference.*
10(c). Letter dated September 24, 1984 to optionees advising them of amendment
to 1979 Incentive Stock Option Plan Agreements (Exhibit 10(b) above),
which appears as Exhibit 10(c) to Registrant's Annual Report on Form 10-K
for the fiscal year ended October 31, 1984, which Exhibit is incorporated
herein by reference.*
10(d). Registrant's Officers Early Retirement Plan, amended and restated as of
January 1, 1996, and First Amendment effective December 1, 1996 to the
Officers Early Retirement Plan.*
10(e). Registrant's 1985 Incentive Compensation Plan, which appears as Exhibit
10(e) to Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1984, which Exhibit is incorporated herein by
reference.*
10(f). Registrant's 1985 Incentive Compensation Plan Stock Option Agreements,
which appear as Exhibit 10(f) to Registrant's Annual Report on Form 10-K
for the fiscal year ended October 31, 1984, which Exhibit is incorporated
herein by reference.*
10(g). Registrant's Excess Benefit Retirement Plan, amended and restated as of
November 1, 1994.*
10(h). Registrant's 1985 Incentive Compensation Plan restricted stock
agreements, which appear as Exhibit 10(h) to Registrant's Annual Report
on Form 10-K for the fiscal year ended October 31, 1985, which Exhibit is
incorporated herein by reference.*
10(i). Registrant's 1987 Director Option Plan, which appears as Appendix A to
Registrant's Proxy Statement dated January 16, 1987, which Appendix is
incorporated herein by reference.*
10(j). Registrant's 1989 Independent Director Deferred Compensation Program,
which appears as Exhibit 10(j) to Registrant's Annual Report on Form 10-K
for the fiscal year ended October 31, 1989, which Exhibit is incorporated
herein by reference.*
10(k). Registrant's 1990 Incentive Stock Plan, which appears as Appendix A to
Registrant's Proxy Statement dated January 11, 1990, which Appendix is
incorporated herein by reference.*
10(l). Registrant's 1990 Incentive Stock Plan stock option and restricted stock
agreements, which appear as Exhibit 10(l) to Registrant's Annual Report
on Form 10-K for the fiscal year ended October 31, 1990, which Exhibit is
incorporated herein by reference.*
10(m). Resolution dated July 17, 1991 adopting amendment to Registrant's 1979
Incentive Stock Option Plan, which appears as Exhibit 10(m) to
Registrant's Annual Report on Form 10-K for the fiscal year ended October
31, 1991, which Exhibit is incorporated herein by reference.*
</TABLE>
10
<PAGE> 12
<TABLE>
<S> <C>
10(n). Resolution dated July 17, 1991 adopting amendment to Registrant's 1985
Incentive Compensation Plan, which appears as Exhibit 10(n) to
Registrant's Annual Report on Form 10-K for the fiscal year ended October
31, 1991, which Exhibit is incorporated herein by reference.*
10(o). Resolution dated July 17, 1991 adopting amendment to Registrant's 1987
Director Option Plan, which appears as Exhibit 10(o) to Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31, 1991,
which Exhibit is incorporated herein by reference.*
10(p). Resolution dated July 17, 1991 adopting amendment to Registrant's 1990
Incentive Stock Plan, which appears as Exhibit 10(p) to Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31, 1991,
which Exhibit is incorporated herein by reference.*
10(q). Registrant's 1995 Incentive Stock Plan, which appears as Appendix A to
Registrant's Proxy Statement dated January 13, 1995, which Appendix is
incorporated herein by reference.*
10(r). Executive Severance Package dated January 10, 1996 between the Registrant
and Willem P. Roelandts, which appears as Exhibit 10(r) to Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31, 1995,
which exhibit is incorporated herein by reference.*
10(s). Registrant's 1995 Incentive Stock Plan stock option and restricted stock
agreements.*
10(t). Amendment dated November 21, 1996 adopting amendment to Registrant's 1995
Incentive Stock Plan, 1990 Incentive Stock Option Plan, 1987 Director
Option Plan, 1985 Incentive Compensation Plan, 1979 Incentive Stock
Option Plan.*
10(u). Registrant's Executive Deferred Compensation Plan, Amended and Restated
as of November 21, 1996.*
11-12. None.
13. Pages 29-54 (excluding order data and "Statement of Management
Responsibility") and the inside back cover of Registrant's 1996 Annual
Report to Shareholders.
14-17. Not applicable.
18. None.
19-20. Not applicable.
21. Subsidiaries of Registrant as of January 17, 1997.
22. None.
23. Consent of Independent Accountants.
24. Powers of Attorney. Contained in page 12 of this Annual Report on Form
10-K and incorporated herein by reference.
25-26. Not applicable.
27. Financial Data Schedule.
28. None.
99. 1996 Employee Stock Purchase Plan Annual Report on Form 11-K.
</TABLE>
- ---------------
* Indicates management contract or compensatory plan, contract or arrangement.
Exhibit numbers may not correspond in all cases to those numbers in Item
601 of Regulation S-K because of special requirements applicable to EDGAR
filers.
(b) Reports on Form 8-K
None.
11
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HEWLETT-PACKARD COMPANY
Date: January 28, 1997
By: /s/ D. CRAIG NORDLUND
-----------------------------------
D. Craig Nordlund
Associate General Counsel and
Secretary
POWER OF ATTORNEY
Know All Persons By These Presents, that each person whose signature
appears below constitutes and appoints D. Craig Nordlund and Ann O. Baskins, or
either of them, his or her attorneys-in-fact, for such person in any and all
capacities, to sign any amendments to this report and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
either of said attorneys-in-fact, or substitute or substitutes, may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<S> <C> <C>
/s/ RAYMOND W. COOKINGHAM Vice President and January 28, 1997
- --------------------------------------------- Controller
Raymond W. Cookingham (Principal Accounting
Officer)
/s/ THOMAS E. EVERHART Director January 28, 1997
- ---------------------------------------------
Thomas E. Everhart
/s/ JOHN B. FERY Director January 28, 1997
- ---------------------------------------------
John B. Fery
Director January , 1997
- ---------------------------------------------
Jean-Paul G. Gimon
/s/ SAM GINN Director January 28, 1997
- ---------------------------------------------
Sam Ginn
/s/ RICHARD A. HACKBORN Director January 28, 1997
- ---------------------------------------------
Richard A. Hackborn
/s/ WALTER B. HEWLETT Director January 28, 1997
- ---------------------------------------------
Walter B. Hewlett
Director January , 1997
- ---------------------------------------------
George A. Keyworth II
/s/ DAVID M. LAWRENCE, M.D. Director January 28, 1997
- ---------------------------------------------
David M. Lawrence, M.D.
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<S> <C> <C>
Director January , 1997
- ---------------------------------------------
Paul F. Miller, Jr.
/s/ SUSAN P. ORR Director January 28, 1997
- ---------------------------------------------
Susan P. Orr
Director January , 1997
- ---------------------------------------------
David W. Packard
/s/ DONALD E. PETERSEN Director January 28, 1997
- ---------------------------------------------
Donald E. Petersen
/s/ LEWIS E. PLATT Chairman, President and January 28, 1997
- --------------------------------------------- Chief Executive Officer
Lewis E. Platt (Principal Executive
Officer)
/s/ ROBERT P. WAYMAN Executive Vice President, January 28, 1997
- --------------------------------------------- Finance and Administration,
Robert P. Wayman Chief Financial Officer and
Director (Principal
Financial Officer)
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
1. Not applicable.
2. None.
3(a). Registrant's Amended and Restated Articles of Incorporation.
3(b). Registrant's Amended By-Laws.
4. None.
5-8. Not applicable.
9. None.
10(a). Registrant's 1979 Incentive Stock Option Plan, which appears as
Exhibit 10(a) to Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1983, which Exhibit is incorporated
herein by reference.(*)
10(b). Registrant's 1979 Incentive Stock Option Plan Agreements, which
appear as Exhibit 10(b) to Registrant's Annual Report on Form 10-K
for the fiscal year ended October 31, 1983, which Exhibit is
incorporated herein by reference.(*)
10(c). Letter dated September 24, 1984 to optionees advising them of
amendment to 1979 Incentive Stock Option Plan Agreements (Exhibit
10(b) above), which appears as Exhibit 10(c) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1984, which
Exhibit is incorporated herein by reference.(*)
10(d). Registrant's Officers Early Retirement Plan, amended and
restated as of January 1, 1996, and First Amendment effective
December 1, 1996 to the Officers Early Retirement Plan.(*)
10(e). Registrant's 1985 Incentive Compensation Plan, which appears as
Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1984, which Exhibit is incorporated
herein by reference.(*)
10(f). Registrant's 1985 Incentive Compensation Plan Stock Option
Agreements, which appear as Exhibit 10(f) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1984, which
Exhibit is incorporated herein by reference.(*)
10(g). Registrant's Excess Benefit Retirement Plan, amended and restated as
of November 1, 1994.(*)
10(h). Registrant's 1985 Incentive Compensation Plan restricted stock
agreements, which appear as Exhibit 10(h) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1985, which
Exhibit is incorporated herein by reference.(*)
10(i). Registrant's 1987 Director Option Plan, which appears as Appendix A
to Registrant's Proxy Statement dated January 16, 1987, which
Appendix is incorporated herein by reference.(*)
10(j). Registrant's 1989 Independent Director Deferred Compensation Program,
which appears as Exhibit 10(j) to Registrant's Annual Report on Form
10-K for the fiscal year ended October 31, 1989, which Exhibit is
incorporated herein by reference.(*)
10(k). Registrant's 1990 Incentive Stock Plan, which appears as Appendix A
to Registrant's Proxy Statement dated January 11, 1990, which
Appendix is incorporated herein by reference.(*)
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10(l). Registrant's 1990 Incentive Stock Plan stock option and restricted
stock agreements, which appear as Exhibit 10(l) to Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31,
1990, which Exhibit is incorporated herein by reference.(*)
10(m). Resolution dated July 17, 1991 adopting amendment to Registrant's
1979 Incentive Stock Option Plan, which appears as Exhibit 10(m) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1991, which Exhibit is incorporated herein by
reference.(*)
10(n). Resolution dated July 17, 1991 adopting amendment to Registrant's
1985 Incentive Compensation Plan, which appears as Exhibit 10(n) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1991, which Exhibit is incorporated herein by
reference.(*)
10(o). Resolution dated July 17, 1991 adopting amendment to Registrant's
1987 Director Option Plan, which appears as Exhibit 10(o) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1991, which Exhibit is incorporated herein by
reference.(*)
10(p). Resolution dated July 17, 1991 adopting amendment to Registrant's
1990 Incentive Stock Plan, which appears as Exhibit 10(p) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1991, which Exhibit is incorporated herein by
reference.(*)
10(q). Registrant's 1995 Incentive Stock Plan, which appears as Appendix A
to Registrant's Proxy Statement dated January 13, 1995, which
Appendix is incorporated herein by reference.(*)
10(r). Executive Severance Package dated January 10, 1996 between the
Registrant and Willem P. Roelandts, which appears as Exhibit 10(r)
to Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1995, which exhibit is incorporated herein by
reference.(*)
10(s). Registrant's 1995 Incentive Stock Plan stock option and restricted
stock agreements.(*)
10(t). Amendment dated November 21, 1996 adopting amendment to Registrant's
1995 Incentive Stock Plan, 1990 Incentive Stock Option Plan, 1987
Director Option Plan, 1985 Incentive Compensation Plan, 1979
Incentive Stock Option Plan.(*)
10(u). Registrant's Executive Deferred Compensation Plan, Amended and
Restated as of November 21, 1996.(*)
11-12. None.
13. Pages 29-54 (excluding order data and "Statement of Management
Responsibility") and the inside back cover of Registrant's 1996
Annual Report to Shareholders.
14-17. Not applicable.
18. None.
19-20. Not applicable.
21. Subsidiaries of Registrant as of January 17, 1997.
22. None.
23. Consent of Independent Accountants.
24. Powers of Attorney. Contained in page 12 of this Annual Report on
Form 10-K and incorporated herein by reference.
25-26. Not applicable.
27. Financial Data Schedule.
28. None.
99. 1996 Employee Stock Purchase Plan Annual Report on Form 11-K.
</TABLE>
- ------------
* Indicates management contract or compensatory plan, contract or arrangement.
<PAGE> 1
EXHIBIT 3(a)
HEWLETT-PACKARD COMPANY
AMENDED AND RESTATED ARTICLES OF INCORPORATION
FIRST: The name of this corporation is HEWLETT-PACKARD COMPANY.
SECOND: The purpose of this corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be incorporated
by the California Corporations Code.
THIRD: This corporation elects to be governed by all of the provisions
of the General Corporation Law of 1977 not otherwise applicable to it under
Chapter 23 thereof.
FOURTH: The number of directors of this corporation shall be not less
than eleven (11) nor more than twenty-one (21). The exact number of directors
shall be fixed and may be changed from time to time, within the limits
specified above, by a by-law or amendment thereof duly adopted by the
shareholders or by the Board of Directors.
FIFTH: The total number of shares of all classes which the corporation
shall have authority to issue shall be 2,700,000,000 which shall be divided
into two classes, one to be designated "Common Stock" and to be constituted of
2,400,000,000 shares, each of a par value of $1.00, and a second class to be
designated "Preferred Stock", and to be constituted of 300,000,000 shares, each
of a par value of $1.00.
Shares of Preferred Stock may be issued by the corporation from time to
time in one or more series, with such designations, powers, privileges,
preferences and relative, participating, optional or other rights, if any, and
such qualifications, limitations or restrictions thereon, as are permitted by
law and as the Board of Directors shall from time to time provide for and fix
by resolution or resolutions duly adopted, including, without limitation,
voting powers, if any (including multiple or fractional votes per share),
dividend rights (including dividend preferences or limited or unlimited
dividend participation), conversion rights, mandatory or optional redemption
rights or restrictions and preferences, or limited or unlimited participation,
in the amount to be paid on liquidation, and the Board of Directors is hereby
authorized to fix and determine the powers, privileges, preferences and rights
of any series of Preferred Shares (including, but not limited to, applicable
conversion or redemption rates or prices or dividend rates), and to fix the
number of shares constituting any such series and to increase or decrease the
number of shares of any such series (but not below the number of shares thereof
then outstanding).
No holders of shares of the corporation of any class, now or hereafter
authorized, shall have any preferential or preemptive rights to subscribe for,
purchase or receive any shares of the corporation of any class, now or
hereafter authorized, or any options or warrants for such shares, or any rights
to subscribe for, purchase or receive any securities convertible to or
exchangeable for such shares, which may at any time be issued, sold or offered
for sale by the corporation, except in the case of any shares of Preferred
Stock to which such rights are specifically granted by any resolution or
resolutions of the Board of Directors adopted pursuant to this Article FIFTH.
Upon the filing in the Office of the Secretary of State of the State of
California of the Certificate of Amendment of Articles of Incorporation of this
corporation whereby this Article FIFTH is amended to read as herein set forth,
each issued and outstanding share of Common Stock of the corporation of the par
value of $1.00 per share shall be thereby and thereupon split up and divided
into two shares of the par value of $1.00 per share and each person at that
time holding of record any issued and outstanding shares of Common Stock shall
be entitled to receive a stock certificate or certificates to evidence and
represent the additional shares of Common Stock to which he becomes entitled by
reason of such stock split on the basis of one additional share for each share
so held of record.
<PAGE> 2
SIXTH: Notwithstanding that no vote may be permitted by law or by any
other Article hereof or by any resolution or resolutions of the Board of
Directors providing for any series of Preferred Stock adopted pursuant to the
provisions of Article FIFTH hereof or by any agreement between the corporation
and any national securities exchange or otherwise, the vote of the shareholders
of the corporation which shall be required to approve any Business Combination
(as hereinafter defined) shall be as set forth in this Article SIXTH.
(a) In addition to any affirmative vote required by law or any other
provision hereof or any resolution or resolutions of the Board of Directors
providing for any series of Preferred Stock adopted pursuant to the provisions
of Article FIFTH hereof, and except as otherwise expressly provided in
paragraph (b) of this Article SIXTH, none of the following transactions shall
be consummated unless and until such transaction shall have been approved by the
affirmative vote of the holders of at least 80 percent of the combined voting
power of the outstanding shares of stock of all classes and series of the
corporation entitled to vote generally in the election of directors ("Voting
Stock"):
(1) any merger or consolidation of the corporation with (i) any
corporation which is an Interested Shareholder (as hereinafter defined)
or (ii) any other corporation which after such merger or consolidation
would be an Interested Shareholder or an Affiliate (as hereinafter
defined) of an Interested Shareholder; or
(2) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Shareholder of (i) all or
substantially all the assets of the corporation or (ii) assets of the
corporation or any Subsidiary (as hereinafter defined) or Subsidiaries
having in the aggregate a Fair Market Value (as hereinafter defined) in
an amount which is more than 10 percent of the total value of the assets
of the corporation and its consolidated subsidiaries as reflected on the
most recent Balance Sheet (as hereinafter defined) of the corporation;
or
(3) any merger or consolidation of any Subsidiary or
Subsidiaries having in the aggregate assets with a Fair Market Value as
of the Announcement Date (as hereinafter defined) in an amount which is
more than 10 percent of the total value of the assets of the corporation
and its consolidated subsidiaries as reflected on the most recent
Balance Sheet of the corporation with (i) any corporation which is an
Interested Shareholder or an
2
<PAGE> 3
Affiliate thereof or (ii) any other corporation which after such merger
or consolidation would be an Interested Shareholder or an Affiliate
of an Interested Shareholder; or
(4) the issuance or transfer by the corporation or any
Subsidiary (in one transaction or a series of related transactions) to
an Interested Shareholder of any securities of the corporation or any
Subsidiary in exchange for cash, securities or other property (or a
combination thereof) having an aggregate Fair Market Value as of the
Announcement Date of $500,000,000 or more, other than the issuance of
securities upon the conversion or exchange of securities of the
corporation or in exchange for securities of any Subsidiary which were
acquired by an Interested Shareholder from the corporation or a
Subsidiary in a Business Combination (as hereinafter defined) which
was approved by a vote of the shareholders pursuant to this Article
SIXTH; or
(5) the adoption of any plan or proposal for the liquidation of
any substantial part of the corporation proposed by or on behalf of any
Interested Shareholder; or
(6) any reclassification of any securities of the corporation
(including any reverse stock split), any recapitalization of the
capital stock of the corporation, any merger or consolidation of the
corporation with or into any of its Subsidiaries, or any other
transaction (whether or not with or involving any Interested
Shareholder), which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any
class of stock or series thereof of the corporation or of any Subsidiary
directly or indirectly Beneficially Owned (as hereinafter defined) by
any Interested Shareholder or as a result of which the shareholders of
the corporation would cease to be shareholders of a corporation
incorporated under the laws of the State of California having, as part
of its articles of incorporation, provisions to the same effect as
this Article SIXTH and the provisions of Article EIGHTH of these
Amended Articles of Incorporation relating to amendments or changes to
this Article SIXTH.
The term "Business Combination" as used in this Article SIXTH shall
mean any transaction or proposed transaction which is referred to in any one or
more of the foregoing subparagraphs (1) through (6) of this paragraph (a) of
this Article SIXTH.
(b) The provisions of paragraph (a) of this Article SIXTH shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only such vote of shareholders, if any, as is
required by law and any other Article hereof or by the terms of any resolution
or resolutions of the Board of Directors providing for any series of preferred
Stock adopted pursuant to the provisions of Article FIFTH hereof or any
agreement between the corporation and any national securities exchanges or
otherwise, if such Business Combination shall have been approved by a majority
of the Disinterested Directors (as hereinafter defined) at the time or if all
the conditions specified in each of the following subparagraphs (1), (2), (3),
(4) and (5) are satisfied:
(1) the transaction constituting the Business Combination shall
provide for a consideration per share to be received by all holders of shares
of Common Stock in exchange for all of their shares of Common Stock, and the
aggregate amount of the cash and the Fair Market Value as of the date of the
consummation of the Business Combination of any consideration other than cash
to be received per share by holders of Common Stock in such Business
Combination, shall be at least equal to the higher of the following:
3
<PAGE> 4
(i) if the Announcement Date of such Business Combination is
within five years of the Determination Date (as hereinafter defined) in
respect of the Interested Shareholder involved in such Business
Combination, the higher, if applicable, of (A) the highest per share
price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by such Interested Shareholder for any
shares of Common Stock which are or were at any time within such
five-year period Beneficially Owned by such Interested Shareholder and
were acquired by it at any time within such five-year period or (B) the
price per share equal to the Fair Market Value per share of Common
Stock on the Announcement Date of such Business Combination multiplied
by the ratio of (x) the price determined pursuant to the foregoing
clause (A) to (y) the average of the Fair Market Values of a share of
Common Stock over each trading day in the period of 90 days prior to
such Determination Date, or
(ii) the average of the Fair Market Values of a share of
Common Stock over each trading day in the period of 90 days prior to
the Announcement Date of such Business Combination;
provided, however, that the price referred to in the foregoing clauses (i)(A),
(i)(B) and (ii) of this subparagraph (1) shall be adjusted to reflect fairly
any stock dividend, stock split, reverse stock split, combination of shares,
recapitalization, reorganization or similar event affecting the number of shares
of Common Stock outstanding and the market price per share of outstanding shares
of Common Stock which has occurred after the date as of which such price is
determined; and
(2) the holders of shares of Common Stock and of any other class or
series of Voting Stock shall have the right, at their option, to receive payment
in cash of the consideration to be received by holders of shares of Common Stock
or of any other class or series of Voting Stock in the Business Combination, if
cash were previously paid by the Interested Shareholder involved in such
Business Combination in order to acquire any shares of Common Stock within the
five-year period immediately prior to the Announcement Date; and
(3) after the Determination Date in respect of the Interested
Shareholder involved in such Business Combination and prior to the consummation
of such Business Combination:
(i) except as approved by a majority of the Disinterested
Directors, there shall have been no failure to declare and have
available for payment at the regular dates therefor the full amount of
any dividends (whether or not cumulative) accrued on any series of
Preferred Stock or any other class of stock or series thereof having a
preference over the Common Stock as to dividends; and
(ii) there shall have been (A) no reduction in the annual rate
of dividends paid on the Common Stock (except as necessary to reflect
any split or subdivision of the Common Stock), except as approved by a
majority of the Disinterested Directors, and (B) an increase in such
annual rate of dividends (as necessary to prevent any such reduction)
in the event of any reclassification (including any reverse stock split
or combination of shares), recapitalization, reorganization or any
similar transaction which has the effect of reducing the number of
outstanding shares of Common Stock, unless the failure so to increase
such annual rate is approved by a majority of the Disinterested
Directors; and
(4) after the Determination Date in respect of the Interested
Shareholder involved in such Business Combination, such Interested
4
<PAGE> 5
Shareholder shall not have received the benefit, directly or indirectly (except
as a stockholder of the corporation, in proportion to its stockholding), of any
loans, advances, guarantees or similar financial assistance (collectively,
"Financial Assistance") provided by the corporation, whether in anticipation of
or in connection with such Business Combination or otherwise, unless the
transaction constituting the Business Combination shall provide for a
consideration to be received by the holders of shares of Common Stock in
exchange for all of their shares of Common Stock in an amount equal to the
amount required under the foregoing subparagraph (1) plus the total amount of
the Fair Market Value of all such Financial Assistance; and
(5) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934 and the rules and regulations thereunder (or any such subsequent
provisions replacing such Act, rules or regulations) shall, at the corporation's
expense, be mailed to stockholders of the corporation at least 30 days prior to
the consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act, rules or
regulations or subsequent provisions), and the Disinterested Directors, if there
are any at the time, shall have been provided a reasonable opportunity to state
their views therein with respect to such proposed Business Combination and to
include therewith an opinion of an independent investment banker selected by the
Disinterested Directors with respect to such Business Combination.
(c) For purposes of this Article SIXTH:
(1) An "Affiliate" of a person shall mean any person who, directly or
indirectly, controls, is controlled by or is under common control with such
person.
(2) "Announcement Date" with respect to any Business Combination
means the date on which the proposal of such Business Combination is first
publicly announced.
(3) An "Associate" means (i) with respect to a corporation or
association, any officer or director thereof or of a subsidiary thereof,
(ii) with respect to a partnership, any general partner thereof or any
limited partner thereof having a 10 percent ownership interest in such
partnership, (iii) with respect to a business trust, any officer or trustee
thereof or of any subsidiary thereof, (iv) with respect to any other trust
or an estate, any trustee, executor or similar fiduciary and any person who
has a substantial interest as a beneficiary of such trust or estate, (v)
with respect to a natural person, the spouses and children thereof and any
other relative thereof or of the spouse thereof who has the same home, and
(vi) any Affiliate of any such person.
(4) "Balance Sheet" as of any particular time means the most recent,
publicly available consolidated balance sheet of the corporation and its
consolidated subsidiaries audited by the corporation's independent public
accountants.
(5) A person shall be "Beneficial Owner" of, or have "Beneficial
Ownership" of or "Beneficially Own", any Voting Stock over which such
person or any of its Affiliates or Associates, directly or indirectly,
through any contract, arrangement, understanding or relationship, has or
shares or, upon the exercise of any conversion right, exchange right,
warrant, option or similar interest (whether or not then exercisable) would
have or share, either (i) voting power (including the power to vote or to
direct the voting) of such security or (ii) investment power (including the
power to dispose or direct the disposition) of such
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security. For the purposes of determining whether a person is an Interested
Shareholder, the number of shares of Voting Stock deemed to be outstanding
shall include any share Beneficially Owned by such person even though not
actually outstanding, but shall not include any other shares of Voting Stock
which are not outstanding but which may be issuable to other persons pursuant
to any agreement, arrangement or understanding, or upon exercise of any
conversion right, exchange right, warrant, option or similar interest.
(6) "Consolidated Transaction Reporting System" means the system of
reporting securities information operated under the authority of Rule 11Aa3-1
under the Securities and Exchange Act of 1934, as amended, as such rule may
from time to time be amended, and any successor rule or rules.
(7) "Determination Date" in respect of an Interested Shareholder means
the date on which such Interested Shareholder first became an Interested
Shareholder.
(8) "Disinterested Director" with respect to a Business Combination
means any member of the Board of Directors of the corporation who is not an
Affiliate or Associate of, and was not directly or indirectly a nominee of, any
Interested Shareholder involved in such Business Combination or any Affiliate
or Associate of such Interested Shareholder and who either (i) was a member of
the Board of Directors prior to the time that such Interested Shareholder
became an Interested Shareholder or (ii) is a successor of a Disinterested
Director and was nominated to succeed a Disinterested Director by a majority of
the Disinterested Directors on the Board of Directors at the time of his
nomination. Any reference to "Disinterested Directors" shall refer to a
singly Disinterested Director if there be but one. Any matter referred to in
this Article SIXTH as requiring action of, or approval by, a majority of the
Disinterested Directors shall mean an action taken or approval given by the
Board of Directors without giving effect to the vote of any Director who is not
a Disinterested Director and with the affirmative vote of a majority of the
Disinterested Directors.
(9) "Fair Market Value" as of any particular date means: (i) in the
case of stock (including Voting Stock of the corporation) which is traded on
any securities exchange or in the over-the-counter market, the average for the
trading days during the thirty-day period immediately preceding the date in
question of the closing sale price of such stock on the New York Stock Exchange
Composite Tape, or, if such stock is not quoted on the Composite Tape, on the
New York Stock Exchange, or, if such stock is not listed on such Exchange, on
the principal United States securities exchange registered under the Securities
Exchange Act of 1934, as amended, on which such stock is listed, or, if such
stock is not listed on any such exchange, of the last sales price at 4:00 p.m.
reported in the Consolidated Transaction Reporting System (as heretofore
defined) or, if such stock is not so reported, the average of the highest
reported bid and the lowest reported asked quotation for a share of such stock
furnished by the National Association of Securities Dealers Automated Quotation
System or any successor quotation reporting system or, if quotations are not
available in such system, as furnished by the National Quotation Bureau
Incorporated or any similar organization furnishing quotations and, if no such
quotations are available, the fair market value on the date in question of a
share of such stock as determined by a majority of the Disinterested Directors
in good faith and (ii) in the case of stock of any class or series which is not
traded on any securities exchange or in the over-the-counter market or in the
case of property other than cash or stock or in the case
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of Financial Assistance, the fair market value of such stock, property
or Financial Assistance, as the case may be, on the date in question as
determined by a majority of the Disinterested Directors in good faith.
(10) "Interested Shareholder" shall mean any person, other
than the corporation, any Subsidiary or any employee benefit plan of the
corporation or any Subsidiary, who or which:
(i) is the Beneficial Owner, directly or indirectly of
shares of Voting Stock which are entitled to cast 20 percent or
more of the total votes which all of the then outstanding shares
of Voting Stock are entitled to cast in the election of
directors or is an Affiliate or Associate of any such person or
(ii) acts with any other person as a partnership,
limited partnership, syndicate, or other group for the purpose
of acquiring, holding or disposing of securities of the
corporation, and such group is the Beneficial Owner, directly
or indirectly, of shares of Voting Stock which are entitled to
cast 20 percent or more of the total votes which all of the then
outstanding shares of Voting Stock are entitled to cast in the
election of directors,
and any reference to a particular Interested Shareholder involved in a
Business Combination shall also refer to any Affiliate or Associate
thereof, any predecessor thereto and any other person acting as a member
of a partnership, limited partnership, syndicate or group with such
particular Interested Shareholder within the meaning of the foregoing
clause (ii) of this subparagraph (10).
(11) a "person" shall mean any individual, firm, corporation
(which shall include a business trust), partnership, joint venture,
trust or estate, association or other entity.
(12) "Subsidiary" in respect of the corporation means any
corporation or partnership of which a majority of any class of its
equity securities is owned, directly or indirectly, by the corporation.
(d) A majority of the Disinterested Directors shall have the power and
duty to determine, on the basis of information known to them after reasonable
inquiry, all facts necessary to determine compliance with this Article SIXTH,
including, without limitation: (i) whether a person is an Interested
Shareholder, (ii) the number of shares of Voting Stock Beneficially Owned by
any person, (iii) whether a person is an Affiliate or Associate of another
person, (iv) whether the requirements of paragraph (b) of this Article SIXTH
have been met with respect to any Business Combination, (v) whether two or more
transactions constitute a "series of related transactions" for purposes of
paragraph (a) of this Article SIXTH, and (vi) whether the assets which are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by the corporation or any Subsidiary
in any Business Combination has, (A) an aggregate Fair Market Value of
$500,000,000 or more or (B) represent in the aggregate more than 10 percent of
the total value of the assets of the corporation and its consolidated
subsidiaries. The good faith determination of a majority of the Disinterested
Directors on such matters shall be conclusive and binding for all purposes of
this Article SIXTH.
(e) Noting contained in this Article SIXTH shall be construed to
relieve any Interested Shareholder from any fiduciary obligation imposed by law.
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SEVENTH: Any action required or permitted to be taken by the
shareholders of the corporation must be effected at a duly called annual or
special meeting of shareholders of the corporation and may not be effected by
any consent in writing by the shareholders.
EIGHTH: (a) The corporation reserves the right at any time and from
time to time to amend, alter, change, or repeal any provisions contained herein,
and other provisions authorized by the laws of the State of California at the
time in force may be added or inserted, in the manner now or hereafter
prescribed by law, and all rights, preferences, and privileges of whatsoever
nature conferred upon stockholders, directors, or any other persons whomsoever
by or pursuant to these Articles of Incorporation in its present form or as
hereafter amended are granted subject to the right reserved in this Article.
(b) In addition to any requirements of law and any other provisions
hereof or any resolution or resolutions of the Board of Directors providing for
any series of Preferred Stock adopted pursuant to Article FIFTH hereof (and
notwithstanding the fact that approval by a lesser vote may be permitted by law,
any other provision hereof or any such resolution or resolutions), the
affirmative vote of the holders of 80 percent or more of the combined voting
power of the then outstanding shares of Voting Stock, voting together as a
single class, shall be required to amend, alter or repeal, or adopt any
provision inconsistent with, this Article EIGHTH or Article SIXTH or SEVENTH
hereof.
NINTH: (a) The liability of the directors of the corporation for
monetary damages shall be eliminated to the fullest extent permissible under
California law.
(b) To the fullest extent expressly permitted by Section 317 of the
Corporations Code, the corporation shall indemnify any Agent who is a natural
person and who was or is a party or is threatened to be made a party to any
Proceeding. In addition, the corporation shall have authority to adopt a
resolution or by-law, enter into an agreement, or take other corporate action
pursuant to which the corporation may be permitted or required to indemnify an
Agent for breach of duty to the corporation or its shareholders in excess of
the indemnification expressly permitted by Section 317 of the Corporation
Code, provided however that no Agent may be indemnified for acts or omissions
or transactions from which a director may not be relieved of liability pursuant
to paragraph (a) of this Article NINTH, or as to circumstances in which
indemnity is expressly prohibited by Section 317 of the Corporations Code.
(c) In serving or continuing to serve the corporation, an Agent is
entitled to rely and shall be presumed to have relied on any rights granted
pursuant to the foregoing provisions of this Article NINTH, which shall be
enforceable as contract rights and continue when the Agent has ceased to be an
Agent and inure to the benefit of the heirs, executors and administrators of the
Agent.
(d) The Board of Directors is authorized, to the fullest extent
permissible under California law, to cause the corporation to pay expenses
incurred by Agents in defending Proceedings and to purchase and maintain
insurance on their behalf whether or not the corporation would have the power
to indemnify them under the provisions of this Article NINTH or otherwise.
(e) Any right or privilege conferred by or pursuant to this Article
NINTH shall not be exclusive of any other rights to which any Agent may
otherwise be entitled.
(f) As used in this Article NINTH:
(1) "Agent" has the meaning given to such term by
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Section 317 of the Corporation Code.
(2) "Indemnify" means to hold harmless against expenses (including
without limitation attorneys' fees and any expenses of establishing a right to
indemnification), judgments, fines, settlements and other amounts actually and
reasonably incurred by an Agent in connection with a Proceeding;
(3) "Proceeding" means any threatened, pending or completed action,
whether civil, criminal, administrative or investigative; and
(4) "Section 317 of the Corporations Code" refers to Section 317 of the
Corporations Code of the State of California, as from time to time amended, and
includes any successor provisions of such code or successor law.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
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EXHIBIT 3(b)
BY-LAWS
of
HEWLETT-PACKARD COMPANY
(a California Corporation)
----------------
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ARTICLE I
OFFICES
Section 1.1 PRINCIPAL OFFICE. The principal office for the
transaction of the business of the corporation is hereby fixed and located at
3000 Hanover Street, in the city of Palo Alto, State of California. The Board
of Directors is hereby granted full power and authority to change said
principal office to another location within or without the State of California.
Section 1.2 OTHER OFFICES. One or more branch or other subordinate
offices may at any time be fixed and located by the Board of Directors at such
place or places within or without the State of California as it deems
appropriate.
ARTICLE II
DIRECTORS
Section 2.1 EXERCISE OF CORPORATE POWERS. Except as otherwise
provided by the Articles of Incorporation of the corporation or by the laws of
the State of California now or hereafter in force, the business and affairs of
the corporation shall be managed and all corporate powers shall be exercised by
or under the direction of the Board of Directors. The Board may delegate the
management of the day-to-day operation of the business of the corporation as
permitted by law provided that the business and affairs of the corporation
shall be managed and all corporate powers shall be exercised under the ultimate
direction of the Board.
Section 2.2 NUMBER. The number of the Corporation's directors shall
be not less than eleven (11) nor more than twenty-one (21) until changed by an
amendment of this Section 2.2 adopted by the Shareholders or Board of
Directors. Within such limits the exact number of directors shall be fourteen
(14) until changed by an amendment to this Section 2.2 adopted by the
shareholders or by the Board of Directors.
Section 2.3 NEED NOT BE SHAREHOLDERS. The directors of the
corporation need not be shareholders of the corporation.
Section 2.4 COMPENSATION. Directors shall receive for their services
as directors such stated fees or other compensation and allowances for expenses
of attendance as may from time to time be fixed by the Board of Directors. The
directors may also serve the corporation in other capacities and receive
compensation therefor.
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Section 2.5 ELECTION AND TERM OF OFFICE. At each annual meeting of
shareholders, directors shall be elected to hold office until the next annual
meeting, provided, that if for any reason, said annual meeting or an
adjournment thereof is not held or the directors are not elected thereat, then
the directors may be elected at any special meeting of the shareholders called
and held for that purpose. The term of office of the directors shall begin
immediately after their election and shall continue until the expiration of the
term for which elected and until their respective successors have been elected
and qualified.
Section 2.6 VACANCIES. A vacancy or vacancies in the Board of
Directors shall exist when any authorized position of director is not then
filled by a duly elected director, whether caused by death, resignation,
removal, change in the authorized number of directors (by the Board or the
shareholders) or otherwise. The Board of Directors may declare vacant the
office of a director who has been declared of unsound mind by an order of court
or convicted of a felony. Except for a vacancy created by the removal of a
director, vacancies on the Board may be filled by a majority of the directors
then in office, whether or not less than a quorum, or by a sole remaining
director. A vacancy created by the removal of a director may be filled only by
the approval of the shareholders. The shareholders may elect a director at any
time to fill any vacancy not filled by the directors, but any such election
requires the affirmative vote of a majority of the outstanding shares entitled
to vote and must be made at a meeting duly called and held in accordance with
Article X. Any director may resign effective upon giving written notice to the
Chairman of the Board, the President, the Secretary or the Board of Directors
of the corporation, unless the notice specifies a later time for the
effectiveness of such resignation. If the resignation is effective at a future
time, a successor may be elected to take office when the resignation becomes
effective.
Section 2.7 REMOVAL. (a) Any and all of the directors may be removed
without cause if such removal is approved by the affirmative vote of a majority
of the outstanding shares entitled to vote at an election of directors, subject
to the following:
(1) No director may be removed (unless the entire Board is
removed) when the votes cast against removal, or not consenting
in writing to such removal, would be sufficient to elect such
director if voted cumulatively at an election at which the same
total number of votes were cast (or, if such action is taken by
written consent, all shares entitled to vote were voted) and
the
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entire number of directors authorized at the time of the
director's most recent election were then being elected; and
(2) When by the provisions of the Articles the holders of
the shares of any class or series, voting as a class or series,
are entitled to elect one or more directors, any director so
elected may be removed only by the applicable vote of the
holders of the shares of that class of series.
(b) Any reduction of the authorized number of directors does not
remove any director prior to the expiration of such director's term of office.
Section 2.8 NOTIFICATION OF NOMINATIONS. Nominations for the election
of directors may be made by the Board of Directors or by any shareholder
entitled to vote for the election of directors. Any shareholder entitled to
vote for the election of directors at a meeting may nominate persons for
election as directors only if written notice of such shareholder's intent to
make such nomination is given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Company not later than (i) with
respect to an election to be held at an annual meeting of shareholders, 90 days
in advance of such meeting, and (ii) with respect to an 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 shall 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 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 had each nominee 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 so elected.
The chairman of a shareholder meeting may refuse to acknowledge the nomination
of any person not made in compliance with the foregoing procedure.
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ARTICLE III
OFFICERS
Section 3.1 ELECTION AND QUALIFICATIONS OF CORPORATE OFFICERS. The
Corporate officers of this corporation shall consist of a President, one or more
Vice Presidents, a Secretary and a Chief Financial Officer who shall be
including but not limited to a Chairman of the Board, a Vice Chairman of the
Board, a Chairman of the Executive Committee and a Treasurer as the Board of
Directors shall deem expedient, who shall be chosen in such manner and hold
their offices for such terms as the Board of Directors may prescribe. Any two or
more of such offices may be held by the same person. The Board of Directors may
designate one or more Vice Presidents as Executive Vice Presidents or Senior
Vice Presidents. Either the Chairman of the Board, the Vice Chairman of the
Board, the Chairman of the Executive Committee, or the President, as the Board
of Directors may designate from time to time, shall be the Chief Executive
Officer of the corporation. The Board of Directors may from time to time
designate the President or any Executive Vice President as the Chief Operating
Officer of the corporation. Any Vice President, Treasurer or Assistant
Treasurer, or Assistant Secretary respectively may exercise any of the powers of
the President, the Chief Financial Officer, or the Secretary, respectively, as
directed by the Board of Directors and shall perform such other duties as are
imposed upon such officer by the By-Laws or the Board of Directors.
Section 3.2 TERMS OF OFFICE AND COMPENSATION. The term of office and
salary of each of said officers and the manner and time of the payment of such
salaries shall be fixed and determined by the Board of Directors and may be
altered by said Board from time to time at its pleasure, subject to the rights,
if any, of said officers under any contract of employment.
Section 3.3 REMOVAL AND VACANCIES. Any officer of the corporation may
be removed at the pleasure of the Board of Directors at any meeting or by vote
of shareholders entitled to exercise the majority of voting power of the
corporation at any meeting or at the pleasure of any officer who may be granted
such power by resolution of the Board of Directors. Any officer may resign at
any time upon written notice to the corporation without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party. If any vacancy occurs in any office of the corporation, the Board of
Directors may elect a successor to fill such vacancy for the remainder of the
unexpired term and until a successor is duly chosen and qualified.
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Section 3.4 APPOINTED OFFICERS. In addition to officers elected by
the Board of Directors in accordance with Sections 3.1 and 3.2 the corporation
may have one or more appointed vice presidents. Such vice presidents may be
appointed by the Chairman of the Board or the President and shall have such
duties as may be established by the Chairman or President. Vice presidents
appointed pursuant to this Section 3.4 may be removed in accordance with
Section 3.3.
ARTICLE IVa
VICE CHAIRMAN OF THE BOARD
Section 4.1a POWERS AND DUTIES. The Vice Chairman of the Board of
Directors, if there shall be one, shall, in the case of the absence, disability
or death of the Chairman, exercise all the powers and perform all the duties of
the Chairman of the Board. The Vice Chairman shall have such other powers and
perform such other duties as may be granted or prescribed by the Board of
Directors.
ARTICLE IVb
CHAIRMAN OF THE EXECUTIVE COMMITTEE
Section 4.1b POWERS AND DUTIES. The Chairman of the Executive
Committee, if there be one, shall have the power to call meetings of the
shareholders and also of the Board of Directors to be held subject to the
limitations prescribed by law or by these By-Laws, at such times and at such
places as the Chairman of the Executive Committee shall deem proper. The
Chairman of the Executive Committee shall have such other powers and be subject
to such other duties as the Board of Directors may from time to time prescribe.
ARTICLE V
PRESIDENT
Section 5.1 POWERS AND DUTIES. The powers and duties of the
President are:
(a) To call meetings of the shareholders and also of the Board of
Directors to be held, subject to the limitations prescribed by law or by these
By-Laws, at such times and at such places as the President shall deem proper.
(b) To affix the signature of the corporation to all deeds,
conveyances, mortgages, leases, obligations, bonds, certificates and other
papers and instruments in writing which have been
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authorized by the Board of Directors or which, in the judgment of the
President, should be executed on behalf of the corporation, and to sign
certificates for shares of stock of the corporation.
(c) To have such other powers and be subject to such other duties as
the Board of Directors may from time to time prescribe.
ARTICLE VI
VICE PRESIDENT
Section 6.1 POWERS AND DUTIES OF ELECTED VICE PRESIDENTS. In case of
the absence, disability of the President, the Vice President, or one of the
Vice Presidents, shall exercise all the powers and perform all the duties of
the President. If there is more than one Vice President, the order in which the
Vice Presidents shall succeed to the powers and duties of the President shall
be as fixed by the Board of Directors. The Vice President or Vice Presidents
shall have such other powers and perform such other duties as may be granted or
prescribed by the Board of Directors.
Section 6.2 POWERS AND DUTIES OF APPOINTED VICE PRESIDENTS. Vice
Presidents appointed pursuant to Section 3.4 shall have such powers and duties
as may be fixed by the Chairman or President, except that such appointed vice
presidents may not exercise the powers and duties of the President.
ARTICLE VII
SECRETARY
Section 7.1 POWERS AND DUTIES. The powers and duties of the
Secretary are:
(a) To keep a book of minutes at the principal office of the
corporation, or such other place as the Board of Directors may order, of all
meetings of its directors and shareholders with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at directors' meetings, the number of shares
present or represented at shareholders' meetings and the proceedings thereof.
(b) To keep the Seal of the Corporation and to affix the same to all
instruments which may require it.
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(c) To keep or cause to be kept at the principal office of the
corporation, or at the office of the transfer agent or agents, a share
register, or duplicate share registers, showing the names of the shareholders
and their addresses, the number and classes of shares, and the number and date
of cancellation of every certificate surrendered for cancellation.
(d) To keep a supply of certificates for shares of the corporation, to
fill in all certificates issued, and to make a proper record of each such
issuance; provided, that so long as the corporation shall have one or more duly
appointed and acting transfer agents of the shares, or any class or series of
shares, of the corporation, such duties with respect to such shares shall be
performed by such transfer agent or transfer agents.
(e) To transfer upon the share books of the corporation any and all
shares of the corporation; provided, that so long as the corporation shall
have one or more duly appointed and acting transfer agents of the shares, or
any class or series of shares, of the corporation, such duties with respect to
such shares shall be performed by such transfer agent or transfer agents, and
the method of transfer of each certificate shall be subject to the reasonable
regulations of the transfer agent to which the certificate is presented for
transfer, and also, if the corporation then has one or more duly appointed and
acting registrars, to the reasonable regulations of the registrar to which the
new certificate is presented for registration; and provided, further that no
certificate for shares of stock shall be issued or delivered or, if issued or
delivered, shall have any validity whatsoever until and unless it has been
signed or authenticated in the manner provided in Section 12.4 hereof.
(f) To make service and publication of all notices that may be
necessary or proper, and without command or direction from anyone. In case of
the absence, disability, refusal, or neglect of the Secretary to make service
or publication of any notices, then such notices may be served and/or published
by the President or a Vice President, or by any person thereunto authorized by
either of them or by the Board of Directors or by the holders of a majority of
the outstanding shares of the corporation.
(g) Generally to do and perform all such duties as pertain to the
office of Secretary and as may be required by the Board of Directors.
ARTICLE VIII
CHIEF FINANCIAL OFFICER
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Section 8.1 POWERS AND DUTIES. The powers and duties of the Chief
Financial Officer are:
(a) To supervise the corporate-wide treasury functions and financial
reporting to external bodies.
(b) To have the custody of all funds, securities, evidence of
indebtedness and other valuable documents of the corporation and, at the Chief
Financial Officer's discretion, to cause any or all thereof to be deposited
for the account of the corporation at such depositary as may be designated from
time to time by the Board of Directors.
(c) To receive or cause to be received, and to give or cause to be
given, receipts and acquittances for monies paid in for the account of the
corporation.
(d) To disburse, or cause to be disbursed, all funds of the
corporation as may be directed by the Board of Directors, taking proper
vouchers for such disbursements.
(e) To render to the President and to the Board of Directors, whenever
they may require, accounts of all transactions and of the financial condition
of the corporation.
(f) Generally to do and perform all such duties as pertain to the
office of Chief Financial Officer and as may be required by the Board of
Directors.
ARTICLE IX
COMMITTEES OF THE BOARD
Section 9.1 APPOINTMENT AND PROCEDURE. The Board of Directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of two (2) or more directors,
to serve at the pleasure of the Board. The Board may designate one (1) or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee.
Section 9.2 POWERS. Any committee appointed by the Board of
Directors, to the extent provided in the resolution of the Board or in these
By-Laws, shall have all the authority of the Board except with respect to:
(a) the approval of any action which requires the approval or vote of
the shareholders;
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(b) the filling of vacancies on the Board or on any committee;
(c) the fixing of compensation of the director for serving on the
Board or on any committee;
(d) the amendment or repeal of By-Laws or the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board which by its
express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at a
rate or in a periodic amount or within a price range determined by the Board;
(g) the appointment of other committees of the Board or the members
thereof.
Section 9.3 EXECUTIVE COMMITTEE. In the event that the Board of
Directors appoints an Executive Committee, such Executive Committee, in all
cases in which specific directions to the contrary shall not have been given by
the Board of Directors, shall have and may exercise, during the intervals
between the meetings of the Board of Directors, all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation (except as provided in Section 9.2 hereof) in such manner as the
Executive Committee may deem in the best interests of the corporation.
ARTICLE X
MEETINGS OF SHAREHOLDERS
Section 10.1 PLACE OF MEETINGS. Meetings (whether regular, special or
adjourned) of the shareholders of the corporation shall be held at the
principal office for the transaction of business as specified in accordance
with Section 1.1 hereof, or any place within or without the State which may be
designated by written consent of all the shareholders entitled to vote thereat,
or which may be designated by the Board of Directors.
Section 10.2 TIME OF ANNUAL MEETINGS. The annual meeting of the
shareholders shall be held at the hour of 2:00 o'clock in the afternoon on the
fourth Tuesday in February of each year, if not a legal holiday, and if a legal
holiday, then on the next succeeding business day not a legal holiday.
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Section 10.3 SPECIAL MEETINGS. Special meetings of the shareholders
may be called by the Board of Directors, the Chairman of the Board, the Vice
Chairman of the Board, the Chairman of the Executive Committee, the President
or the holders of shares entitled to cast not less than 10% of the vote at the
meeting.
Section 10.4 NOTICE OF MEETINGS. (a) Whenever shareholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given not less than 10 nor more than 60 days before the day of
the meeting to each shareholder entitled to vote thereat. Such notice shall
state the place, date and hour of the meeting and (1) in the case of a special
meeting, the general nature of the business to be transacted, and that no other
business may be transacted, or (2) in the case of the annual meeting, those
matters which the Board, at the time of the mailing of the notice, intends to
present for action by the shareholders, but subject to the provisions of
subdivision (b) any proper matter may be presented at the meeting for such
action. The notice of any meeting at which directors are to be elected shall
include the names of nominees intended at the time of the notice to be
presented by management for election.
(b) Any shareholder approval at a meeting, other than unanimous
approval by those entitled to vote, on any of the matters listed below shall be
valid only if the general nature of the proposal so approved was stated in the
notice of meeting or in any written waiver of notice;
(1) a proposal to approve a contract or other transaction
between the corporation and one or more of its directors, or between the
corporation and any corporation, firm or association in which one or
more directors has a material financial interest;
(2) a proposal to amend the Articles of Incorporation;
(3) a proposal regarding a reorganization, merger or
consolidation involving the corporation;
(4) a proposal to wind up and dissolve the corporation;
(5) a proposal to adopt a plan of distribution of the shares,
obligations or securities of any other corporation, domestic or foreign,
or assets other than money which is not in accordance with the
liquidation rights of any preferred shares as specified in the Articles
of Incorporation.
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Section 10.5 DELIVERY OF NOTICE. Notice of a shareholders' meeting
or any report shall be given either personally or by mail or other means of
written communication, addressed to the shareholder at the address of such
shareholder appearing on the books of the corporation or given by the
shareholder to the corporation for the purpose of notice; or if no such address
appears or is given, at the place where the principal executive office of the
corporation is located or by publication at least once in a newspaper of
general circulation in the county in which the principal executive office is
located. The notice or report shall be deemed to have been given at the time
when delivered personally or deposited in the mail or sent by other means of
written communication. An affidavit of mailing of any notice or report in
accordance with the provisions of this section, executed by the Secretary,
Assistant Secretary or any transfer agent, shall be prima facie evidence of the
giving of the notice or report.
If any notice or report addressed to the shareholders at the address of
such shareholder appearing on the books of the corporation is returned to the
corporation by United States Postal Service marked to indicate that the United
States Postal Service is unable to deliver the notice or report to the
shareholder at such address, all future notices or reports shall be deemed to
have been duly given without further mailing if the same shall be available for
the shareholder upon written demand of the shareholder at the principal
executive office of the corporation for a period of one (1) year from the date
of the giving of the notice to all other shareholders.
Section 10.6 ADJOURNED MEETINGS. When a shareholders' meeting is
adjourned to another time or place, unless the By-Laws otherwise require and
except as provided in this section, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact
any business which might have been transacted at the original meeting. If the
adjournment is for more than forty-five (45) days or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote at the
meeting.
Section 10.7 CONSENT TO SHAREHOLDERS' MEETING. The transactions of
any meeting of shareholders, however called and noticed, and wherever held, are
as valid as though had at a meeting duly held after regular call and notice, if
a quorum is present either in person or by proxy, and if, either before or
after the meeting, each of the persons entitled to vote, not present in person
or by proxy signs a written waiver of notice or a consent to
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the holding of the meeting or an approval of the minutes thereof. All such
waivers, consents and approvals shall be filed with the corporate records or
made a part of the minutes of the meeting. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except when the person
objects at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by the California General Corporation Law to
be included in the notice but not so included in the notice if such objection
is expressly made at the meeting. Neither the business to be transacted at nor
the purpose of any regular or special meeting of shareholders need be
specified in any written waiver of notice, unless otherwise provided in the
Articles of Incorporation or By-Laws, except as provided in subdivision (b) of
Section 10.4.
Section 10.8 QUORUM. (a) The presence in person or by proxy of the
person entitled to vote the majority of the voting shares at any meeting shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of the majority of shares represented at the meeting and
entitled to vote on any matter shall be the act of the shareholders, unless the
vote of a greater number or voting by classes is required by law or the
Articles of Incorporation of these By-laws and except as provided in
subdivision (b).
(b) The shareholders present at a duly called or held meeting at which
a quorum is present may continue to transact business until adjournment
notwithstanding the withdrawal of the number of enough shareholders to leave
less than a quorum, if any action taken (other than adjournment) is approved by
at least a majority of the shares required to constitute a quorum.
(c) In the absence of a quorum, any meeting of shareholders may be
adjourned from time to time by the vote of a majority of the shares represented
either in person or by proxy, but no other business may be transacted, except
as provided in subdivision (b).
Section 10.9 ACTION BY CONSENT. Subject to the rights of the
holders of shares of any series of Preferred Stock or any other class of stock
or series thereof having a preference over the Common Stock as to dividend or
upon liquidation, any action required or permitted to be taken by the
stockholders of the Company must be effected at a duly called annual or special
meeting of stockholders of the Company and may not be effected by any
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consent in writing by such stockholders.
Section 10.10 VOTING RIGHTS. Except as provided in Section 10.12 or
in the Articles of Incorporation or in any statute relating to the election of
directors or to other particular matters, each outstanding share, regardless of
class, shall be entitled to one vote on any matter submitted to a vote of
shareholders. Any holder of shares entitled to vote on any matter may vote
part of the shares in favor of the proposal and refrain from voting the
remaining shares or vote them against the proposal, other than elections to
office, but, if the shareholder fails to specify the number of shares such
shareholder is voting affirmatively, it will be conclusively presumed that the
shareholders' approving vote is with respect to all shares such shareholder is
entitled to vote.
Section 10.11 DETERMINATION OF HOLDERS OF RECORD. (a) In order that
the corporation may determine the shareholders entitled to notice of any
meeting or to vote, or entitled to receive payment of any dividend or other
distribution or allotment of any rights or entitled to exercise any rights in
respect of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty (60) nor less than ten (10)
days prior to the date of such meeting nor more than sixty (60) days prior to
any other action.
(b) In the absence of any record date set by the Board of Directors
pursuant to subdivision (a) above then:
(1) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close
of business on the business day next preceding the day on which notice
is given or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held.
(2) The record date for determining shareholders for any
other purpose shall be at the close of business on the day on which the
Board adopts the resolution relating thereto, or the sixtieth (60th) day
prior to the date of such other action, whichever is later.
(c) A determination of shareholders of record entitled to notice of or
to vote at a meeting of shareholders shall apply to any adjournment of the
meeting unless the Board fixes a new record date for the adjourned meeting, but
the Board shall fix a new
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record date if the meeting is adjourned for more than forty-five (45) days from
the date set for the original meeting.
(d) Shareholders on the record date are entitled to notice and to vote
or to receive the dividend, distribution or allotment of rights or to exercise
the rights, as the case may be, notwithstanding any transfer of any shares on
the books of the corporation after the record date, except as otherwise
provided in the Articles of Incorporation or these By-Laws or by agreement or
applicable law.
Section 10.12 ELECTION FOR DIRECTORS. (a) Every shareholder complying
with subdivision (b) and entitled to vote at any election of directors may
cumulate such shareholder's 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 the shareholder's shares are entitled, or distribute the shareholder's
votes on the same principle among as many candidates as the shareholder thinks
fit.
(b) No shareholder shall be entitled to cumulate votes (i.e., cast for
any one or more candidates a number of votes greater than the number of the
shareholder's shares) unless such candidates or candidates' names have been
placed in nomination prior to the voting and the shareholder has given
written notice to the chairman of the meeting at the meeting prior to the voting
of the shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes
for candidates in nomination.
(c) In any election of directors, the candidates receiving the highest
number of votes of the shares entitled to be voted for them up to the number of
directors to be elected by such shares are elected.
(d) Elections for directors need not be by ballot unless a shareholder
demands election by ballot at the meeting and before the voting begins or
unless the By-Laws so require.
Section 10.13 PROXIES. (a) Every person entitled to vote shares may
authorize another person or persons to act by proxy with respect to such
shares. Any proxy purporting to be executed in accordance with the provisions
of the General Corporation Law of the State of California shall be
presumptively valid.
(b) No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every
proxy continues in full force and effect until
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revoked by the person executing it prior to the vote pursuant thereto, except
as otherwise provided in this section. Such revocation may be effected by a
writing delivered to the corporation stating that the proxy is revoked or by
a subsequent proxy executed by, or by attendance at the meeting and voting in
person by, the person executing the proxy. The dates contained on the forms of
proxy presumptively determine the order of execution, regardless of the
postmark dates on the envelopes in which they are mailed.
(c) A proxy is not revoked by the death or incapacity of the maker
unless, before the vote is counted, written notice of such death or incapacity
is received by the corporation.
Section 10.14 INSPECTORS OF ELECTION. (a) In advance of any meeting
of shareholders the Board may appoint inspectors of election to act at the
meeting and any adjournment thereof. If inspectors of election are not so
appointed, or if any persons so appointed fail to appear or refuse to act, the
chairman of any meeting of shareholders may, and on the request of any
shareholder or a shareholder's proxy shall, appoint inspectors of election (or
persons to replace those who so fail or refuse) at the meeting. The number of
inspectors shall be either one (1) or three (3). If appointed at a meeting on
the request of one or more shareholders or proxies, the majority of shares
represented in person or by proxy shall determine whether one (1) or three (3)
inspectors are to be appointed.
(b) The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum and the authenticity, validity and effect of
proxies, receive votes, ballots or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count
and tabulate all votes or consents, determine when the polls shall close,
determine the result and do such acts as may be proper to conduct the election
or vote with fairness to all shareholders.
(c) The inspectors of election shall perform their duties impartially,
in good faith, to the best of their ability and as expeditiously as is
practical. If there are three (3) inspectors of election, the decision, act or
certificate of a majority is effective in all respects as the decision, act or
certificate of all. Any report or certificate made by the inspectors of
election is prima facie evidence of the facts stated therein.
Section 10.15 ORGANIZATION. The Chairman of the Board of Directors
shall preside at each meeting of shareholders. In the
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absence of the Chairman, the meeting shall be chaired by an officer of the
corporation in accordance with the following order: Vice Chairman, Chairman of
the Executive Committee, President, Executive Vice President, Senior Vice
President and Vice President. In the absence of all such officers, the meeting
shall be chaired by a person chosen by the vote of a majority in interest of the
shareholders present in person or represented by proxy and entitled to vote
thereat, shall act as chairman. The Secretary or in his or her absence an
Assistant Secretary or in the absence of the Secretary and all Assistant
Secretaries a person whom the chairman of the meeting shall appoint shall act as
secretary of the meeting and keep a record of the proceedings thereof. The Board
of Directors of the Company shall be entitled to make such rules or regulations
for the conduct of meetings of shareholders as it shall deem necessary,
appropriate or convenient. Subject to such rules and regulations of the Board of
Directors, if any, the chairman of the meeting shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts as, in the judgment of such chairman, are necessary, appropriate or
convenient for the proper conduct of the meeting, including, without limitation,
establishing an agenda or order of business for the meeting, rules and
procedures for maintaining order at the meeting and the safety of those present,
limitations on participation in such meeting to shareholders of record of the
Company and their duly authorized and constituted proxies, and such other
persons as the Chairman shall permit, restrictions on entry to the meeting after
the time fixed for the commencement thereof, limitations on the time allotted to
questions or comments by participants and regulation of the opening and closing
of the polls for balloting on matters which are to be voted on by ballot,
unless, and to the extent, determined by the Board of Directors or the chairman
of the meeting, meetings of shareholders shall not be required to be held in
accordance with rules of parliamentary procedure.
ARTICLE XI
MEETING OF DIRECTORS.
Section 11.1 PLACE OF MEETINGS. Unless otherwise specified in the
notice thereof, meetings (whether regular, special, of adjourned) of the Board
of Directors of this corporation shall be held at the principal office of the
corporation for the transaction of business, as specified in accordance with
Section 1.1 hereof, which is hereby designed as an office for such purpose in
accordance with the laws of the State of California, or in any other place
within or without the State which has been designated
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from time to time by resolution of the Board of by written consent of all
members of the Board.
Section 11.2 REGULAR MEETINGS. Regular meetings of the Board of
Directors, of which no notice need be given except as required by the laws of
the State of California, may be called at such times as may be designated from
time to time by the Board of Directors.
Section 11.3 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board, the Vice
Chairman of the Board, the President, the Chairman of the Executive Committee,
any Vice President or the Secretary or by any two (2) or more of the directors.
(As amended January 20, 1978.)
Section 11.4 NOTICE OF MEETINGS. Except in the case of regular
meetings, notice of which has been dispensed with, the meetings of the Board of
Directors shall be held upon four (4) days' notice by mail or forty-eight (48)
hours' notice delivered personally or by telephone, telegraph or other
electronic or wireless means. If the address of a director is not shown on the
records and is not readily ascertainable, notice shall be addressed to him at
the city or place in which the meetings of the directors are regularly held.
Except as set forth in Section 11.6, notice of the time and place of holding an
adjourned meeting need not be given to absent directors if the time and place
be fixed at the meeting adjourned.
Section 11.5 QUORUM. A majority of the authorized number of directors
constitutes a quorum of the Board for the transaction of business. Every act or
decision done or made by a majority of the directors present at a meeting duly
held at which a quorum is present shall be regarded as the act of the Board of
Directors, except as otherwise provided by law. A meeting of which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.
Section 11.6 ADJOURNED MEETING. A majority of the directors present,
whether or not a quorum is present, may adjourn any meeting to another time and
place. If the meeting is adjourned for more than twenty-four (24) hours, notice
of any adjournment to another time or place shall be given prior to the time of
the adjourned meeting to the directors who were not present at the time of the
adjournment.
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Section 11.7 WAIVER OF NOTICE AND CONSENT. (a) Notice of a meeting
need not be given to any director who signs a waiver of notice, whether before
or after the meeting, or who attends the meeting without protesting, prior
thereto or at its commencement, the lack of notice to such director.
(b) The transactions of any meeting of the Board, however called and
noticed or wherever held, are as valid as though had at a meeting duly held
after regular call and notice if a quorum is present and if, either before of
after the meeting, each of the directors not present signs a written waiver of
notice, a consent to holding the meeting or an approval of the minutes thereof.
All such waivers, consents and approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
Section 11.8 ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the Board may be taken without a meeting, if all
members of the Board shall individually or collectively consent in writing to
such action. Such written consent or consents shall be filed with the minutes
of the proceedings of the Board. Such action by written consent shall have the
same force and effect as an unanimous vote of such directors.
Section 11.9 CONFERENCE TELEPHONE MEETINGS. Members of the Board may
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Participation in a meeting pursuant to this section
constitutes presence in person at such meeting.
Section 11.10 ORGANIZATION. The Chairman of the Board shall preside
at all meetings of the Board of Directors. In the absence of the Chairman, the
meeting shall be chaired by one of the following directors in the order stated:
Vice Chairman, Chairman of the Executive Committee, President and Executive
Vice President. In the absence of all such directors, a President Pro Tem
chosen by a majority of the directors present shall preside at the meeting.
Section 11.11 MEETINGS OF COMMITTEES. The provisions of this Article,
except for Section 11.10, apply also to committees of the Board and action by
such committees.
ARTICLE XII
SUNDRY PROVISIONS
Section 12.1 INSTRUMENTS IN WRITING. All checks, drafts, demands for
money and notes of the corporation, as all written
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contracts of the corporation, shall be signed by such officer or officers,
agent or agents, as the Board of Directors may from time to time by resolution
designate. No officer, agent, or employee of the corporation shall have power
to bind the corporation by contract or otherwise unless authorized to do so by
these By-Laws or by the Board of Directors.
Section 12.2 FISCAL YEAR. The fiscal year of this corporation shall
begin on the first day of November of each year and end on the last day of
October of the following year.
Section 12.3 SHARES HELD BY THE CORPORATION. Shares in other
corporations standing in the name of this corporation may be voted or
represented and all rights incident thereto may be exercised on behalf of this
corporation by the President or by any other officer of this corporation
authorized so to do by resolution of the Board of Directors.
Section 12.4 CERTIFICATES OF STOCK. There shall be issued to each
holder of fully paid shares of the capital stock of the corporation a
certificate or certificates for such shares. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the Chairman or Vice Chairman of the Board or the President or a
Vice President and by the Chief Financial Officer or the Treasurer or an
Assistant Treasurer or the Secretary or any Assistant Secretary, certifying the
number of shares and the class or series of shares owned by the shareholder.
Any or all of the signatures on the certificate may be facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if such person were an
officer, transfer agent or registrar at the date of issue.
Section 12.5 LOST CERTIFICATES. The corporation may issue a new
share certificate or a new certificate for any other security in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate or the owner's legal representative to give the
corporation a bond (or other adequate security) sufficient to indemnify it
against any claim that may be made against it (including any expense or
liability) on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate. The Board of Directors
may adopt such other provisions and restrictions with reference to lost
certificates, not inconsistent with applicable law, as it shall in its
discretion deem appropriate.
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Section 12.6 CERTIFICATION AND INSPECTION OF BY-LAWS. The
corporation shall keep at its principal executive office in this state, or if
its principal executive office is not in this state at its principal business
office in this state, the original or a copy of these By-Laws as amended to
date, which shall be open to inspection by the shareholders at all reasonable
times during office hours. If the principal executive office of the
corporation is outside this state and the corporation has no principal business
office in this state, it shall upon the written request of any shareholder
furnish to such shareholder a copy of the By-Laws as amended to date.
Section 12.7 NOTICES. Any reference in these By-Laws to the time a
notice is given or sent means, unless otherwise expressly provided, the time a
written notice by mail is deposited in the United States mails, postage
prepaid; or the time any other written notice is personally delivered to the
recipient or is delivered to a common carrier for transmission, or actually
transmitted by the person giving the notice by electronic means, to the
recipient; or the time any oral notice is communicated, in person or by
telephone or wireless, to the recipient or to a person at the office of the
recipient who the person giving the notice has reason to believe will promptly
communicate it to the recipient.
Section 12.8 REPORTS TO SHAREHOLDERS. Except as may otherwise be
required by law, the rendition of an annual report to the shareholders is
waived so long as there are less than one hundred (100) holders of record of the
shares of the corporation (determined as provided in Section 605 of the
California General Corporation Law). At such time or times, if any, that the
corporation has one hundred (100) or more holders of record of its shares, the
Board of Directors shall cause an annual report to be sent to the shareholders
not later than one hundred twenty (120) days after the close of the fiscal year
or within such shorter time period as may be required by applicable law, and
such annual report shall contain such information and be accompanied by such
other documents as may be required by applicable law.
ARTICLE XIII
CONSTRUCTION OF BY-LAWS WITH REFERENCE TO PROVISIONS OF LAW
Section 13.1 DEFINITIONS. Unless defined otherwise in these By-Laws
or, unless the context otherwise requires, terms used herein shall have the
same meaning, if any, ascribed thereto in the California General Corporation
Law, as amended from time to time.
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Section 13.2 BY-LAW PROVISIONS ADDITIONAL AND SUPPLEMENTAL TO
PROVISIONS OF LAW. All restrictions, limitations, requirements and other
provisions of these By-Laws shall be construed, insofar as possible, as
supplemental and additional to all provisions of law applicable to the subject
matter thereof and shall be fully complied with in addition to the said
provisions of law unless such compliance shall be illegal.
Section 13.3 BY-LAW PROVISIONS CONTRARY TO OR INCONSISTENT WITH
PROVISIONS OF LAW. Any article, section, subsection, subdivision, sentence,
clause or phrase of these By-Laws which upon being construed in the manner
provided in Section 13.2 hereof, shall be contrary to or inconsistent with any
applicable provision of law, shall not apply so long as said provisions of law
shall remain in effect, but such result shall not affect the validity or
applicability of any other portions of these By-Laws, it being hereby declared
that these By-Laws would have been adopted and each article, section,
subsection, subdivision, sentence, clause or phrase thereof, irrespective of
the fact that any one or more articles, sections, subsections, subdivisions,
sentences, clauses or phrases is or are illegal.
ARTICLE XIV
AMENDMENTS
All by-laws of the company shall be subject to alteration, amendment,
or repeal, in whole or in part, and new By-Laws not inconsistent with the laws
of the State of California or any provision of the Articles of Incorporation
may be made, either by the affirmative vote of a majority of the whole Board of
Directors at any regular or special meeting of the Board, or by the affirmative
vote of the holders of a majority of the issued and outstanding stock of the
Company entitled to vote in respect thereof, given at an annual meeting or at
any special meeting at which a quorum shall be present, provided that, in each
case of a proposed alteration, amendment, or repeal of the By-Laws of or the
proposal of new By-Laws to be voted on at a meeting of stockholders notices
thereof shall be included in the notice of the meeting of the stockholders.
As amended November 22, 1996
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EXHIBIT 10(d)
HEWLETT-PACKARD COMPANY OFFICERS
EARLY RETIREMENT PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE OF PLAN
The Hewlett-Packard Company Officers Early Retirement Plan was adopted
and established effective April 1, 1983 (the "Effective Date"). The Plan was
last amended and restated as of January 1, 1996 to read as set forth herein.
The Plan is intended to provide benefits for a select group of management and
highly compensated employees referred to as "Officers" herein. The purpose of
the program is to provide an opportunity for Officers to retire early with the
benefits provided in Section 4.
SECTION 2. DEFINITIONS
The following words and phrases when capitalized and used in this Plan
shall have the following meaning unless from the context it clearly appears
otherwise:
<PAGE> 2
(a) "Anniversary Year" means, with respect to any Officer, a period of
twelve (12) consecutive months commencing on his or her Election Date and each
annual anniversary of such date at which the individual continues to be an
Officer.
(b) "Company" means Hewlett-Packard Company, a California corporation.
(c) "Early Retirement Benefit" means the benefit provided under Section
4. A Participant's Early Retirement Benefit shall commence the month following
his or her termination of employment.
(d) "Election Date" means the date as of which an individual becomes an
Officer by action of the Board of Directors of the Company.
(e) "Eligible Employee" means an Employee who at termination of
employment either is an Officer or has been an Officer during his or her career.
(f) "Employee" means an individual employed by the Company or any
foreign or domestic subsidiary of the Company.
(g) "ERISA" means the Employee Retirement Income Security Act of
1974, as it may be amended from time to time.
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(h) "Final Base Rate of Pay" means the greater of (i) the Rate of Pay
on the last day of an Employee's active employment, or (2) the Rate of Pay on
the last day an Employee is an Officer.
(i) "Normal Retirement Date" means the last day of the month in which
an individual attains age sixty five (65).
(j) "Officer" means any Employee who, with respect to the Company,
holds the title of president or vice president, and is on the U.S. dollar
payroll of the Company.
(k) "Participant" means any individual who is receiving or entitled to
receive benefits under the Plan.
(l) "Plan" means the Hewlett-Packard Company Officers Early Retirement
Plan, as amended from time to time.
(m) "Rate of Pay" means, with respect to an Employee, the average of
his or her monthly rates of pay in effect at the beginning of a fiscal quarter
for the four (4) consecutive fiscal quarters ending with the fiscal quarter in
which the determination is made.
(n) "Vested Fraction" means with respect to an Officer who has an
Election Date prior to November 1, 1993, one (1.0); and with respect to an
Officer who has an Election Date on
3
<PAGE> 4
and after November 1, 1993 a fraction determined by the service of the
individual as an Officer after his or her Election Date pursuant to the
following Vesting Schedule:
Vesting Schedule
<TABLE>
<CAPTION>
Number of Anniversary Years Vested
Following Election Date Fraction
<S> <C>
Less than 1 0
1 but less than 2 .2
2 but less than 3 .4
3 but less than 4 .6
4 but less than 5 .8
5 or more 1.0
</TABLE>
(o) "Years of Full-Time Equivalent Service" means twelve (12) month
periods of service or, in the case of an individual employed in other than
full-time status, such longer periods of service required to aggregate two
thousand eighty-eight (2088) standard hours, and during which an individual is
in active pay status on the U.S. Dollar payroll of the Company. Such periods
shall include, without limitation, flexible time off, vacation, sick leave,
jury duty, holidays, and bereavement leave. Such periods shall not include
personal or medical leaves of absence.
Years of Full-Time Equivalent Service shall include all "Years of
Service" as defined in the Plan and accrued as of December 31, 1988. Years of
Full-Time Equivalent Service shall include service with a foreign subsidiary of
the Company.
4
<PAGE> 5
The determination of an individual's Years of Full-Time Equivalent
Service shall be made by the Company consistent with the determination of
foreign and United States service for service-based welfare benefit programs
sponsored by the Company.
For all purposes under the Plan, the total Years of Full-Time
Equivalent Service of an Eligible Employee shall be determined as of the last
day an Employee is an Officer.
The determination of an individual's Years of Full-Time Equivalent
Service shall be made by the Company, and such determination shall be
conclusive and binding on all persons.
SECTION 3. ELIGIBILITY AND PARTICIPATION
(a) Eligibility. Any Eligible Employee whose employment terminates upon
or after attainment of age sixty (60) while this Plan is in effect shall be
eligible to participate in this Plan. By action of the Board of Directors of
the Company, in its sole and absolute discretion, the age requirement may be
reduced, but not below age fifty-five (55), and the Vested Fraction may be
accelerated.
(b) Participation. Termination of employment and participation in this
Plan are voluntary at the Eligible Employee's election subject to any action
required by the Board of Directors
5
<PAGE> 6
of the Company pursuant to Section 3(a). A request to participate in this Plan
is made by notifying a member of the Executive Committee of the Board of
Directors.
SECTION 4. BENEFITS
(a) Termination of Employment At or After Age Sixty. Upon receipt by
the Company of an Eligible Employee's election to participate in this Plan upon
termination of employment on or after age sixty (60), the Company shall pay the
Early Retirement Benefit. A Participant's monthly Early Retirement Benefit
shall be determined as follows:
(i) The Final Base Rate of Pay shall be multiplied by a
fraction, the numerator of which is the age at termination of
employment, plus the Years of Full-Time Equivalent Service minus
forty-five (45), and the denominator of which is one hundred (100); and
(ii) The amount determined in Section 4(a)(i) above shall be
multiplied by the Vested Fraction at termination of employment.
The amount determined under Section 4(a)(ii) above shall be the Participant's
monthly Early Retirement Benefit. The percentage of Final Base Rate of Pay as
determined by Section 4(a)(i) above is shown in Table 1 attached hereto.
(b) Termination of Employment At or After Age Fifty-Five and Prior to
Age Sixty. Upon receipt by the Company of an Eligible Employee's request to
participate in this Plan on
6
<PAGE> 7
termination of employment at or after age fifty-five (55) and prior to age
sixty (60), the Company shall seek approval of the Board of Directors as
required by Section 3(a). Upon approval by the Board of Directors of early
commencement and/or acceleration of the Vested Fraction, the Company shall pay
the Early Retirement Benefit actuarially reduced for commencement prior to age
sixty (60). The monthly Early Retirement Benefit payable under this Section
4(b) shall equal the present value of the monthly Early Retirement Benefit
determined under Section 4(a) assuming payments, as determined under Section
4(a), would have commenced when the Participant attained age sixty (60). For
purposes of the immediately preceding sentence, all benefits are deemed paid
through the Participant's Normal Retirement Date and all discounting shall be
based on the average 7-year U.S. Treasury note interest rate for the month
prior to the commencement of benefits.
(c) Disability Plan Offset. Early Retirement Benefits payable hereunder
shall be reduced by payments under the Hewlett-Packard Company Employee
Benefits Organization Income Protection Plan and the Hewlett-Packard Company
Supplemental Income Protection Plan to the extent benefits from this Plan and
disability benefits are paid with respect to the same periods of time.
(d) Form and Payment of Benefits. The Early Retirement Benefit will be
paid monthly effective as of the beginning of the month following termination
of employment.
(e) Duration of Early Retirement Benefit. An individual who is
receiving Early Retirement Benefits shall continue to do so through the earlier
of
7
<PAGE> 8
(i) the month in which the Participant attains age sixty-five (65),
(ii) the month in which the Participant dies, or
(iii) the month during which the date described in subsection 4(f)
occurs.
(f) Activity in Conflict with Company's Interests. Participants may not
engage in any activity, whether or not compensated, which is in conflict with
the interests of the Company (referred to herein as "conflicting activity").
Conflicting activities shall include, but not be limited to, employment,
consulting, or directorship assignments with firms, partnerships, etc. that
compete or are likely to compete directly or indirectly with HP. Such
activities shall also include activities which enhance or support a
competitor's products or services. Participants must provide prior written
notice to the Company before engaging in any activity which potentially is, or
might become, a conflicting activity. The Company, through its Board of
Directors, shall make a determination as to whether the proposed activity is a
conflicting activity. A written notice of such determination shall be provided
to the Participant. Should the Participant elect to engage in a conflicting
activity after receiving notice, benefits shall end at the conclusion of the
month in which the conflicting activity begins.
Should the Participant engage in potentially conflicting activity
without providing prior written notice to the Company and the Company becomes
aware of such activity, the Company through its Board of Directors, shall make
a determination as to whether the activity is a conflicting
8
<PAGE> 9
activity. A written notice of such determination shall be provided to the
Participant. If the activity is determined to be a conflicting activity then
all benefits under the plan shall immediately terminate.
Financial investment, so long as it is totally passive with respect to
the Participant's activity, shall not be considered a conflicting activity.
SECTION 5. FUNDING POLICY AND METHOD
Benefits and any administrative expenses shall be paid as needed solely
from the general assets of the Company. No contributions are required from any
Officer or Participant. This Plan shall not be construed to require the Company
to fund any of the benefits provided hereunder nor to establish a trust for
such purpose. The Company may make such arrangements as it desires to provide
for the payment of benefits, including, but not limited to, the establishment
of a rabbi trust or such other equivalent arrangements as the Company may
decide. No such arrangement shall cause the Plan to be a funded plan within the
meaning of Title I of ERISA, nor shall any such arrangement change the nature
of the obligation of the Company nor the rights of the Participants under the
Plan as provided in this document. Neither the Participant nor his or her
estate shall have any rights against the Company with respect to the Early
Retirement Benefit except as a general unsecured creditor. No Participant has
an interest in his or her Early Retirement Benefit until the Participant
actually receives the payment.
9
<PAGE> 10
SECTION 6. CLAIMS PROCEDURE
(a) Initiation of Benefits. Plan benefits will be paid to or on behalf
of a Participant under the Plan, subject to any action required by the Board of
Directors of the Company pursuant to Section 3(a), after the Eligible Employee
has notified a member of the Executive Committee of the Board of Directors of
his or her intention to terminate employment and participate in this Plan.
(b) Denial of Claims. In the event any claim for benefits is denied, in
whole or in part, the Company shall notify the claimant of such denial in
writing and shall advise the claimant of his or her right to appeal the denial.
Such written notice shall set forth specific reasons for the denial and shall
be given to the claimant within ninety (90) days after the Company receives his
or her claim.
SECTION 7. REVIEW PROCEDURE
(a) Review Panel. The Review Panel appointed for the Hewlett-Packard
Company Deferred Profit Sharing and Retirement Plans shall be the named
fiduciary which shall have discretionary authority to act with respect to
appeals from denials of claims for benefits under the Plan.
10
<PAGE> 11
(b) Right to Appeal. Any person whose claim for benefits is denied
in whole or in part, may appeal from the denial by submitting a written request
for review of the claim to the Review Panel within 60 days after receiving
written notice of the denial from the Company.
(c) Form of Request for Review. A request for review must be made
in writing and shall be addressed as follows: "Review Panel under the
Hewlett-Packard Company Officers Early Retirement Plan; 3000 Hanover Street,
Palo Alto, California 94304." A request for review shall set forth all of the
grounds upon which it is based, all facts in support thereof and any other
matters which the claimant deems pertinent.
(d) Review Panel Decision. Within sixty (60) days after receipt of
a request for review, the Review Panel shall give written notice of its
decision to the claimant and the Company. In the event the Review Panel
confirms the denial of the claim for benefits, in whole or in part, such notice
shall set forth, in a manner calculated to be understood by the claimant,
specific reasons for such denial and specific references to the Plan provisions
on which the decision was based. In the event that the Review Panel determines
that the claim for benefits should not have been denied, in whole or in part,
the Company shall take appropriate remedial action as soon as reasonably
practicable after receiving notice of the Review Panel's decision.
11
<PAGE> 12
SECTION 8. AMENDMENT AND TERMINATION OF THE PLAN
The Company reserves the right to amend or terminate the Plan at any
time. Any amendment or termination of the Plan will not affect the entitlement
of any Eligible Employee who terminates employment before the amendment or
termination. All benefits to which any Participant may be entitled shall be
determined under the Plan as in effect at the time the Participant terminates
employment and shall not be affected by any subsequent change in the provisions
of the Plan. Officers will be given notice prior to the discontinuance of the
Plan or reduction of any benefits provided by the Plan.
SECTION 9. GENERAL PROVISIONS
(a) Choice of Law. This Plan, and all rights under this Plan, shall be
interpreted and construed in accordance with ERISA and, to the extent that
state laws are not preempted by ERISA, the law of the State of California.
(b) Assignment. The interest and property rights of any person in the
Plan or in any payment to be made under the Plan shall not be subject to option
nor be assignable either by voluntary or involuntary assignment or operation of
law, including (without limitation) bankruptcy, garnishment, attachment or
other creditor's process, and any act in violation of this Section 9(b) shall
be void.
12
<PAGE> 13
(c) Number. Except as otherwise clearly indicated, the singular
shall include the plural, and vice versa.
(d) Headings and Captions. The headings and captions herein are
provided for reference and convenience only and shall not be considered part of
the Plan nor shall they be employed in the construction of the Plan.
(e) Competency to Handle Benefits. If, in the opinion of the
Company, any person becomes unable to properly handle any property
distributable to such person under the Plan, the Company may make any
reasonable arrangement for the distribution of Plan benefits on such person's
behalf as it deems appropriate. Payment to anyone described in this Section
9(e) will release the Company from all further liability to the extent of the
payment made.
(f) Severability of Provisions. If any provision of the Plan shall
be held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, and the Plan shall be construed and enforced
as if such provision had not been included.
13
<PAGE> 14
SECTION 10. EXECUTION
To record the adoption of the Plan, the Company has caused its Chair of
the Compensation Committee of the Board of Directors to affix the Company's
name and seal hereto this 16th day of November, 1995
HEWLETT-PACKARD COMPANY
By: /s/ John B. Fery
-----------------------------------
John B. Fery
Chair of the Compensation Committee
of the Board of Directors
14
<PAGE> 15
EARLY RETIREMENT BENEFIT PERCENTAGE SCHEDULE
<TABLE>
<CAPTION>
YEARS OF SERVICE
15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
56 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51
57 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52
A 58 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53
G 59 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54
E 60 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55
61 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56
62 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57
63 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58
64 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59
</TABLE>
TABLE 1
<PAGE> 16
FIRST AMENDMENT TO THE
HEWLETT-PACKARD COMPANY
OFFICERS EARLY RETIREMENT PLAN
(As Last Amended and Restated Effective January 1, 1996)
The Hewlett-Packard Company Officers Early Retirement Plan (the "Plan") is
hereby amended to change the definition of "Officer" so that only those
individuals elected by a majority vote of the Board of Directors of the Company
pursuant to section 3.1 of the Company's amended By-Laws are eligible to
participate in the Plan.
Section 2(j)(definition of "Officer") of the Plan is amended in its entirety to
read as follows:
"Officer" means any Employee on the U.S. dollar payroll of the Company
who, with respect to the Company, is the president or a vice president
by election of a majority vote of the Board of Directors of the Company
pursuant to section 3.1 of the Company's amended By-Laws. An Employee
who holds any title established by any other authority, including but
not limited to, a committee of the Board of Directors or any person or
group operating as or on behalf of Company management, shall not be an
Officer for any purpose under this Plan.
This First Amendment is effective December 1, 1996.
To record the adoption of this First Amendment, the undersigned has executed
this First Amendment this 12th day of December, 1996.
HEWLETT-PACKARD COMPANY
BY: /s/ Susan P. Orr
-----------------------------------
Susan P. Orr
Chair of the Compensation Committee
of the Board of Directors
<PAGE> 1
EXHIBIT 10(g)
HEWLETT-PACKARD COMPANY EXCESS
BENEFIT RETIREMENT PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE OF PLAN
The Hewlett-Packard Company Excess Benefit Retirement Plan was adopted
and established effective November 1, 1983. The Plan is intended to provide
supplemental retirement benefits to certain management and highly compensated
employees equal to those benefits that are limited under the Deferred Profit
Sharing Plan and/or Retirement Plan because of the limitations on contributions
and benefits imposed by Section 415 of the Internal Revenue Code of 1986 (the
"Code") and the limitation on compensation imposed by Section 401(a)(17) of the
Code. This Plan is intended to be an unfunded excess benefit plan under
Sections 3(36) and 4(b)(5) of the Employee Retirement Income Security Act of
1974 ("ERISA"). The Plan is also intended to be a plan which is unfunded and is
maintained by an employer primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
under Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. The Plan was last
amended and restated as of November 1, 1994, to read as set forth herein. The
Company retains the right, as provided in Section 8, to amend or terminate the
Plan at any time. The Plan is administered by the
<PAGE> 2
Compensation Committee of the Board of Directors of the Company, as provided in
Section 7.
SECTION 2. DEFINITIONS
Certain capitalized words and phrases used in the text of the Plan
shall have the meaning attributed to them in the DPSP or RP or the following
meaning unless the text further specifies the meaning or from the context it
clearly appears otherwise:
(a) "Actual DPSP Contribution" means the amount of Company
Contributions, Separation Contributions and Forfeitures in fact made to a
Participant's Account under the DPSP for any Plan Year ending on or prior to
October 31, 1993.
(b) "Actual DPSP Account" means the amount in the separate
account established for each Participant under the DPSP to which is allocated
his or her share of Company Contributions, Separation Contributions and
Forfeitures as provided in the DPSP.
(c) "Actual RP Benefit" means the benefit in fact determined
under the RP at the following times:
2
<PAGE> 3
(i) In the case of a Participant who at termination of
employment has an Actual DPSP Account, as of the
date when benefits are to be paid under the DPSP, or
(ii) In the case of a Participant who at termination of
employment does not have an Actual DPSP Account, as
of the date of termination of employment.
(d) "Committee" means the Compensation Committee of the Board of
Directors of the Company; provided, that for purposes of Sections 5(b) and 9,
with respect to any Participant other than a Participant who is an officer as
defined in the Hewlett-Packard Company Officers Early Retirement Plan,
Committee means the Executive Committee of the Board of Directors of the
Company.
(e) "DPSP" or "Deferred Profit-Sharing Plan" means the
Hewlett-Packard Company Deferred Profit-Sharing Plan Amended and Restated as of
November 1, 1993, and as it may be amended from time to time.
(f) "Participant" means any individual entitled to a Virtual DPSP
Contribution under Section 4(a) or a Virtual Retirement Benefit under
Section 5.
3
<PAGE> 4
(g) "Plan" means the Hewlett-Packard Company Excess Benefit
Retirement Plan, as described herein and as it may be amended from time to time.
(h) "RP" or "Retirement Plan" means the Hewlett-Packard Company
Retirement Plan Amended and Restated as of October 29, 1993, and as it may be
amended from time to time.
(i) "Virtual DPSP Account" means a bookkeeping account established
under Section 4 to which is credited all Virtual DPSP Contributions and
investment earnings as provided in Section 4.
(j) "Virtual DPSP Contribution" means an amount established under
Section 4 with respect to a Plan Year ending on or prior to October 31, 1993
which equals the excess amount that would have been contributed on behalf of a
Participant to the Participant's Account under the DPSP but was not so
contributed by reason of the limitations imposed by Section 415 of the Code or
Section 401(a)(17) of the Code.
(k) "Virtual Retirement Benefit" means the benefit payable to a
Participant or Beneficiary determined under Section 5.
4
<PAGE> 5
(l) "Virtual RP Benefit" means the benefit determined under the RP
based on the Annuity Value of the Actual DPSP Account, if applicable, but
otherwise without regard to the limitations of Section 415 or Section
401(a)(17) of the Code.
SECTION 3. ELIGIBILITY AND PARTICIPATION
(a) General Rule. Any individual who is participating in the DPSP
and/or the RP and who by reason of the limitations of Section 415 or Section
401(a)(17) of the Code is unable to receive the formula contributions or
benefits otherwise provided under the DPSP and/or RP shall automatically be a
Participant in this Plan.
(b) Termination of Participation. An individual shall cease to be a
Participant as of the date he or she ceases to be an Employee, unless the
individual is entitled to benefits hereunder, in which event his or her status
as a Participant shall terminate on the earlier of the date of his or her death
or the date no further amount is payable to the individual hereunder.
SECTION 4. VIRTUAL DPSP CONTRIBUTIONS AND ACCOUNTS
(a) Virtual DPSP Contribution. As of the last day of each Plan Year
ending on or prior to October 31, 1993, or in the case of an Employee whose
employment by the Affiliated Group terminated during any such Plan Year, the
Employee's Valuation
5
<PAGE> 6
Date (if other than the last day of the Plan Year), the Committee has
determined the amount of Company Contributions, Separation Contributions, and
Forfeitures allocable to the Participant's Account under the DPSP with regard
to both the limitations of Section 401(a)(17) of the Code and of Section 415 of
the Code (but without regard to any other defined contribution plan of the
Company). The amount determined to be the maximum permissible contribution
pursuant to the Code under the immediately preceding sentence shall be the
"Actual DPSP Contribution." As of the last day of each Plan Year ending on or
prior to October 31, 1993, or in the case of an Employee whose employment by
the Affiliated Group terminated during any such Plan Year, the Employee's
Valuation Date (if other than the last day of the Plan Year), the Committee has
determined the amount of Company Contributions, Separation Contributions, and
Forfeitures that would have been allocable to the Participant's Account under
the DPSP if contributions under the DPSP were determined without regard to the
limitations of both Section 415 and Section 401(a)(17) of the Code. The amount
determined under the immediately preceding sentence less the Actual DPSP
Contribution is the "Virtual DPSP Contribution."
(b) Virtual DPSP Account. A separate account, called a "Virtual
DPSP Account," shall be maintained by the Committee for each Participant to
which has been credited the Participant's Virtual DPSP Contribution for each
Plan Year ending on or prior to October 31, 1993. As of the last day of each
Plan Year, or in the case of an Employee whose employment by the Affiliated
Group has terminated and who has made claim for benefits under the DPSP, as of
the Employee's Valuation Date (if other than the last day
6
<PAGE> 7
of the Plan Year), each Virtual DPSP Account shall be revalued. For purposes of
valuation, the Virtual DPSP Account shall be deemed invested as the assets of
the DPSP including the periodic transfer of assets from Fund A to Fund B as
provided in the DPSP.
SECTION 5. VIRTUAL RETIREMENT BENEFIT
(a) Determination of Benefit. The benefits payable under this Plan
shall be determined as of the date when benefits are to be paid under the DPSP,
or, if no benefits are payable under the DPSP, as of the date of termination of
employment. As of that date the Committee shall determine the Virtual RP
Benefit and the Actual RP Benefit. As of the same date the Committee shall
determine the Annuity Value of the Virtual DPSP Account, if any, in the same
manner as the Annuity Value of the Actual DPSP Account, if any, is determined
under the RP. The benefit payable under this Plan, if any, shall equal:
(i) The greater of the Virtual RP Benefit or the Annuity Value
of the Virtual DPSP Account; less
(ii) The Actual RP Benefit.
The benefit determined pursuant to the immediately preceding sentence shall be
known as the Virtual Retirement Benefit.
7
<PAGE> 8
(b) Form and Time of Payment. The Participant's Virtual Retirement
Benefit shall be converted to a lump sum benefit as of the date the
Participant's DPSP benefit is to be paid, or, if no benefits are payable under
the DPSP, as of the date of termination of employment. The conversion shall be
based on the same actuarial factors that would be used to convert an RP benefit
from an annuity to a lump sum at the time of the conversion. Thereafter, the
unpaid portion of such lump sum Virtual Retirement Benefit shall be credited
with earnings as if it were a benefit invested in Fund B under the DPSP until it
is paid out to the Participant under this Plan as set forth below in this
Section 5(b).
Benefits are payable under this Plan in the form of a lump sum or
annual installments at such time or times as the Committee shall determine in
its sole discretion, subject to the following limitations:
(i) If benefits are payable under the DPSP, no benefits shall
be payable under this Plan until benefits are to be paid
under the DPSP;
(ii) The Committee may change the date a payment is to be made
at any time before the date of the scheduled payment;
(iii) Any annual installments shall be payable in January of
the particular year;
8
<PAGE> 9
(iv) No lump sum may be payable later than January of the
calendar year following the calendar year in which the
Participant attains (or would have attained) age 70-1/2;
provided, that the Committee may allow the unpaid balance
to be paid in a lump sum after annual installment payments
have commenced;
(v) Annual installments must be 15 or fewer in number and
commence no later than January of the calendar year
following the calendar year in which the Participant
attains (or would have attained) age 70-1/2;
(vi) The amount of each annual installment shall be determined
by dividing the unpaid balance as of the last day of the
prior Plan Year by the sum of the annual payments
remaining to be made; and
(vii) If at the time the Virtual Retirement Benefit is first
determined under this Section 5 the lump sum equivalent of
such benefit does not exceed one hundred fifty thousand
dollars ($150,000.00), benefits shall be payable
under this Plan as soon as administratively practicable
after the date the Virtual Retirement Benefit is first
determined and only in the form of a lump sum.
9
<PAGE> 10
If the Committee has not otherwise determined, benefits shall be
payable in 15 annual installments commencing in January of the calendar year
following the calendar year in which the Participant attains (or would have
attained) age 70-1/2.
In administering these payment provisions of the Plan, the Committee may allow
Participants to elect the form and time of payment that they desire consistent
with these rules, and the Committee may establish guidelines for its own use in
determining what elections made pursuant to these rules shall be disapproved.
However, such Participant elections and Committee guidelines shall not in any
way limit the Committee's sole discretion to determine the form and time of
payment of a Participant's Virtual Retirement Benefit consistent with the rules
set forth in this Section 5(b) of the Plan.
(c) Death of Participant. If a Participant dies, without regard to
whether he or she is employed by any member of the Affiliated Group at the time
of death, his or her Beneficiary shall be the individual (or individuals)
designated on the form prescribed by the Committee (or, in the absence of such
a designation, his or her Beneficiary under the DPSP). Such Beneficiary shall
be entitled to the unpaid portion (if any) of the Virtual Retirement Benefit
determined under Section 5(a). The Beneficiary shall be subject to the rules of
form and time of payment established under Section 5(b).
10
<PAGE> 11
SECTION 6. FUNDING POLICY AND METHOD
Benefits and administrative expenses shall be paid as needed solely
from the general assets of the Company. This Plan shall be unfunded within the
meaning of Section 4(b)(5) of ERISA. No contributions are required or permitted
from any Participant.
SECTION 7. ADMINISTRATION
The Plan shall be administered by the Committee. No member of the
Committee shall become a Participant in the Plan. The Committee shall make such
rules, interpretations and computations as it may deem appropriate, and any
decision of the Committee with respect to the Plan, including (without
limitation) any determination of eligibility to participate in the Plan and any
calculation of benefits under the Plan shall be conclusive and binding on all
persons. Those responsibilities of the Committee that do not involve the
exercise of its discretion may be performed on behalf of the Committee by the
Company through its employees.
11
<PAGE> 12
SECTION 8. AMENDMENT AND TERMINATION OF THE PLAN
The Company reserves the right to amend or terminate the Plan at any
time by resolution of the Company's Board of Directors or by resolution by any
proper delegatee of the Company's Board of Directors. Any amendment or
termination of the Plan will not affect the entitlement of any Participant who
terminates employment before the amendment or termination. All benefits to
which any Participant may be entitled shall be determined under the Plan as in
effect at the time the Participant terminates employment and shall not be
affected by any subsequent changes in the provisions of the Plan. Participants
will be given notice prior to the discontinuance of the Plan or reduction of
any benefits provided by the Plan.
SECTION 9. GENERAL PROVISIONS
(a) Choice of Law. This Plan, and all rights under this Plan, shall
be interpreted and construed in accordance with the law of the State of
California.
(b) Assignment. The interest and property rights of any person in the
Plan or in any payment to be made under the Plan shall not be subject to
option nor be assignable either by voluntary or involuntary assignment or
operation of law, including (without limitation) bankruptcy, garnishment,
attachment or other creditor's process, and any act in violation of this
Section 9(b) shall be void.
12
<PAGE> 13
(c) Number. Except as otherwise clearly indicated, the singular shall
include the plural, and vice versa.
(d) Headings and Captions. The headings and captions herein are
provided for reference and convenience only and shall not be considered part
of the Plan nor shall they be employed in the construction of the Plan.
(e) Competency to Handle Benefits. If, in the opinion of the
Committee, any person becomes unable to properly handle any property
distributable to such person under the Plan, the Committee may make any
reasonable arrangement for the distribution of Plan benefits on such person's
behalf as it deems appropriate. Payment to anyone described in this Section
9(e) will release the Company from all further liability to the extent of the
payment made.
(f) Severability of Provisions. If any provision of the Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, and the Plan shall be construed and
enforced as if such provision had not been included.
(g) Tax Withholding. If any Federal or state tax withholding or
payroll tax is required with respect to a Participant's Virtual Retirement
Benefit, the Committee shall make appropriate arrangements with the
Participant for satisfaction of such obligation.
13
<PAGE> 14
(h) No Employment Rights. Nothing in the Plan, nor any action of the
Committee or the Company pursuant to the Plan, shall be deemed to give any
person any right to remain in the employ of the Company or affect the right of
the Company to terminate a person's employment at any time, with or without
cause.
SECTION 10. EXECUTION
To record the amendment and restatement of the Plan as set forth
herein, the Company has caused its Chair of the Compensation Committee of the
Board of Directors to affix the Company's name and seal hereto this 21st day of
July, 1994.
HEWLETT-PACKARD COMPANY
By: /s/John B. Fery
---------------------
John B. Fery
Chair of the Compensation
Committee of the Board
of Directors
14
<PAGE> 1
EXHIBIT 10(s)
[Hewlett-Packard Logo]
HEWLETT-PACKARD COMPANY
INCENTIVE STOCK PLAN STOCK OPTION AGREEMENT (NON-QUALIFIED)
THIS AGREEMENT, dated ("Grant Date") between
HEWLETT-PACKARD COMPANY, a California corporation ("Company"), and
("Employee"), an employee of is entered into as follows:
WITNESSETH:
WHEREAS, the Company has established the Hewlett-Packard Company 1995
Incentive Stock Plan ("Plan"), a copy of which is attached hereto as Exhibit "A"
and made a part hereof; and
WHEREAS, the Compensation Committee of the Company ("Committee") has
determined that the Employee shall be granted an option under the Plan as
hereinafter set forth;
NOW THEREFORE, the parties hereby agree that in consideration of services
rendered and to be rendered, the Company grants the Employee an option
("Option") to purchase shares of its $1 par value voting Common Stock
upon the terms and conditions set forth herein.
1. This Option is granted under and pursuant to the Plan and is subject to each
and all of the provisions thereof.
2. This Option price shall be per share.
3. This Option is not transferable by the Employee otherwise than by will or
the laws of descent and distribution, and is exercisable only by the
Employee during his lifetime. This Option may not be transferred, assigned,
pledged or hypothecated by the Employee during his lifetime, whether by
operation of law or otherwise, and is not subject to execution, attachment
or similar process.
4. This Option may not be exercised before the first anniversary of the date
hereof, nor may it be exercised as to more than one-fourth the number of
shares covered herein before the second anniversary hereof, nor may it be
exercised as to more than one-half of the number of shares covered herein
before the third anniversary hereof, nor may it be exercised as to more than
three-fourths the number of shares covered herein before the fourth
anniversary hereof. Notwithstanding the foregoing, this Option shall be
exercisable in full upon the retirement of the Employee because of age or
permanent and total disability, or upon his death.
5. This Option will expire ten (10) years from the date hereof, unless sooner
terminated or canceled in accordance with the provisions of the Plan.
6. This Option shall be exercised by delivering to the Secretary of the Company
at its head office a written notice stating the number of shares as to which
the Option is exercised; provided, however, that no such exercise shall be
with respect to fewer than twenty-five (25) shares or the remaining shares
covered by the Option if less than twenty-five. The written notice must be
accompanied by the payment of the full Option price of such shares. Payment
may be in cash or shares of the Company's Common Stock or a combination
thereof; provided, however, that any payment in shares shall be in strict
compliance with all procedural rules established by the Committee.
7. All rights of the Employee in this Option, to the extent that it has not
been exercised, shall terminate upon the death of the Employee (except as
hereinafter provided) or termination of his employment for any reason other
than retirement because of age or permanent and total disability, and in
case of such retirement three (3) years from the date thereof; provided,
however, that in the event of the Employee's death his legal representative
or designated beneficiary shall have the right to exercise all or a portion
of the Employee's right under this Option. The representative or designee
must exercise the Option within one (1) year after the death of the
employee, and shall be bound by the provisions of the Plan. In all cases,
however, the Option will expire no later than the expiration date set forth
in Paragraph 5.
8. The Employee shall remit to the Company payment for all applicable U.S.
withholding taxes at the time the Employee exercises any portion of this
Option.
9. Whenever used in this Agreement, the masculine gender shall be deemed to
include the feminine.
10. Neither the Plan nor this Agreement nor any provision under either shall be
construed so as to grant Employee any right to remain in the employ of the
Company, and it is expressly agreed and understood that employment is
terminable at the will of either party.
HEWLETT-PACKARD COMPANY
By
--------------------------------
Lewis E. Platt
Chairman, CEO and President
By
--------------------------------
D. Craig Nordlund
Associate General Counsel and Secretary
<PAGE> 2
[Hewlett-Packard Logo]
HEWLETT-PACKARD COMPANY
RESTRICTED STOCK AGREEMENT
This agreement is made as of the by and between Hewlett-Packard
Company, a California Corporation ("Company"), and
("Employee").
WHEREAS the continued participation of the Employee is considered by the
Company to be important for the Company's continued growth; and
WHEREAS in order to give the Employee an incentive to continue in the
employ of the Company and to participate in the affairs of the Company, the
Company is willing to grant to the Employee shares of the Company's $1 par
value Common Stock ("Stock") subject to the restrictions stated below and in
accordance with the terms and conditions of the Company's 1995 Incentive
Stock Plan ("Plan").
THEREFORE, the parties agree as follows:
1. Grant of Stock.
Subject to the terms and conditions of this Agreement and of the Plan, the
Company hereby grants to Employee shares of stock.
2. Vesting Schedule.
The interest of Employee in the Stock shall vest in full 3 years from the
date of this agreement. Provided the Employee remains in the employ of the
Company on a continuous, full-time basis through the close of business on
the interest of the Employee in the Stock shall become fully
vested on that date.
3. Restrictions.
(a) The Stock or rights granted hereunder may not be sold, pledged or
otherwise transferred until the shares become vested in accordance with
Section 2. The period of time between the date hereof and the date
shares become vested is referred to herein as the "Restriction
Period."
(b) If Employee's employment with the Company is terminated at any time for
any reason other than retirement after attaining 55 years of age with
15 years of service to the Company or 65 years of age without regard to
service prior to the lapse of the Restriction Period, all Stock granted
hereunder shall be forfeited by the Employee, and ownership transferred
back to the Company.
4. Legend.
All certificates representing any shares of Stock of the Company subject to
the provisions of this Agreement shall have endorsed thereon the following
legend:
"The shares represented by this certificate are subject to an agreement
between the Corporation and the registered holder, a copy of which is on
file at the principal office of this Corporation."
5. Escrow.
The certificate or certificates evidencing the Stock subject hereto shall be
delivered to and deposited with the Secretary of the Company as Escrow Agent
in this transaction. The Stock may also be held in a restricted book entry
account in the name of the Employee. Such certificates or such book entry
shares are to be held by the Escrow Agent until termination of the
Restriction Period, when they shall be delivered by said Escrow Agent to
Employee.
6. Employee Shareholder Rights.
During the Restriction Period, the Employee shall have all the rights of a
shareholder with respect to the Stock except for the right to transfer the
Stock, as set forth in Section 3. Accordingly, the Employee shall have the
right to vote the Stock and to receive any cash dividends paid to or made
with respect to the Stock.
7. Retirement of Employee.
If Employee retires after attaining 55 years of age with 15 years of service
to the Company or 65 years of age without regard to service, the Company's
obligation to deliver Stock out of escrow is subject to the condition that
for the entire Restriction Period:
(a) Employee shall render, as an independent contractor and not as an
employee, such advisory or consultative services to the Company as
shall reasonably be requested by the Company, consistent with
Employee's health and any other employment or other activities in which
such Employee may be engaged;
(b) Employee shall not render services for any organization or engage
directly or indirectly in any business which, in the opinion of the
Company, competes with or is in conflict with the interests of the
Company;
(c) Employee shall not, without prior written authorization from the
Company, disclose to anyone outside the Company, or use in other than
the Company's business, any confidential information or material
relating to the business of the Company, either during or after
employment with the Company; and
(d) Employee shall disclose promptly and assign to the Company all right,
title and interest in any invention or idea, patentable or not, made or
conceived by the Employee during employment by the Company, relating in
any manner to the actual or anticipated business, anything reasonably
necessary to enable the Company to secure a patent where appropriate in
the United States and in foreign countries.
8. Total and Permanent Disability of Employee.
In the event of total and permanent disability of Employee, any unpaid but
vested award shall be paid to Employee if legally competent or to a legally
designated guardian or representative if Employee is legally incompetent.
<PAGE> 3
9. Death of Employee.
In the event of the Employee's death prior to the end of the
Restriction Period, the Employee's estate or designated beneficiary shall
receive a pro rata number of shares determined by multiplying the total
shares granted by a fraction equal to a.) the number of whole years
elapsed between the date of this agreement and the Employee's death,
divided by b.)3. In the event of the Employee's death after the vesting
date but prior to the payment of shares, said shares shall be paid to the
Employee's estate or designated beneficiary.
10. Taxes.
Employee shall be liable for any and all taxes, including withholding
taxes, arising out of this grant or the vesting of Stock hereunder.
11. Miscellaneous.
(a) The Company shall not be required (i) to transfer on its books any
shares of Stock of the Company which shall have been sold or
transferred in violation of any of the provisions set forth in this
agreement or (ii) to treat as owner of such shares or to accord the
right to vote as such owner or to pay dividends to any transferee to
whom such shares shall have been so transferred.
(b) The parties agree to execute such further instruments and to take such
action as may reasonably be necessary to carry out the intent of this
Agreement.
(c) Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon delivery to Employee at his
address then on file with the Company.
(d) Neither the Plan nor this Agreement nor any provisions under either
shall be construed so as to grant the Employee any right to remain in
the employ of the Company.
(e) This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof.
HEWLETT-PACKARD COMPANY
By:
--------------------------------------
Lewis E. Platt
Chairman, CEO, and President
By:
---------------------------------------
D. Craig Nordlund
Associate General Counsel and Secretary
<PAGE> 4
[Hewlett-Packard Logo]
HEWLETT-PACKARD COMPANY
RESTRICTED STOCK AGREEMENT
This Agreement is made as of by and between Hewlett-Packard
Company, a California Corporation ("Company"), and Employee
Number .
WHEREAS in order to give the Employee an incentive to continue in the employ
of the Company, to participate in the affairs of the Company, and to help the
Company attain certain performance objectives, the Company is willing to grant
to the Employee shares of the Company's $1 par value Common Stock subject to the
restrictions stated below and in accordance with the terms and conditions of the
Company's 1995 Incentive Stock Plan ("Plan").
THEREFORE, the parties agree as follows:
1. Grant of Stock
Subject to the terms and conditions of this Agreement and of the Plan,
the Company hereby grants to Employee shares of the
Company's $1 par value Common Stock ("Shares").
2. Vesting Conditions and Schedule
(a) The vesting of the Shares shall be based on the average
of the annual growth rates in the Company's reported earnings per share
("EPS") and return on assets ("ROA") for the 1997, 1998 and 1999 fiscal
years using fiscal 1996 EPS of $2.46 and fiscal 1995 and 1996 average
ROA of 9.67% as baselines. The full number of shares shall vest only if
the respective averages of EPS and ROA growth rates for fiscal 1997
through 1999 . If actual performance does not meet those
objectives, the percentage of Shares that will vest, if any, shall be
determined by the Committee in accordance with the attached matrix.
(b) During the six-month period following the publication of the
Company's consolidated financial results for the fiscal year ending
October 31, 1999, the Compensation Committee of the Company's Board of
Directors ("Committee") shall determine whether and to what extent the
EPS and ROA goals described in the preceding paragraph have been
attained, and shall authorize a.) the removal of restrictions and
release from escrow of the percent of Shares indicated by the attached
EPS/ROA matrix and b.) the cancellation of remaining Shares.
(c) EPS goals for fiscal 1997-1999
shall be adjusted to reflect the impact of any required changes in
accounting policies implemented in any of these years where such changes
are required by an external financial accounting standards body such as
the Financial Accounting Standards Board.
(d) In the event the Employee dies prior to October 31, 1999
without having previously forfeited his Shares, his beneficiary shall
be entitled to receive, in fiscal 2000, a portion of the Shares equal
to a.) the number of Shares determined by the Committee to have vested,
multiplied by b.) the number of whole years elapsed between November 1,
1996 and the date of the employee's death, divided by c.) 3.
3. Potential Unrestricted Stock Bonus
If the average of the annual EPS growth rates for fiscal 1997-1999
exceed , the Committee will grant an unrestricted stock
bonus in an amount determined in accordance with the matrix, which shall
not exceed Shares (such maximum to be adjusted to reflect
any stock split or similar occurrence). The grant shall not be made, if
at all, until the six-month period following the publication of the
Company's consolidated financial results for the fiscal year ending
October 31, 1999, and will be made only if Employee remains an active
employee of the Company through October 31, 1999.
4. Restrictions
(a) The Shares granted hereunder may not be sold, pledged or
otherwise transferred until the Shares become vested in accordance with
Section 1. The period of time between the date hereof and the date
Shares become vested is referred to herein as the "Restriction Period".
(b) If Employee's employment with the Company is terminated prior to
October 31, 1999 for any reason other than retirement after attaining 55
years of age with 15 years of service to the Company or 65 years without
regard to service prior to the lapse of the Restriction Period, all
Shares granted hereunder shall be forfeited by the Employee, and
ownership transferred back to the Company.
5. Legend
All certificates representing any Shares subject to the provisions of
this Agreement shall have endorsed thereon the following legend: "The
shares represented by this certificate are subject to an agreement
between the Corporation and the registered holder, a copy of which is
on file as the principal office of this Corporation."
<PAGE> 5
6. Escrow
The certificate or certificates evidencing the Shares subject hereto
shall be delivered to and deposited with the Secretary of the Company as
Escrow Agent in this transaction. The Shares may also be held in a
restricted book entry account in the name of the Employee. Such
certificates or such book entry shares are to be held by the Escrow
Agent until termination of the Restriction Period, when they shall be
delivered by said Escrow Agent to Employee.
7. Employee Shareholder Rights
During the Restriction Period, the Employee shall have all the rights of
a shareholder with respect to the Shares except for the right to
transfer the Shares as set forth in Section 4. Accordingly, the Employee
shall have the right to vote the Shares and to receive any cash
dividends paid to or made with respect to the Shares.
8. Retirement or Total and Permanent Disability of Employee
If Employee retires after attaining 55 years of age with 15 years of
service to the company or 65 years of age without regard to service, or
if Employee becomes totally and permanently disabled, the Company's
obligation to deliver Shares is subject to the vesting requirements of
Section 2 and to the condition that for the entire Restriction Period:
(a) Employee shall render, as an independent contractor and not as
an employee, such advisory or consultative services to the Company as
shall be reasonable requested by the Company, consistent with Employee's
health and any other employment or other activities in which such
Employee may be engaged.
(b) Employee shall not render services for any organization or
engage directly or indirectly in any business which, in the opinion of
the Company, competes with or is in conflict with the interests of the
Company.
(c) Employee shall not, without prior written authorization from the
Company, disclose to anyone outside the Company, or use in other than
the Company's business, any confidential information or material
relating to the business of the Company, either during or after
employment with the Company; and
(d) Employee shall disclose promptly and assign to the Company all
right, title and interest in any invention or idea, patentable or not,
made or conceived by the Employee during employment by the Company,
relating in any manner to the actual or anticipated business, anything
reasonable necessary to enable the Company to secure a patent where
appropriate in the United States and in foreign countries.
9. Taxes
Employee shall be liable for any and all taxes, including withholding
taxes, arising out of this grant or the vesting of Shares hereunder.
10. Miscellaneous
(a) The Company shall not be required (i) to transfer on its books
any Shares which shall have been sold or transferred in violation of any
of the provisions set forth in this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such Shares shall have been so
transferred.
(b) The parties agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the
intent of this Agreement.
(c) Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon delivery to Employee
at his address then on file with the Company.
(d) Neither the Plan nor this Agreement nor any provision under
either shall be construed so as to grant the Employee any right to
remain in the employ of the Company.
(e) This Agreement constitutes the entire agreement of parties with
respect to the subject matter hereof.
HEWLETT-PACKARD COMPANY
By
-------------------------------------
Lewis E. Platt
Chairman, CEO and President
EMPLOYEE
By
-------------------------------------
- ---------------------------------- D. Craig Nordland
Associate General Counsel and Secretary
<PAGE> 6
COMPANY CONFIDENTIAL
FY97 Performance-Based Restricted Stock
Payout Table
[3-YEAR PERFORMANCE CYCLE]
<TABLE>
<CAPTION>
EPS Delta %
===================================================================
<S> <C> <C> <C> <C> <C>
0 25 50 75 100
-------------------------------------------------------------------
R
O 25 50 75 100 125
A
-------------------------------------------------------------------
D
E 50 75 100 125 150
L
T -------------------------------------------------------------------
A
75 100 125 150 200
%
===================================================================
</TABLE>
Baseline: FY96 EPS = $2.46
ROA = 9.67 (Average of 10.0 (fy95) & 9.34 (fy96))
<PAGE> 1
Exhibit 10(t)
Amendments dated November 21, 1996 to the Company's 1995 Incentive Stock Plan,
1990 Incentive Stock Plan, 1987 Director Option Plan, 1985 Incentive
Compensation Plan, and 1979 Incentive Stock Option Plan, as set forth below,
respectively:
1995 Incentive Stock Plan:
Part I. Section II., Part 2, Section X. and Part 4, Section XXV, of the
Company's 1995 Incentive Stock Plan are hereby amended to read, respectively, as
follows:
Section 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 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 for employees subject to Section 16 of the Exchange Act. In addition, the
Board or the Committee may delegate to the Executive Committee of the Board of
Directors the power to approve stock options and stock awards to employees not
subject to Section 16 of the Exchange Act.
1
<PAGE> 2
Section X. Stock Appreciation Rights
Paragraphs 7, 8 and 9 of Section X. shall be replaced in their entirety with
the following:
The Board or the Committee shall have the sole discretion to consent to approve
or disapprove, in whole or in part, any election to receive any portion of the
Appreciation in cash.
B. Additional Restrictions Applicable to Section 16 Employees. No stock
appreciation right or related Option may be exercised during the first six
months of its term, except in the event of death or total and permanent
disability of the holder occurring prior to the expiration of this six-month
period.
Stock appreciation rights granted to individuals subject to Section 16 of the
Exchange Act must comply with any applicable provisions of Rule 16b-3. These
rights shall contain such additional conditions or restrictions as may be
required under this rule (or any successor rule) to qualify for the maximum
exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
Section XXV. Amendment of the Plan
The Board or the Committee may suspend or discontinue the Plan or revise or
amend it in any respect whatsoever; provided, however, that the Company may
seek shareholder approval of an amendment if determined to be required by or
advisable by any law or regulation, including without limitation, any
regulations of the Securities and Exchange Commission or the Internal Revenue
Service, the rules of any stock exchange on which the Company's stock is listed
or other applicable law or regulation.
1990 Incentive Stock Plan:
Part I, Section II., Part 2, Section X. and Part 4, Section XXIII. of the
Company's 1990 Incentive Stock Plan are hereby amended to read, respectively,
as follows:
Section 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"),
2
<PAGE> 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 Committee or the Board shall from time to time designate the key employees
of the Participating Companies who shall be granted stock options, stock or
cash awards under the Plan and the amount and nature of the award granted to
each such employee.
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 for employees subject to Section 16 of the Exchange Act. In
addition, the Board or the Committee may delegate to the Executive Committee of
the Board of Directors the power to approve stock options and stock awards to
employees not subject to Section 16 of the Exchange Act.
Section X. Stock Appreciation Rights
Paragraphs 6 and 7 of Section X. shall be replaced in their entirety with the
following:
No stock appreciation right or related Option may be exercised during the first
six months of its term, except in the event of death or total and permanent
disability of the holder occurs prior to the expiration of this six-month
period.
The Board or the Committee shall have the sole discretion to consent to approve
or disapprove, in whole or in part, any election to receive any portion of the
Appreciation in cash.
Section XXIII. Amendment of the Plan
The Board or the Committee may suspend or discontinue the Plan or revise or
amend it in any respect whatsoever; provided, however, that the Company may
3
<PAGE> 4
seek shareholder approval of an amendment if determined to be required by or
advisable by any law or regulation, including without limitation, any
regulations of the Securities and Exchange Commission or the Internal Revenue
Service, the rules of any stock exchange on which the Company's stock is listed
or other applicable law or regulation.
1987 Director Option Plan:
Part 2, Section VI.A. and Part 3, Section XV. of the Company's 1987 Director
Option Plan are hereby amended to read, respectively, as follows:
Section VI. Terms, Conditions and Form of Options
Each option granted under this plan shall be evidenced by a written agreement in
such form as the Committee shall from time to time approve, which Agreements
shall comply with and be subject to the following terms and conditions:
A. Option Grant Dates. Options shall be granted automatically on March 1, (or,
if March 1 is not a business day, on the next succeeding business day) of any
year to any eligible director who, on or prior to the immediately preceding
February 1, files with the Secretary an election to receive a stock option in
lieu of retainer fees to be earned in the following year beginning March 1 and
ending February 28 (or February 29, as the case may be) ("Plan Year").
Section XV. Amendment of the Plan
The Board or the Committee may suspend or discontinue the Plan or revise or
amend it in any respect whatsoever; provided, however, that the option formula
set forth in Section VI.B. of the Plan shall not be amended more than once every
six months, except to the extent necessary to comply with changes in the
Internal Revenue Code, as amended, or the Employee Retirement Income Security
Act of 1974, as amended, or the rules of each thereunder.
1985 Incentive Compensation Plan:
Part I, Section II., Part 2, Section X. and Part 4, Section XXII. of the
Company's 1985 Incentive Compensation Plan are hereby amended to read,
respectively, as follows:
4
<PAGE> 5
Section 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 Committee or the Board shall from time to time designate the key employees
of the Participating Companies who shall be granted stock options, stock or
cash awards under the Plan and the amount and nature of the award granted to
each such employee.
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 for employees subject to Section 16 of the Exchange Act. In addition, the
Board or the Committee may delegate to the Executive Committee of the Board of
Directors the power to approve stock options and stock awards to employees not
subject to Section 16 of the Exchange Act.
Section X. Stock Appreciation Rights
Paragraphs 5 and 6 of Section X. shall be replaced in their entirety with the
following:
No stock appreciation right or related Option may be exercised during the first
six months of its term, except in the event of death or total and permanent
disability of the holder occurs prior to the expiration of this six-month
period.
The Committee shall have the sole discretion to consent to approve or
disapprove, in whole or in part, any election to receive any portion of the
Appreciation in cash.
5
<PAGE> 6
Section XXII. Amendment of the Plan
The Board or the Committee may suspend or discontinue the Plan or revise or
amend it in any respect whatsoever; provided, however, that the Company may seek
shareholder approval of an amendment if determined to be required by or
advisable by any law or regulation, including without limitation, any
regulations of the Securities and Exchange Commission or the Internal Revenue
Service, the rules of any stock exchange on which the Company's stock is listed
or other applicable law or regulation.
1979 Incentive Stock Option Plan:
Sections II., XII., and XIV. of the Company's 1979 Incentive Stock
Option Plan are hereby amended to read, respectively, as follows:
Section 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 Committee or the Board shall from time to time designate the key employees
of the Participating Companies who shall be granted stock options under the Plan
and the amount of stock to be optioned to each such employee.
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 for employees subject to Section 16 of the Exchange Act. In addition, the
Board or the
6
<PAGE> 7
Committee may delegate to the Executive Committee of the Board of Directors the
power to approve stock options and stock awards to employees not subject to
Section 16 of the Exchange Act.
Section XII. Amendment of the Plan
The Board or the Committee may suspend or discontinue the Plan or revise or
amend it in any respect whatsoever; provided, however, that the Company may
seek shareholder approval of an amendment if determined to be required by or
advisable by any law or regulation, including without limitation, any
regulations of the Securities and Exchange Commission or the Internal Revenue
Service, the rules of any stock exchange on which the Company's stock is listed
or other applicable law or regulation.
Section XIV. Stock Appreciation Rights
Paragraphs 5 and 6 of Section XIV. shall be replaced in their entirety with the
following:
No stock appreciation right or related Option may be exercised during the first
six months of its term, except in the event of death or total and permanent
disability of the holder occurs prior to the expiration of this six-month
period.
The Board or the Committee shall have the sole discretion to consent to approve
or disapprove, in whole or in part, any election to receive any portion of the
Appreciation in cash.
7
<PAGE> 1
EXHIBIT 10(u)
HEWLETT-PACKARD COMPANY
EXECUTIVE DEFERRED COMPENSATION PLAN
(Amended and Restated as of November 21, 1996)
Section 1. Establishment and Purpose of Plan
The Hewlett-Packard Company Executive Deferred Compensation Plan was adopted
and established effective January 1, 1994. The Plan provides deferred
compensation for a select group of management or highly compensated employees
as established in Title I of ERISA. As of November 21, 1996, the Plan is
modified in the following principal respect: Employees with "applicable
employee remuneration" in excess of the limitation set forth under Code section
162(m) may defer an amount of Base Earnings equal to the amount of such excess,
even if this amount exceeds 40% of Base Earnings.
The Plan is intended to be an unfunded and unsecured deferred compensation
arrangement between the Participant and the Company, in which the Participant
agrees to give up a portion of the Participant's current salary in exchange for
the Company's unfunded and unsecured promise to make a deferred payment at a
future date, as specified in Section 6. The Company retains the right, as
provided in Section 14, to amend or terminate the Plan at any time. Certain
capitalized items used in the text of the Plan are defined in Section 19 in
alphabetical order.
1
<PAGE> 2
Section 2. Participation in the Plan
Employees on the U.S. payroll of the Company are eligible to defer compensation
under the Plan if they have Base Earnings, at the time of election as specified
in Section 3, equal to or in excess of the sum of (1) the amount defined in
Code Section 401(a)(17), as adjusted by the Secretary of the Treasury under
Code section 415(d), in effect on January 1 of the calendar year for which
amounts are to be deferred, plus (2) $6,000.
Section 3. Amount of Deferred Compensation
An Eligible Employee shall make an annual election to participate in the Plan.
The election to participate must be made prior to the beginning of the calendar
year for which amounts are to be deferred. Once an election by an Eligible
Employee is made, an annual whole dollar amount will be deferred from Base
Earnings, taken equally over twenty-four (24) pay periods. The minimum amount
which may be deferred is $6,000 a year and the maximum amount which may be
deferred shall be the lesser of (1) 40% of Base Earnings or (2) Base Earnings
less the amount defined in the Code section 401(a)(17), as adjusted by the
Secretary of the Treasury under Code section 415(d), in effect on January 1 of
the calendar year for which amounts are to be deferred. Notwithstanding the
maximum deferral amount set forth in the immediately preceding sentence, an
Eligible Employee receiving "applicable employee remuneration" in excess of the
limitation amount set forth in Code section 162(m), as amended, or as adjusted
by regulation or other
2
<PAGE> 3
Internal Revenue Service promulgation, pronouncement or other action
($1,000,000 for calendar year 1996), may defer an amount of Base Earnings equal
to such excess.
Section 4. Deferral Accounts
Deferred Amounts made pursuant to Section 3 shall be credited to a Deferral
Account in the name of the Participant. The Deferred Amounts shall be credited
to the Deferral Account at least quarterly. The Participant's rights in the
Deferral Account shall be no greater than the rights of any unsecured general
creditor of the Company. Deferred Amounts and Earnings thereon invested
hereunder shall for all purposes be part of the general funds of the Company.
Section 5. Earnings on the Deferral Account
The money allocated to the Participant's Deferral Account by the Company will be
credited at least quarterly with Earnings until it is paid out to the
Participant under this Plan as set forth below in Section 6. All Earnings
attributable to the money allocated to the Deferral Account shall be added to
the liability and retained therein by the Company. Any such addition to the
liability shall be appropriately reflected on the books and records of the
Company and identified as an addition to the total sum owing the Participant.
3
<PAGE> 4
Section 6. Payment to the Participants
If the Participant terminates employment on or after his or her Retirement Date
and an election as to the form and timing of the benefit is made twelve (12)
months or more prior to the Retirement Date, the Participant may elect to
receive either (a) a single lump sum payout by January 15 of the year following
termination of employment, or (b) payouts in annual installments over a five
(5) to fifteen (15) year period beginning with the January 15th following the
year of termination of employment. If the Participant terminates employment on
or after his or her Retirement Date and an election as to the form and timing
of the benefit is made twelve (12) months or more prior to the Retirement Date,
the Participant may elect to further defer commencement of payout, under either
the single lump sum or the annual installment election, an additional one (1),
two (2) or three (3) years beginning after the January 15 following the year of
termination of employment. The payout installment election made by the
Participant is based on the entire Deferral Account, and shall be determined by
dividing the unpaid balance as of January 1 of the payout year by the number of
annual payments remaining to be made.
If the Participant terminates employment on or after his or her Retirement Date
and an election as to the form and timing of the benefit is not made twelve
(12) months or more prior to his or her Retirement Date, the Participant will
receive his or her payout in annual installments over the fifteen (15) year
period beginning with the January 15 following the year of termination of
employment. If the Participant dies and an election was made, the Beneficiary
will be paid according to the election even though the election was not made
twelve (12) months or more
4
<PAGE> 5
prior to the Participant's death. If the Participant dies and no election was
made,then the Beneficiary will receive his or her payout in annual installments
over the fifteen (15) year period beginning with the January 15 following the
year of the Participant's death.
If the Participant terminates employment prior to his or her Retirement Date,
then the Participant will receive a single lump sum payout at termination of
employment.
Section 7. Hardship Provision
Neither the Participant nor his or her Beneficiary is eligible to withdraw
funds from the Deferral Account prior to the time specified in Section 6.
However, funds in the Deferral Account may be subject to early withdrawal
if an "Unforeseeable Emergency" occurs that is caused by an event beyond the
Participant's or Beneficiary's control and would result in severe financial
hardship to the individual if early withdrawal is not permitted. A significant
hardship exists only when all other reasonably available financial resources
have been exhausted. The Compensation Committee of the Board of Directors of
the Company (the "Committee") shall have sole discretion to determine whether
to approve any hardship withdrawal, which amount will be limited to the amount
necessary to meet the emergency. The Committee's decision will be final and
binding on all interested parties.
If the Committee approves a hardship withdrawal, the Participant may not defer
Base Earnings, as specified in Section 3, for (1) the remainder of the calendar
year in which the hardship
5
<PAGE> 6
withdrawal is received, and (2) the calendar year following the calendar year
in which the hardship withdrawal is received.
Section 8. Use of Funds
Neither the Participant nor his or her Beneficiary is eligible to withdraw
funds from the Deferral Account prior to the time specified in Section 6.
However, funds in the Deferral Account may be subject to early withdrawal if an
"Unanticipated Need For Funds" occurs, other than a need specified in Section
7; provided that the Participant permanently forfeits ten (10) percent of the
amount to be withdrawn. Additionally, withdrawals based on an "Unanticipated
Need For Funds" may be made no more than once each calendar year and the amount
to be withdrawn must be at least $12,000.
If the Participant withdraws funds under this section, he or she may not defer
Base Earnings, as specified in Section 3, for (1) the remainder of the calendar
year in which the withdrawal is received, and (2) the calendar year following
the calendar year in which the withdrawal is received.
Section 9. Designation of Beneficiary
The Participant shall, by written notice to the Company, (1) at the time of the
first election designate a Beneficiary hereunder, and (2) shall have the right
thereafter to change any
6
<PAGE> 7
Beneficiary previously designated by the Participant. In the case of a
Participant's death, payment due under this Plan shall be made to the
designated Beneficiary or, in the absence of such designation, by will or the
laws of descent and distribution in the state of residence of the Participant.
Section 10. Change in Control
In the event of a proposed change in control of the Company, as defined below,
the Committee shall have complete authority and discretion, but no obligation
to accelerate payments of both terminated and active Participants.
A "proposed change in control" shall mean (1) a tender offer by any person or
entity, other than the Company or a Company subsidiary, to acquire securities
representing 40 percent or more of the voting power of the Company or (2) the
submission to the Company's shareholders for approval of a transaction
involving the sale of all or substantially all of the assets of the Company or
a merger of the Company with or into another corporation.
The Committee may also ask the Board of Directors to negotiate, as part of any
agreement involving the sale or merger of the Company, or a sale of
substantially all of the Company's assets or a similar transaction, terms
providing for protection of Participants and their interests in the Plan.
7
<PAGE> 8
Section 11. Limitation on Assignments
Benefits under this Plan are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment or
garnishments by creditors of the Participant or the Participant's Beneficiary
and any attempt to do so shall be void.
Section 12. Administration
The Plan shall be administered by the Committee. No member of the Committee
shall become a Participant of the Plan. The Committee shall have the sole
authority to interpret the Plan, to establish and revise rules and regulations
relating to the Plan and to make any other determinations that it believes
necessary or advisable for the administration of the Plan. Decisions and
determination by the Committee shall be final and binding upon all parties,
including shareholders, Participants, Beneficiaries and other employees. The
Committee may delegate its responsibilities as it sees fit.
Books and records maintained for the purpose of the Plan shall be maintained by
the officers and employees of the Company at its expense and subject to
supervision and control of the Committee.
8
<PAGE> 9
Section 13. No Funding Obligation
The Company is under no obligation to transfer amounts credited to the
Participant's Deferral Account to any trust or escrow account, and the Company
is under no obligation to secure any amount credited to a Participant's
Deferral Account by any specific assets of the Company or any other asset in
which the Company has an interest. This Plan shall not be construed to require
the Company to fund any of the benefits provided hereunder nor to establish a
trust for such purpose. The Company may make such arrangements as it desires to
provide for the payment of benefits, including, but not limited to, the
establishment of a rabbi trust or such other equivalent arrangements as the
Company may decide. No such arrangement shall cause the Plan to be a funded
plan within the meaning of Title I of ERISA, nor shall any such arrangement
change the nature of the obligation of the Company nor the rights of the
Participants under the Plan as provided in this document. Neither the
Participant nor his or her estate shall have any rights against the Company
with respect to any portion of the Deferral Account except as a general
unsecured creditor. No Participant has an interest in his or her Deferral
Account until the Participant actually receives the deferred payment.
Section 14. Amendment and Termination of the Plan
The Company, by action of the Committee, in its sole discretion may suspend or
terminate the Plan or revise or amend it in any respect whatsoever, provided,
however, that amounts already allocated to the Deferral Accounts will continue
to be owed to the Participants or Beneficiaries
9
<PAGE> 10
and will continue to accrue Earnings and continue to be a liability of the
Company. Any amendment or termination of the Plan will not affect the
entitlement of any Participant or the Beneficiary of a Participant who
terminates employment before the amendment or termination. All benefits to
which any Participant or Beneficiary may be entitled shall be determined under
the Plan as in effect at the time the Participant terminates employment and
shall not be affected by any subsequent change in the provisions of the Plan;
provided, that the Company reserves the right to change the basis of return on
investment of the Deferral Account with respect to any Participant or
Beneficiary. Participants or Beneficiaries will be given notice prior to the
discontinuance of the Plan or reduction of any benefits provided by the Plan.
Section 15. Tax Withholding
If any federal, state, or local income or employment tax withholding is
required with respect to any deferral of income or payment hereunder, the
Committee shall make appropriate arrangements with the Participant or his or
her Beneficiary for satisfaction of such obligation.
Section 16. Choice of Law
This Plan, and all rights under this Plan, shall be interpreted and construed
in accordance with ERISA and, to the extent not preempted, the law of the State
of California, unless otherwise stated in the Plan.
10
<PAGE> 11
Section 17. Notice
Any written notice to the Company required by any of the provisions of this Plan
shall be addressed to the chief personnel officer of the Company or his or her
delegate and shall become effective when it is received.
Section 18. No Employment Rights
Nothing in the Plan, nor any action of the Company pursuant to the Plan, shall
be deemed to give any person any right to remain in the employ of the Company
or affect the right of the Company to terminate a persons's employment at any
time, with or without cause.
Section 19. Definitions
(a) Base Earnings means the annual base rate of pay for employees on the
U.S. payroll of the Company. It does not include bonuses, commissions, overtime
pay, shift differential, payments under the Hewlett-Packard Company Employee
Benefits Organization Income Protection Plan and the Hewlett-Packard Company
Supplemental Income Protection Plan, or any other additional compensation.
(b) Beneficiary means the person or persons designated by a Participant
under Section 9 to receive any amounts payable under the Plan in the event of
the Participant's death.
(c) Code means the Internal Revenue Code of 1986, as amended from time to
time.
11
<PAGE> 12
(d) Committee means the Compensation Committee of the Board of
Directors of the Company.
(e) Company means Hewlett-Packard Company, a California corporation.
(f) Deferral Account means the account of the Participant which
includes all Deferred Amounts and the Earnings thereon prior to payout to the
Participant.
(g) Deferred Amount means the amount the Participant annually elects
to have deferred from Base Earnings.
(h) Earnings means the deemed return on investment (or charge on
investment loss) on money allocated to the Participant's Deferral Account,
based on the return of the Fund, reduced ten (10) percent to partially offset
the costs of the Plan, as described in Section 5.
(i) Eligible Employee means an employee on the U.S. payroll of the
Company who has Base Earnings at the time of election as specified in Section 3
equal to or in excess of the sum of (1) the amount defined in Code section
401(a)(17), as adjusted by the Secretary of the Treasury under Code section
415(d), in effect on January 1 of the calendar year for which amounts are to be
deferred, plus (2) $6,000.
(j) ERISA means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
(k) Fund means an S&P 500 Index Fund, as designated by the Committee
from time to time.
(l) Participant means any individual who has benefits in the Deferral
Account under the Plan or who is receiving or entitled to receive benefits
under the Plan.
12
<PAGE> 13
(m) Plan means the Hewlett-Packard Company Executive Deferred
Compensation Plan amended and restated as of November 21, 1996, as amended from
time to time.
(n) Retirement Date means the date on which a Participant has completed
at least 15 years of service, as defined in the Retirement Plan, and has
attained age 55.
(o) Retirement Plan means the Hewlett-Packard Company Retirement Plan
in effect as of November 1, 1993, as amended from time to time.
Section 20. Execution
IN WITNESS WHEREOF, the Company has caused this Plan to be duly executed by the
undersigned this 21 day of November, 1996.
Hewlett-Packard Company
By: /s/ Susan P. Orr
---------------------------
SUSAN P. ORR
CHAIR, COMPENSATION COMMITTEE
13
<PAGE> 1
EXHIBIT 13
SELECTED FINANCIAL DATA
Unaudited
<TABLE>
<CAPTION>
For the years ended October 31
In millions except per share amounts
and employees
1996 1995 1994 1993 1992
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
U.S. orders $ 17,181 $ 14,686 $11,692 $ 9,462 $ 7,569
International orders 21,708 17,999 13,658 11,310 9,192
-------- -------- ------- ------- -------
Total orders $ 38,889 $ 32,685 $25,350 $20,772 $16,761
======== ======== ======= ======= =======
Net revenue $ 38,420 $ 31,519 $24,991 $20,317 $16,410
Earnings from operations $ 3,726 $ 3,568 $ 2,549 $ 1,879 $ 1,404
Earnings, before effect of
accounting change in 1992 $ 2,586 $ 2,433 $ 1,599 $ 1,177 $ 881
Net earnings $ 2,586 $ 2,433 $ 1,599 $ 1,177 $ 549
Per share amounts, restated for
1996 stock split:
Earnings, before effect of
accounting change in 1992 $ 2.46 $ 2.31 $ 1.54 $ 1.16 $ .87
Net earnings $ 2.46 $ 2.31 $ 1.54 $ 1.16 $ .55
Cash dividends $ .44 $ .35 $ .275 $ .225 $ .18
At year-end:
Total assets $ 27,699 $ 24,427 $19,567 $16,736 $13,700
Long-term debt $ 2,579 $ 663 $ 547 $ 667 $ 425
Employees 112,000 102,300 98,400 96,200 92,600
======== ======== ======= ======= =======
</TABLE>
1992 results include an after-tax charge of $.32 per share for the cumulative
effect of a change in accounting for retiree medical benefits.
- --------------------
Graphs
A bar chart entitled "Total Orders (In millions)" at the bottom left of page 29
of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and
1996 (shown on the x-axis) the Company had total orders (shown on the y-axis)
in the respective amounts provided in the table entitled "Selected Financial
Data (Unaudited)" on page 29 of the Annual Report.
A bar chart entitled "Earnings from Operations (In millions)" at the bottom
center of page 29 of the Annual Report shows that for the fiscal years 1992,
1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had earnings from
operations (shown on the y-axis) in the respective amounts provided in the
table entitled "Selected Financial Data (Unaudited)" on page 29 of the Annual
Report.
A bar chart entitled "Employees and Net Revenue Per Employee (In thousands)" at
the bottom right of page 29 of the Annual Report shows that for the fiscal
years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had
employees in the respective numbers (shown on the y-axis) provided in the table
entitled "Selected Financial Data (Unaudited)" on page 29 of the Annual Report.
In addition, the graph shows that for the fiscal years 1992, 1993, 1994, 1995
and 1996 (shown on the x-axis) the Company had net revenue per employee (shown
on the y-axis) of $180,800, $215,200, $256,900, $314,100 and $358,600,
respectively.
<PAGE> 2
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
For the years ended October 31
In millions except per share amounts 1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Net revenue:
Products $33,114 $27,125 $21,380
Services 5,306 4,394 3,611
------- ------- -------
Total net revenue 38,420 31,519 24,991
------- ------- -------
Costs and expenses:
Cost of products sold 22,013 17,069 13,012
Cost of services 3,486 2,945 2,478
Research and development 2,718 2,302 2,027
Selling, general and administrative 6,477 5,635 4,925
------- ------- -------
Total costs and expenses 34,694 27,951 22,442
------- ------- -------
Earnings from operations 3,726 3,568 2,549
Interest income and other, net 295 270 29
Interest expense 327 206 155
------- ------- -------
Earnings before taxes 3,694 3,632 2,423
Provision for taxes 1,108 1,199 824
------- ------- -------
Net earnings $ 2,586 $ 2,433 $ 1,599
======= ======= =======
Net earnings per share $ 2.46 $ 2.31 $ 1.54
======= ======= =======
Weighted average shares and equivalents outstanding 1,052 1,052 1,041
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
FINANCIAL REVIEW
Unaudited
RESULTS OF OPERATIONS
In 1996, HP continued its 20 percent-plus growth in revenue, adding almost $7
billion in revenue during the year. Order growth was strong as well, at 19
percent, and the company also made progress in reducing its operating-expense
ratio. However, the first half of the year was stronger than the second half, in
which order and revenue growth were reduced by various factors including
inventory adjustments in the reseller channel and the company's decision to exit
disk-mechanism manufacturing in the third quarter. As a result, full-year
operating- and net-profit margins were lower than in 1995, and net earnings
growth was 6 percent, compared with 52 percent in 1995.
HP's orders increased 19 percent over 1995 to $38.9 billion, compared with a 29
percent increase in 1995. Slower, but still very healthy growth rates, in the
company's computer businesses, representing approximately 80 percent of HP's
orders, were key factors in the order growth from 1995. Geographically, domestic
and international orders grew 17 and 21 percent, respectively, compared to
growth of 26 percent and 32 percent, respectively, in the prior year.
Net revenue grew 22 percent both in the U.S. and internationally in 1996 to
$17.0 billion and $21.4 billion, respectively, following increases of 22 percent
in the U.S. and 30 percent internationally in 1995. Currency unfavorably
impacted the international growth rate as the dollar strengthened in 1996.
Net revenue from product sales increased 22 percent, compared with 27 percent in
1995. The sustained increase in net revenue, while lower than in 1995, primarily
reflects the company's continued success in technological innovation and rapid
time to market with new products.
Shipments of the company's computer and peripheral products, such as the HP
Vectra and Pavilion PCs, HP NetServer PC servers, multiuser UNIX systems, and
HP's families of DeskJet and LaserJet printers, continued strong in 1996. As in
1995, strong unit volume growth was driven primarily by new product
introductions. In addition, intense competition contributed to declines in the
average selling price for many of these products. As a result, unit volume
growth outpaced revenue growth. Sales of consumable supplies for the company's
printer products increased strongly this year, reflecting increased printer
usage and a larger installed base.
Revenue growth in the company's non-computer businesses was slowed by various
industry-specific factors during the year, including weakness in the markets for
components and semiconductor-test equipment. Information on orders and net
revenue by groupings of similar products and services is presented on page 53 of
this report.
Services such as systems integration, selective-outsourcing management,
consulting, education, product financing and rentals, as well as hardware and
software support and maintenance, are an integral part of the company's
offerings. Net revenue from services grew 21 percent, compared with 22 percent
in 1995. During 1996 and 1995, service and support
- ---------------
Graphs
A graph entitled "Net Revenue (in millions)" at the top right of page 31 of the
Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996
(shown on the x-axis) the Company had total net revenue (shown on the y-axis)
in the respective amounts provided in the table entitled "Selected Financial
Data (Unaudited)" on page 29 of the Annual Report; and international net
revenue of $9,198 million, $10,971 million, $13,522 million, $17,556 million
and $21,379 million, respectively. In addition, the graph shows that for the
fiscal years 1992 and 1993 (shown on the x-axis) the company had U.S. net
revenue (shown on the y-axis) of $7,212 million and $9,346 million,
respectively; and U.S. net revenue for the fiscal years 1994, 1995 and 1996
(shown on the x-axis) in the respective amounts (shown on the y-axis) provided
in the section entitled "Geographic Area Information" under the caption "United
States: Unaffiliated customer sales" in the table on page 51 of the Annual
Report.
A graph entitled "U.S. Dollar Relative to Major Foreign Currencies (Fiscal
1980 equals 1.00)" at the bottom right of page 31 of the Annual Report shows
that in the months running consecutively from November 1991 through October
1996 (shown on the x-axis) the U.S. Dollar was equal to (shown on the y-axis)
1.06, 1.04, 1.04, 1.07, 1.09, 1.09, 1.06, 1.04, .99, .98, .99, 1.04, 1.11,
1.12, 1.14, 1.17, 1.17, 1.13, 1.13, 1.15, 1.19, 1.20, 1.16, 1.18, 1.21, 1.21,
1.22, 1.21, 1.19, 1.19, 1.18, 1.16, 1.13, 1.13, 1.12, 1.09, 1.11, 1.13, 1.12,
1.11, 1.07, 1.06, 1.06, 1.06, 1.05, 1.07, 1.08, 1.06, 1.06, 1.07, 1.08, 1.09,
1.09, 1.10, 1.11, 1.11, 1.09, 1.09, 1.09, and 1.10, respectively, multiplied by
the currencies of the following foreign countries, with varying weights
assigned to each of such currencies: Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Italy, Japan, Netherlands, Norway, Spain, Sweden,
Switzerland and United Kingdom.
<PAGE> 4
revenue continued to grow with the increase in the installed base, higher
leasing revenue and the continued success of the professional services
businesses.
Costs, expenses and earnings as a percentage of net revenue were as follows:
<TABLE>
<CAPTION>
For the years ended October 31 1996 1995 1994
- ------------------------------ ---- ---- ----
<S> <C> <C> <C>
Cost of products sold and services 66.4% 63.5% 62.0%
Research and development 7.1% 7.3% 8.1%
Selling, general and administrative 16.8% 17.9% 19.7%
Earnings from operations 9.7% 11.3% 10.2%
Net earnings 6.7% 7.7% 6.4%
==== ==== ====
</TABLE>
During 1996, cost of products sold and services as a percentage of net revenue
was 66.4 percent, an increase of 2.9 percentage points, compared with a 1.5
percentage point increase in 1995. Intense price competition affected product
revenues and resulted in reduced gross profit margins. Additionally, the
continued shift in the mix of products sold towards lower gross-margin,
high-volume product families, as well as costs associated with the stream of
new-product introductions, helped drive both the 1996 and 1995 increases in cost
of sales. These factors are likely to continue to put some upward pressure on
the cost of sales ratio.
Pretax charges of approximately $135 million due to the exit from disk-mechanism
manufacturing, and the related operating losses in that business, also
contributed to the overall increase in the cost of sales ratio over the year-ago
period. Cost of products sold and services as a percentage of net revenue would
have been 65.5 percent for 1996 without these factors.
Research and development expenditures increased 18 percent in 1996 to $2.7
billion, versus 14 percent growth and expenditures of $2.3 billion in 1995. The
ongoing increase in spending on research and development reflects the company's
belief that success in a global marketplace requires a continuing flow of
innovative, high-quality products. Selling, general and administrative expenses
grew 15 percent in 1996 and 14 percent in 1995. This growth was due largely to
increased selling costs related to order and revenue growth, and increased
advertising and marketing costs associated with the company's growing presence
in high-volume, consumer-oriented businesses. Both research and development and
selling, general and administrative expenses decreased as a percentage of net
revenue in 1996 and 1995, which reflects the growth of the net revenue base in
both years. These decreases also reflect the company's focused management of
operating-expense growth, which was most evident in the second half of 1996 when
the company quickly adjusted to slowing order and revenue growth.
Interest income and other, net was $295 million in 1996, compared with $270
million in 1995 and $29 million in 1994. The increased levels in 1996 and 1995
are primarily due to increased earnings on cash and other investments, increased
income from equity investees, and gains on sales of real estate and other
assets. Interest expense was $327 million in 1996, compared with $206 million in
1995 and $155 million in 1994, reflecting increasing levels of debt outstanding,
as well as interest rate changes during the respective periods.
- ---------------
Graphs
A graph entitled "Costs and Expenses (As a percentage of net revenue)"
at the top left of page 32 of the Annual Report shows that for the fiscal years
1992 and 1993 (shown on the x-axis) the Company had (shown on the y-axis) cost
of products sold and services of 55.8% and 59.7%, respectively, of net revenue;
selling, general and administrative expenses of 25.7% and 22.4%, respectively,
of net revenue; and research and development expenses of 9.9% and 8.7%,
respectively, of net revenue. In addition, the graph shows that for the fiscal
years 1994, 1995 and 1996 (shown on the x-axis) the Company had, as a
percentage of net revenue (shown on the y-axis), cost of products sold and
services, selling, general and administrative expenses and research and
development expenses in the respective amounts provided in the table at the top
of page 32 of the Annual Report.
A bar chart entitled "Net Earnings (In millions)" at the bottom left of page 32
of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and
1996 (shown on the x-axis) the Company had net earnings (shown on the y-axis)
in the respective amounts provided in the table entitled "Selected Financial
Data (Unaudited)" on page 29 of the Annual Report.
<PAGE> 5
The company's effective tax rate was 30 percent in 1996, compared with 33
percent in 1995 and 34 percent in 1994. A combination of factors led to the
decreases, including continued shifts in the geographical composition of
earnings and resolution of certain issues related to tax returns filed in
previous years.
Net earnings increased 6 percent to $2.6 billion in 1996. This compares with a
52 percent increase in 1995 and a 36 percent increase in 1994. As a percentage
of net revenue, net earnings were 6.7 percent in 1996, compared with 7.7 percent
in 1995 and 6.4 percent in 1994. Net earnings growth for 1996 would have been
higher without the effects of the company's exit from disk-mechanism
manufacturing.
FINANCIAL CONDITION AND LIQUIDITY
HP's financial position remains strong, with cash and cash equivalents and
short-term investments of $3.3 billion at October 31, 1996, and $2.6 billion at
October 31, 1995. In addition, other long-term investments, relatively low
levels of debt compared to assets, and a large equity base continue to
demonstrate the company's financial flexibility.
Operating activities generated $3.5 billion in cash in 1996, compared with $1.6
billion and $2.2 billion in 1995 and 1994, respectively. The increase in cash
generated from operations in 1996 compared with 1995 is primarily due to
substantially reduced receivables and inventory growth. Receivables as a
percentage of net revenue decreased to 18.5 percent at October 31, 1996, from
21.4 percent a year ago, while inventories as a percentage of net revenue
decreased to 16.7 percent from 19.1 percent. Slowing revenue growth in the
second half of the year contributed to these declines. The company's efforts to
enhance processes, with a focus on improving asset utilization and supply-chain
management in order to accommodate shorter product life cycles and rapid product
ramps, were also a factor in the improvements of these ratios.
Capital expenditures in 1996 were $2.2 billion, compared with $1.6 billion and
$1.3 billion in 1995 and 1994, respectively. The increases in capital
expenditures relate primarily to expansion of production capacity to accommodate
higher volumes and the introduction of new products, but also reflect increasing
expenditures to support growth in the company's leasing business.
The company invests excess cash in short- and long-term investments, depending
on its projected cash needs for operations, capital expenditures and other
business purposes. Additionally, the company from time to time supplements its
internally generated cash flow with a combination of short- and long-term
borrowings. Recent changes in tax laws in Puerto Rico have resulted in the
company liquidating a substantial portion of its short-term investments there
and using the cash to pay down notes payable and short-term borrowings.
Long-term debt has increased, however, as it is utilized to support increased
investments in the company's lease portfolio and to finance interest-bearing
assets. Cash flow from net changes in debt structure resulted in net borrowings
of $811 million in 1996 compared
- ---------------
Graphs
A bar chart entitled "Selected Cash Flows (In millions)" at the top right of
page 33 of the Annual Report shows that for the fiscal years 1992 and 1993
(shown on the x-axis) the Company had cash flows from operating activities
(shown on the y-axis) of $1,288 and $1,142 million, respectively; capital
expenditures of $1,032 million and $1,405 million, respectively; and dividends
paid of $183 million and $228 million, respectively. In addition, the bar chart
shows that for the fiscal years 1994, 1995 and 1996 (shown on the x-axis) the
Company had cash flows from operating activities and dividends paid (shown on
the y-axis) in the respective amounts provided in the table entitled
"Consolidated Statement of Cash Flows" on page 38 of the Annual Report.
Finally, the bar chart shows that for the fiscal years 1994, 1995 and 1996
(shown on the x-axis) the Company had capital expenditures (shown on the
y-axis) in the respective amounts shown as "Investment in property, plant and
equipment" provided in the table entitled "Consolidated Statement of Cash
Flows" on page 38 of the Annual Report.
A graph entitled "Asset Management (As a percentage of net revenue)" at the
bottom right of page 33 of the Annual Report shows that for the fiscal years
1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had (shown on
the y-axis) net property, plant and equipment of 22.2%, 20.6%, 17.3%, 14.9% and
14.4%, respectively, of net revenue; accounts and notes receivable of 21.3%,
20.7%, 20.1%, 21.4% and 18.5%, respectively, of net revenue; and inventories of
15.9%, 18.2%, 17.1%, 19.1% and 16.7%, respectively, of net revenue.
<PAGE> 6
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
October 31
In millions except par value and number of shares 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,885 $ 1,973
Short-term investments 442 643
Accounts and notes receivable 7,126 6,735
Inventories:
Finished goods 3,956 3,368
Purchased parts and fabricated assemblies 2,445 2,645
Other current assets 1,137 875
- --------------------------------------------------------------------------------------------------
Total current assets 17,991 16,239
- --------------------------------------------------------------------------------------------------
Property, plant and equipment:
Land 475 485
Buildings and leasehold improvements 4,257 3,810
Machinery and equipment 5,466 4,452
- --------------------------------------------------------------------------------------------------
10,198 8,747
Accumulated depreciation (4,662) (4,036)
- --------------------------------------------------------------------------------------------------
5,536 4,711
Long-term investments and other assets 4,172 3,477
- --------------------------------------------------------------------------------------------------
Total assets $27,699 $24,427
==================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 2,125 $ 3,214
Accounts payable 2,375 2,422
Employee compensation and benefits 1,675 1,568
Taxes on earnings 1,514 1,494
Deferred revenues 951 782
Other accrued liabilities 1,983 1,464
- --------------------------------------------------------------------------------------------------
Total current liabilities 10,623 10,944
- --------------------------------------------------------------------------------------------------
Long-term debt 2,579 663
Other liabilities 1,059 981
Commitments and contingencies
Shareholders' equity:
Preferred stock, $1 par value
(authorized: 300,000,000 shares; issued: none) -- --
Common stock and capital in excess of $1 par value
(authorized: 2,400,000,000 shares; issued and outstanding:
1,014,123,000 in 1996 and 1,019,910,000 in 1995) 1,014 1,381
Retained earnings 12,424 10,458
- --------------------------------------------------------------------------------------------------
Total shareholders' equity 13,438 11,839
- --------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $27,699 $24,427
==================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
with $857 million and $155 million in 1995 and 1994, respectively. At October
31, 1996, the company had various uncommitted borrowing arrangements in place
with borrowing capacity totaling $4.6 billion.
The company split its stock on a 2-for-1 basis effective June 21, 1996,
following a similar split in March of last year. All share and per share amounts
have been restated to reflect the retroactive effect of this split. Shares are
repurchased periodically to manage the dilution created by shares issued under
various employee stock plans. In 1996, 24.6 million shares were repurchased at
an aggregate price of $1,089 million. In 1995, 20.8 million shares were
repurchased for $686 million and in 1994, 16.1 million shares were repurchased
for $325 million. Additional stock repurchases, based on certain price and
volume criteria, are periodically authorized by the Board of Directors.
FACTORS THAT MAY AFFECT FUTURE RESULTS
HP's future operating results may be adversely affected if the company is unable
to continue to rapidly develop, manufacture and market innovative products and
services that meet customer requirements. The process of developing new high
technology products and solutions is inherently complex and uncertain. It
requires accurate anticipation of customers' changing needs and emerging
technological trends. The company then must make long-term investments and
commit significant resources before knowing whether its predictions will
eventually result in products that achieve market acceptance. After a product is
developed, the company must quickly ramp manufacturing in sufficient volumes at
acceptable costs.
This is a process that requires accurate forecasting of volumes, mix of products
and configurations. Moreover, the supply and timing of a new product or service
must match the customers' demand and timing for those particular products or
services. Given the wide variety of systems, products and services the company
offers, the process of planning production and managing inventory levels becomes
increasingly difficult.
Inventory management has also become increasingly complex as the company
continues to sell a greater mix of products, especially printers and personal
computers, through third-party distribution channels. Resellers constantly
adjust their ordering patterns in response to the company's, and its
competitors', supply into the channel and the timing of their new product
introductions and relative feature sets, as well as seasonal fluctuations in
end-user demand such as the back-to-school and holiday selling periods.
Resellers may increase orders during times of shortages, cancel orders if the
channel is filled with currently available products, or delay orders in
anticipation of new products. Any excess supply could result in price reductions
and inventory writedowns, which in turn could adversely affect the company's
gross margins.
The short life cycles of many of the company's products pose a challenge for the
effective management of the transition from existing products to new products
and could adversely affect the company's future operating results. Product
development or manufacturing
<PAGE> 8
delays, variations in product costs, and delays in customer purchases of
existing products in anticipation of new product introductions are among the
factors that make a smooth transition from current products to new products
difficult. In addition, the timing of competitors' introductions of new products
and services may negatively affect the future operating results of the company,
especially when these introductions coincide with periods leading up to the
company's own introduction of new or enhanced products. Furthermore, some of the
company's own new products replace or compete with others of the company's
current products.
Portions of the company's manufacturing operations are dependent on the ability
of suppliers to deliver components, subassemblies and completed products in time
to meet critical manufacturing and distribution schedules. The company
periodically experiences constrained supply of certain component parts in some
product lines as a result of strong demand in the industry for those parts. Such
constraints, if persistent, may adversely affect the company's operating results
until alternate sourcing could be developed. In order to secure components for
production and introduction of new products, the company frequently makes
advance payments to certain suppliers, and often enters into noncancelable
purchase commitments with vendors for such components. Volatility in the prices
of these component parts, the possible inability of the company to secure enough
components at reasonable prices to build new products in a timely manner in the
quantities and configurations demanded or, conversely, a temporary oversupply of
these parts, could adversely affect the company's future operating results.
The company continues to expand into third-party distribution channels to
accommodate changing customer preferences. As a result, the financial health of
these resellers, and the company's continuing relationships with them, become
more important to the company's success. Some of these companies are thinly
capitalized and may be unable to withstand changes in business conditions. The
company's financial results could be adversely affected if the financial
condition of these resellers substantially weakens or the company's relationship
with such resellers deteriorates.
Sales outside the United States make up more than half of the company's
revenues. In addition, a portion of the company's product and component
manufacturing, along with key suppliers, are located outside the United States.
Accordingly, the company's future results could be adversely affected by a
variety of factors, including changes in foreign currency exchange rates,
changes in a specific country's or region's political or economic conditions,
trade protection measures, import or export licensing requirements, the overlap
of different tax structures, unexpected changes in regulatory requirements and
natural disasters.
As a matter of course, the company frequently engages in discussions with a
variety of parties relating to possible acquisitions, strategic alliances, joint
ventures and divestitures. Although the consummation of any transaction is
unlikely to have a material effect on the
<PAGE> 9
company's results as a whole, the implementation or integration of the
transaction may contribute to the company's results differing from the
investment community's expectation in a given quarter. Divestitures may result
in the cancellation of orders and charges to earnings. Acquisitions and
strategic alliances may require, among other things, integration or coordination
with a different company culture, management team organization, and business
infrastructure. They may also require the development, manufacture and marketing
of product offerings with the company's products in a way that enhances the
performance of the combined business or product line. Depending on the size and
complexity of the transaction, successful integration or implementation depends
on a variety of factors, including the hiring and retention of key employees,
management of geographically separate facilities, and the integration or
coordination of different research and development and product manufacturing
facilities. All of these efforts require varying levels of management resources,
which may temporarily adversely impact other business operations.
A portion of the company's research and development activities, its corporate
headquarters, other critical business operations and certain of its suppliers
are located near major earthquake faults. The ultimate impact on the company,
its significant suppliers and the general infrastructure is unknown, but
operating results could be materially affected in the event of a major
earthquake. The company is predominantly self-insured for losses and
interruptions caused by earthquakes.
Operations of the company involve the use of substances regulated under various
federal, state and international laws governing the environment. It is the
company's policy to apply strict standards for environmental protection to sites
inside and outside the U.S., even if not subject to regulations imposed by local
governments. The liability for environmental remediation and related costs is
accrued when it is considered probable and the costs can be estimated.
Environmental costs are presently not material to the company's operations or
financial position.
Although the company believes that it has the product offerings and resources
needed for continuing success, future revenue and margin trends cannot be
reliably predicted and may cause the company to adjust its operations. The
company's stock price, like that of other technology companies, is subject to
significant volatility. The announcement of new products, services or
technological innovations by the company or its competitors, quarterly
variations in the company's results of operations, changes in revenue or
earnings estimates by the investment community and speculation in the press or
investment community are among the factors affecting the company's stock price.
In addition, the stock price may be affected by general market conditions and
domestic and international macroeconomic factors unrelated to the company's
performance. Because of the foregoing reasons, recent trends should not be
considered reliable indicators of future stock prices or financial results.
<PAGE> 10
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended October 31
In millions 1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,586 $ 2,433 $ 1,599
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,297 1,139 1,006
Deferred taxes on earnings (284) (102) (156)
Changes in current assets and liabilities:
Accounts and notes receivable (293) (1,696) (848)
Inventories (356) (1,740) (582)
Accounts payable (55) 956 243
Taxes on earnings 102 180 320
Other current assets and liabilities 553 663 585
Other, net (94) (220) 57
------- ------- -------
Net cash provided by operating activities 3,456 1,613 2,224
------- ------- -------
Cash flows from investing activities:
Investment in property, plant and equipment (2,201) (1,601) (1,257)
Disposition of property, plant and equipment 316 294 291
Purchase of short-term investments (6,652) (3,191) (2,758)
Maturities of short-term investments 7,074 3,669 2,392
Purchase of long-term investments (734) (308) (332)
Maturities of long-term investments -- -- 47
Acquisitions, net of cash acquired -- -- (62)
Other, net 22 (38) 69
------- ------- -------
Net cash used in investing activities (2,175) (1,175) (1,610)
------- ------- -------
Cash flows from financing activities:
Change in notes payable and short-term borrowings (1,137) 755 250
Issuance of long-term debt 1,989 434 64
Payment of current maturities of long-term debt (41) (332) (159)
Issuance of common stock under employee stock plans 363 361 300
Repurchase of common stock (1,089) (686) (325)
Dividends (450) (358) (280)
Other, net (4) 4 4
------- ------- -------
Net cash (used in) provided by financing activities (369) 178 (146)
------- ------- -------
Increase in cash and cash equivalents 912 616 468
Cash and cash equivalents at beginning of year 1,973 1,357 889
------- ------- -------
Cash and cash equivalents at end of year $ 2,885 $ 1,973 $ 1,357
======= ======= =======
Supplemental cash flow disclosures:
Income taxes paid, net $ 1,159 $ 1,058 $ 626
Interest paid $ 267 $ 187 $ 143
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 11
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common stock
----------------------------
Par value
Number of and capital in Retained
In millions except number of shares in thousands shares excess of par earnings Total
--------- -------------- -------- --------
<S> <C> <C> <C> <C>
Balance October 31, 1993 1,010,852 $ 1,447 $ 7,064 $ 8,511
Employee stock plans:
Shares issued 24,568 421 -- 421
Shares repurchased (16,112) (325) -- (325)
Dividends -- -- (280) (280)
Net earnings -- -- 1,599 1,599
--------- ------- -------- --------
Balance October 31, 1994 1,019,308 1,543 8,383 9,926
Employee stock plans:
Shares issued 21,392 524 -- 524
Shares repurchased (20,790) (686) -- (686)
Dividends -- -- (358) (358)
Net earnings -- -- 2,433 2,433
--------- ------- -------- --------
Balance October 31, 1995 1,019,910 1,381 10,458 11,839
Acquisition via immaterial pooling 3,056 137 (162) (25)
Employee stock plans:
Shares issued 15,737 577 -- 577
Shares repurchased (24,580) (1,081) (8) (1,089)
Dividends -- -- (450) (450)
Net earnings -- -- 2,586 2,586
--------- ------- -------- --------
BALANCE OCTOBER 31, 1996 1,014,123 $ 1,014 $ 12,424 $ 13,438
========= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Hewlett-Packard Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as revenues and expenses reported for the periods presented.
The company regularly assesses these estimates and, while actual results may
differ, management believes that the estimates are reasonable.
REVENUE RECOGNITION Revenue from product sales is generally recognized at the
time the product is shipped, with provisions established for price protection
programs and for estimated product returns. Upon shipment, the company also
provides for the estimated cost that may be incurred for product warranties and
post-sales support. Service revenue is recognized over the contractual period or
as services are rendered and accepted by the customer.
ADVERTISING Advertising costs are expensed as incurred and amounted to $999
million in 1996, $830 million in 1995, and $686 million in 1994.
TAXES ON EARNINGS Income tax expense is based on pretax financial accounting
income. Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax bases of assets and
liabilities and their reported amounts.
NET EARNINGS PER SHARE Net earnings per share is computed using the
weighted-average number of common shares and common share equivalents
outstanding during each period. Common share equivalents represent the dilutive
effect of outstanding stock options.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The company has classified
investments as cash equivalents if the original maturity of such investments is
three months or less. Short-term investments are principally comprised of
certificates of deposit, temporary money-market instruments and repurchase
agreements and are stated at cost, which approximates market.
INVENTORIES Inventories are valued at standard costs that approximate actual
costs computed on a first-in, first-out basis, not in excess of market values.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost.
Additions, improvements and major renewals are capitalized. Maintenance, repairs
and minor renewals are expensed as incurred. Depreciation is provided using
accelerated methods, principally over the following useful lives: buildings and
improvements, 15 to 40 years; machinery and equipment, 3 to 10 years.
Depreciation of leasehold improvements is provided using the straight-line
method over the life of the lease or the asset, whichever is shorter.
LONG-TERM INVESTMENTS The company's investments are primarily comprised of debt
securities which are held-to-maturity.
<PAGE> 13
EMPLOYEE STOCK COMPENSATION The company accounts for its employee stock
compensation plans using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." In
October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation," which is effective for fiscal year 1997. Under SFAS 123 companies
may elect, but are not required, to use a fair value methodology to recognize
compensation expense for all stock-based awards. In fiscal 1997, the company
will implement the disclosure-only provisions of SFAS 123.
FOREIGN CURRENCY TRANSLATION The company uses the U.S. dollar as its functional
currency. Foreign currency assets and liabilities are translated into U.S.
dollars at end-of-period exchange rates except for inventories, property, plant
and equipment, other assets and deferred revenue, which are translated at
historical exchange rates. Revenues and expenses are translated at average
exchange rates in effect during each period, except for those expenses related
to balance sheet amounts which are translated at historical exchange rates.
Gains or losses from foreign currency translation are included in net earnings.
The effect of foreign currency exchange rate fluctuations on cash and cash
equivalents denominated in foreign currencies was not material.
ACQUISITIONS
The company acquired several companies during the last three years, which were
not significant to its financial position or results of operations. During 1996,
one acquisition was accounted for as a pooling of interests; however, prior
period consolidated financial statements were not restated because the
retroactive effect was not material. All other acquisitions were accounted for
using the purchase method. Under the purchase method, the results of operations
of acquired companies are included prospectively from the date of acquisition,
and the acquisition cost is allocated to the acquirees' assets and liabilities
based upon their fair market values at the date of the acquisition. At October
31, 1996, the net book value of goodwill associated with acquisitions was $288
million and is being amortized on a straight-line basis over 3 to 10 years.
FINANCIAL INSTRUMENTS
OFF-BALANCE-SHEET RISK The company enters into foreign exchange contracts to
hedge against possible exposure from changes in foreign currency exchange rates.
Such exposure arises from assets and liabilities that are denominated in
currencies other than the U.S. dollar as well as firm foreign currency
commitments. When foreign exchange contracts hedge balance sheet exposure, such
effects are recognized when the exchange rate changes. When the company's
foreign exchange contracts hedge operational exposure, the effects of movements
in exchange rates on these instruments are recognized when the related revenues
and expenses are recognized. Because the impact of movements in exchange rates
on foreign exchange contracts offsets the related impact on the underlying items
being hedged, these instruments do not subject the company to risk that would
otherwise result from such changes. Foreign exchange contracts require the
company to exchange foreign currencies for U.S. dollars and generally mature
within six months. The company had foreign exchange contracts of $7.1 billion
and $5.4 billion at October 31, 1996 and 1995, respectively. At October 31, 1996
and 1995, deferred gains and deferred losses on these contracts amounted to $66
million and $78 million, and $126 million and $82 million, respectively.
<PAGE> 14
The company enters into interest rate swap agreements to manage its exposure to
interest rate changes. The transactions generally involve the exchange of fixed
and floating interest payment obligations without the exchange of the underlying
principal amounts. Interest rate differentials under interest rate swap
agreements are recognized over the life of the contracts as interest expense.
The notional amounts and maturities of interest rate swap agreements match those
of the underlying debt. At October 31, 1996 and 1995, off-balance-sheet
exposures under interest rate swap agreements were not material.
CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the
company to significant concentrations of credit risk consist principally of
cash, investments, trade accounts receivable and certain other off-balance-sheet
financial instruments.
The company maintains cash and cash equivalents, short- and long-term
investments and certain other off-balance-sheet financial instruments with
various financial institutions. These financial institutions are located in many
different geographies, and company policy is designed to limit exposure with any
one institution. As part of its cash and risk management processes, the company
performs periodic evaluations of the relative credit standing of the financial
institutions. The company has not sustained material credit losses from these
instruments.
The company sells a significant portion of its products through third-party
resellers and, as a result, maintains individually significant receivable
balances with major distributors. If the financial condition and operations of
these distributors deteriorate substantially, the company's operating results
could be adversely affected. The ten largest distributor receivable balances
collectively represent 13 percent of total accounts and notes receivable at both
October 31, 1996 and 1995. Credit risk with respect to other trade accounts
receivable is generally diversified due to the large number of entities
comprising the company's customer base and their dispersion across many
different industries and geographies. The company performs ongoing credit
evaluations of its third-party resellers' and other customers' financial
condition, utilizes flooring arrangements with third-party financing companies
and requires collateral, such as letters of credit and bank guarantees, in
certain circumstances.
FAIR VALUE OF FINANCIAL INSTRUMENTS For certain of the company's financial
instruments, including cash and cash equivalents, short-term investments,
accounts and notes receivable, notes payable and short-term borrowings, accounts
payable, and other accrued liabilities, the carrying amounts approximate fair
value due to their short maturities. Long-term floating rate notes, long-term
stock investments and certificates of deposit are carried at amounts that
approximate fair value. The estimated fair value of long-term debt is primarily
based on quoted market prices, as well as borrowing rates currently available to
the company for bank loans with similar terms and maturities. This fair value,
when adjusted for unrealized gains and losses on related interest rate swap
agreements, approximates the carrying amount of long-term debt.
The estimated fair value for foreign exchange contracts is primarily based on
quoted market prices for the same or similar instruments, adjusted where
necessary for maturity differences. At October 31, 1996 and 1995, the estimated
fair value of foreign exchange contracts with carrying values of $(7) million
and $(15) million, respectively, amounted to $(19) million and $44 million,
respectively.
<PAGE> 15
The estimated fair values may not be representative of actual values of the
financial instruments that could have been realized as of year-end or that will
be realized in the future.
FINANCE RECEIVABLES AND EQUIPMENT ON OPERATING LEASES
Finance receivables represent sales-type and direct-financing leases and
installment sales resulting from the marketing of the company's and
complementary third-party products. These receivables have terms from two to
five years and are typically collateralized by a security interest in the
underlying assets. The components of finance receivables, net, which are
included in accounts and notes receivable and long-term investments and other
assets at October 31, are:
<TABLE>
<CAPTION>
In millions 1996 1995
------- -------
<S> <C> <C>
Gross finance receivables $ 2,004 $ 1,723
Unearned income (224) (181)
------- -------
Finance receivables, net 1,780 1,542
Less current portion (897) (791)
------- -------
Amounts due after one year, net $ 883 $ 751
======= =======
</TABLE>
Contractual maturities of the company's gross finance receivables at October 31,
1996 are $1,022 million in 1997, $527 million in 1998, $291 million in 1999,
$116 million in 2000 and $48 million thereafter. Actual cash collections may
differ, however, primarily due to customer early buy-outs and refinancings.
The company also leases its products to customers under operating leases.
Equipment on operating leases was $849 million and $573 million at October 31,
1996 and 1995, respectively, and is included in machinery and equipment.
Accumulated depreciation on equipment on operating leases was $378 million and
$286 million at October 31, 1996 and 1995, respectively. Minimum future rentals
on noncancelable operating leases with original terms of one year or longer are
$466 million in 1997, $259 million in 1998, $92 million in 1999, $17 million in
2000 and $14 million thereafter.
TAXES ON EARNINGS
The provision for income taxes is comprised of:
<TABLE>
<CAPTION>
In millions 1996 1995 1994
------- ------- -----
<S> <C> <C> <C>
U.S. federal taxes:
Current $ 614 $ 642 $ 511
Deferred (115) (87) (156)
Non-U.S. taxes:
Current 716 609 441
Deferred (169) (15) --
State taxes 62 50 28
------- ------- -----
$ 1,108 $ 1,199 $ 824
======= ======= =====
</TABLE>
<PAGE> 16
The significant components of deferred tax assets, which required no valuation
allowance, and deferred tax liabilities included on the balance sheet at October
31 are:
<TABLE>
<CAPTION>
1996 1995
--------------------------- -------------------------
Deferred Deferred Deferred Deferred
tax tax tax tax
In millions assets liabilities assets liabilities
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Inventory $ 497 $ 13 $ 381 $ 50
Fixed assets 142 8 110 10
Retiree medical benefits 251 -- 248 --
Other retirement benefits -- 111 -- 111
Employee benefits, other than
retirement 178 34 130 42
Leasing activities -- 84 -- 86
Other 272 133 325 228
------ ------ ------ ----
$1,340 $ 383 $1,194 $527
====== ====== ====== ====
</TABLE>
Tax benefits of $123 million, $91 million and $41 million associated with the
exercise of employee stock options were allocated to equity in 1996, 1995 and
1994, respectively.
The differences between the U.S. federal statutory income tax rate and the
company's effective rate are:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
U.S. federal statutory income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 1.1 0.9 0.8
Lower rates in other jurisdictions, net (6.9) (5.0) (4.8)
Other, net 0.8 2.1 3.0
---- ---- ----
30.0% 33.0% 34.0%
==== ==== ====
</TABLE>
After allocating eliminations and corporate items, earnings before taxes are:
<TABLE>
<CAPTION>
In millions 1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
U.S. operations including Puerto Rico $1,535 $1,548 $ 915
Non-U.S 2,159 2,084 1,508
------ ------ ------
$3,694 $3,632 $2,423
====== ====== ======
</TABLE>
The company has not provided for U.S. federal income and foreign withholding
taxes on $3.8 billion of non-U.S. subsidiaries' undistributed earnings as of
October 31, 1996, because such earnings are intended to be reinvested
indefinitely. If these earnings were distributed, foreign tax credits should
become available under current law to reduce or eliminate the resulting U.S.
income tax liability. Where excess cash has accumulated in the company's
non-U.S. subsidiaries and it is advantageous for tax or foreign exchange
reasons, subsidiary earnings are remitted.
<PAGE> 17
As a result of certain employment and capital investment actions undertaken by
the company, income from manufacturing activities in certain countries is
subject to reduced tax rates, and in some cases is wholly exempt from taxes, for
years through 2010. The income tax benefits attributable to the tax status of
these subsidiaries are estimated to be $212 million, $168 million and $163
million for 1996, 1995 and 1994, respectively.
The Internal Revenue Service (IRS) has completed its examination of the
company's federal income tax returns filed through 1983. The IRS has not
commenced its examination of returns for years subsequent to 1992. The company
believes that adequate accruals have been provided for all years.
BORROWINGS
Notes payable and short-term borrowings and the related average interest rates
at October 31 are:
<TABLE>
<CAPTION>
1996 1995
----------------------------- -----------------------------
Average Average
interest interest
In millions rate rate
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Commercial paper $1,848 5.3% $2,785 5.8%
Notes payable to banks 200 7.5% 315 6.6%
Other short-term borrowings 77 6.2% 114 3.5%
------ --- ------ ---
$2,125 $3,214
====== ======
</TABLE>
At October 31, 1996, the company had various borrowing arrangements in place
with unused borrowing capacity totaling $4.6 billion. These credit arrangements
are generally uncommitted and generally do not require commitment fees.
Long-term debt and related maturities and interest rates at October 31 are:
<TABLE>
<CAPTION>
In millions 1996 1995
------- -----
<S> <C> <C>
U.S. dollar notes due 1997-2017 at 5.25%-7.98% $ 1,348 $ 488
Deutschemark notes, due 2000-2002 at 4.75%-5.63% 513 --
Yen notes, due 1999-2002 at 1.80%-5.00% 567 --
British pound issue, due 1999 at 7.13% 149 149
Other 87 65
Less current portion (85) (39)
------- -----
Long-term debt $ 2,579 $ 663
======= =====
</TABLE>
The company utilizes interest rate swaps to modify the interest expense on its
long-term debt to achieve primarily U.S. LIBOR-based floating rates. The company
also hedges currency exposure on its foreign-currency denominated long-term
debt. The aggregate future repayments of long-term debt outstanding at October
31, 1996 are $85 million in 1997, $256 million in 1998, $1,245 million in 1999,
$417 million in 2000, $246 million in 2001 and $415 million thereafter.
<PAGE> 18
SHAREHOLDERS' EQUITY
STOCK SPLIT The company made a 2-for-1 split of its $1 par value common stock in
the form of a 100 percent distribution to shareholders of record as of June 21,
1996. As a result of the stock split, authorized, outstanding, and reserved
common shares doubled and retained earnings was reduced by the par value of the
additional common shares issued. The rights of the holders of these securities
were not otherwise modified. All share and per share data and stockholders'
equity balances have been restated for the effect of the stock split.
EMPLOYEE STOCK PURCHASE PLAN Eligible company employees may generally contribute
up to 10 percent of their base compensation to the quarterly purchase of company
stock under the Employee Stock Purchase Plan. Under this plan, employee
contributions to purchase HP stock are partially matched with shares contributed
by the company. At October 31, 1996, approximately 89,000 employees were
eligible to participate and approximately 52,000 employees were participants in
the plan.
INCENTIVE COMPENSATION PLANS The company has four principal stock option plans,
adopted in 1979, 1985, 1990 and 1995. All plans permit options granted to
qualify as "Incentive Stock Options" under the Internal Revenue Code. The
exercise price of a stock option is generally equal to the fair market value of
the company's common stock on the date the option is granted. Under the 1990 and
1995 Incentive Stock Plans, however, the Compensation Committee, in certain
cases, may choose to establish a discounted exercise price at no less than 75
percent of fair market value on the grant date. In 1996 and 1995, discounted
options totaling 1,165,000 shares and 1,536,000 shares, respectively, were
granted. Stock compensation expense related to the discounted options was not
material. Options generally vest at a rate of 25 percent per year over a period
of four years from the date of grant except for discounted options, which
generally may not be exercised before the fifth anniversary of the option grant
date, at which time such options become 100 percent vested. The plans also
provide for the granting of stock appreciation rights with respect to options
granted to officers. The company has not included stock appreciation rights with
options granted to officers since October 31, 1991.
The following table summarizes option activity during 1996:
<TABLE>
<CAPTION>
Price
In thousands except price per share amounts Options per share
------- ---------
<S> <C> <C>
Outstanding at October 31, 1995 49,616 $ 7-48
Granted 7,876 29-53
Exercised (7,214) 7-49
Cancelled (934) 7-53
------ ------
Outstanding at October 31, 1996 49,344 $ 7-53
====== ======
</TABLE>
<PAGE> 19
At October 31, 1996, options to purchase 25,649,000 shares were exercisable at
prices ranging from $7 to $47 per share. Shares available for option grants at
October 31, 1996 and 1995 were 65,531,000 and 74,488,000, respectively.
Approximately 49,000 employees were considered eligible to receive stock
options in fiscal 1996. There were approximately 29,000 employees holding
options under one or more of the option plans as of October 31, 1996.
Under the 1985 Incentive Compensation Plan and the 1990 and 1995 Incentive Stock
Plans, certain key employees may be granted cash or restricted stock awards.
Cash and restricted stock awards are independent of option grants and are
subject to restrictions considered appropriate by the company's Compensation
Committee. The majority of the shares of restricted stock outstanding at October
31, 1996 are subject to forfeiture if employment terminates prior to five years
from the date of grant. During that period, ownership of the shares cannot be
transferred. Restricted stock has the same dividend and voting rights as other
common stock and is considered to be currently issued and outstanding. The cost
of the awards, determined to be the fair market value of the shares at the date
of grant, is expensed ratably over the period the restrictions lapse. Such
expense was not material in 1996, 1995 or 1994. At October 31, 1996 and 1995,
the company had 3,926,000 and 3,062,000 shares, respectively, of restricted
stock outstanding.
SHARES RESERVED The company has reserved shares for future issuance under the
employee stock plans. At October 31, 1996 and 1995, 145,622,000 and 160,468,000
shares, respectively, were reserved.
STOCK REPURCHASE PROGRAM Under the company's stock repurchase program, shares of
HP common stock are purchased primarily to manage the dilution created by shares
issued under the employee stock plans. In 1996, 1995 and 1994, 24,580,000,
20,790,000 and 16,112,000 shares were repurchased for an aggregate purchase
price of $1,089 million, $686 million and $325 million, respectively. At October
31, 1996, HP had authorization for an aggregate of $230 million in future
repurchases under this program based on certain price and volume criteria.
During November 1996, the Board of Directors authorized an additional $1 billion
in stock repurchases.
RETIREMENT PLANS AND RETIREE MEDICAL BENEFITS
PENSION AND DEFERRED PROFIT-SHARING PLANS Substantially all of the company's
employees are covered under various pension and deferred profit-sharing
retirement plans. Worldwide pension and deferred profit-sharing costs were $281
million in 1996, $233 million in 1995, and $196 million in 1994.
U.S. employees who meet certain minimum eligibility criteria are provided
retirement benefits under the Hewlett-Packard Company Retirement Plan
(Retirement Plan). Defined benefits are based upon an employee's highest average
pay rate and length of service. For eligible service through October 31, 1993,
the benefit payable under the Retirement Plan is reduced by any amounts due to
the employee under the company's frozen defined contribution Deferred
Profit-Sharing Plan (DPS), which has since been closed to new participants.
<PAGE> 20
The combined status of the Retirement Plan and DPS follows:
<TABLE>
<CAPTION>
In millions 1996 1995
------ ------
<S> <C> <C>
Fair value of plan assets $2,744 $2,400
Retirement benefit obligation $2,799 $2,413
------ ------
</TABLE>
Employees outside the U.S. generally receive retirement benefits under various
defined benefit and defined contribution plans based upon factors such as years
of service and employee compensation levels. Eligibility is generally determined
in accordance with local statutory requirements.
RETIREE MEDICAL PLAN In addition to providing pension benefits, the company also
sponsors a medical plan that provides defined benefits to U.S. retired
employees. Substantially all of the company's current U.S. employees could
become eligible for these benefits and the existing benefit obligation relates
primarily to those employees. Once participating in the plan, retirees may
choose from managed-care and indemnity options, with their contributions
dependent on options chosen and length of service.
401(K) PLAN U.S. employees of the company may participate in the Tax Saving
Capital Accumulation Plan (TAXCAP), which was established as a supplemental
retirement program. Under the TAXCAP program, the company matches contributions
by employees up to a maximum of 4 percent of an employee's annual compensation.
The maximum combined contribution to the Employee Stock Purchase Plan and TAXCAP
is 17 percent of an employee's annual base compensation subject to certain
regulatory and plan limitations. At October 31, 1996, 52,000 employees were
participating in TAXCAP out of 58,000 who were eligible.
FUNDED STATUS The funded status of the defined benefit and retiree medical plans
is:
<TABLE>
<CAPTION>
U.S. defined benefit plan Non-U.S. defined benefit plans U.S. retiree medical plan
------------------------- ------------------------------ -------------------------
In millions 1996 1995 1996 1995 1996 1995
----- ----- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Fair value of plan assets $ 485 $ 358 $ 1,223 $ 1,116 $ 365 $ 310
Benefit obligation (540) (371) (1,246) (1,182) (429) (412)
----- ----- ------- ------- ----- -----
Benefit obligation in excess of
plan assets (55) (13) (23) (66) (64) (102)
Unrecognized net experience
(gain) loss (19) (8) 50 95 (225) (176)
Unrecognized prior service cost
(benefit) related to plan changes 48 52 27 32 (163) (173)
Unrecognized net transition asset* (31) (39) -- -- -- --
----- ----- ------- ------- ----- -----
Prepaid (accrued) costs $ (57) $ (8) $ 54 $ 61 $(452) $(451)
===== ===== ======= ======= ===== =====
Vested benefit obligation $(232) $(157) $ (893) $ (812)
Accumulated benefit obligation $(232) $(157) $ (944) $ (859)
----- ----- ------- -------
</TABLE>
*Amortized over 15 years for the U.S. plan and over periods ranging from 12 to
20 years for non-U.S. plans.
<PAGE> 21
Plan assets consist primarily of listed stocks and bonds for the U.S. plans and
listed stocks, bonds and cash surrender value of life insurance policies for the
non-U.S. plans. It is the company's practice to fund these costs to the extent
they are tax-deductible.
NET PERIODIC COST The company's net pension and retiree medical costs are
comprised of:
<TABLE>
<CAPTION>
Pension
-----------------------------------------------------
U.S. plans Non-U.S. plans U.S. retiree medical plan
------------------------- ----------------------- -------------------------
In millions 1996 1995 1994 1996 1995 1994 1996 1995 1994
----- ----- ----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service cost --benefits earned
during the period $ 137 $ 108 $ 112 $ 86 $ 88 $ 73 $ 23 $ 21 $ 27
Interest cost on
benefit obligation 27 15 6 74 72 58 32 28 33
Actual return on plan assets (61) (59) (7) (120) (26) (44) (55) (52) (7)
Net amortization and deferral 25 25 (29) 36 (52) (16) 8 18 (27)
----- ----- ----- ----- ---- ---- ---- ---- ----
Net plan cost $ 128 $ 89 $ 82 $ 76 $ 82 $ 71 $ 8 $ 15 $ 26
===== ===== ===== ===== ==== ==== ==== ==== ====
</TABLE>
ASSUMPTIONS The assumptions used to measure the benefit obligations and to
compute the expected long-term return on assets for the company's defined
benefit and retiree medical plans are:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
U.S. defined benefit plan:
Discount rate 7.5% 7.5% 8.0%
Average increase in compensation levels 5.5% 5.5% 5.5%
Expected long-term return on assets 9.0% 9.0% 9.0%
Non-U.S. defined benefit plans:
Discount rate 4.0 to 8.5% 4.0 to 8.5% 5.0 to 8.8%
Average increase in compensation levels 3.5 to 6.5% 3.5 to 6.5% 4.1 to 7.0%
Expected long-term return on assets 5.8 to 10.0% 5.8 to 10.0% 7.0 to 9.5%
U.S. retiree medical plan:
Discount rate 7.5% 7.5% 8.0%
Expected long-term return on assets 9.0% 9.0% 9.0%
Current medical cost trend rate 10.0% 10.4% 10.8%
Ultimate medical cost trend rate 6.0% 6.0% 6.0%
Medical cost trend rate decreases to ultimate
rate in year 2007 2007 2007
Effect of a 1% increase in the medical cost trend
rate (millions):
Increase in benefit obligation $ 90 $ 87 $ 66
Increase in the annual retiree medical cost $ 13 $ 12 $ 13
------- ------- -------
</TABLE>
<PAGE> 22
COMMITMENTS
The company leases certain real and personal property under non-cancelable
operating leases. Future minimum lease payments at October 31, 1996 are $182
million for 1997, $151 million for 1998, $111 million for 1999, $87 million for
2000, $78 million for 2001 and $287 million thereafter. Certain leases require
the company to pay property taxes, insurance and routine maintenance and include
escalation clauses. Rent expense was $353 million in 1996, $302 million in 1995
and $274 million in 1994.
CONTINGENCIES AND FACTORS THAT COULD AFFECT FUTURE RESULTS
CONTINGENCIES The company is involved in lawsuits, claims, investigations and
proceedings, including patent, commercial, and environmental matters, which
arise in the ordinary course of business. There are no such matters pending
that the company expects to be material in relation to its business, financial
condition, or results of operations.
FACTORS THAT COULD AFFECT FUTURE RESULTS A substantial portion of the company's
revenues each year are generated from the development, manufacture and rapid
release to market of high technology products newly introduced during the year.
In the extremely competitive industry environment in which the company operates,
such product generation, manufacturing and marketing processes are uncertain and
complex, requiring accurate prediction of market trends and demand as well as
successful management of various manufacturing risks inherent in such products.
Additionally, the company's production strategy relies on certain key suppliers'
ability to deliver completed products, subassemblies, and component parts in
time to meet critical manufacturing and distribution schedules, and its sales
strategy on the ability of certain third-party resellers to support sales
channels to the mass market effectively. In light of these dependencies, it is
reasonably possible that failure to successfully manage a significant product
introduction, failure of certain key suppliers to deliver as needed, or failure
of certain resellers to remain customers and channel partners could have a
severe near-term impact on the company's order growth, revenue growth, or
results of operations.
<PAGE> 23
GEOGRAPHIC AREA INFORMATION
The company, operating in a single industry segment, designs, manufactures and
services products and systems for measurement, computation and communications.
Net revenue, earnings from operations and identifiable assets, classified by the
major geographic areas in which the company operates, are:
<TABLE>
<CAPTION>
In millions 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
NET REVENUE
United States:
Unaffiliated customer sales $ 17,041 $ 13,963 $ 11,469
Interarea transfers 7,263 5,728 4,653
-------- -------- --------
24,304 19,691 16,122
-------- -------- --------
Europe:
Unaffiliated customer sales 13,252 11,142 8,423
Interarea transfers 1,643 1,432 1,058
-------- -------- --------
14,895 12,574 9,481
-------- -------- --------
Japan, Other Asia Pacific,Canada, Latin America:
Unaffiliated customer sales 8,127 6,414 5,099
Interarea transfers 5,470 3,783 2,765
-------- -------- --------
13,597 10,197 7,864
-------- -------- --------
Eliminations (14,376) (10,943) (8,476)
-------- -------- --------
$ 38,420 $ 31,519 $ 24,991
======== ======== ========
EARNINGS FROM OPERATIONS
United States $ 2,470 $ 2,259 $ 1,472
Europe 769 930 660
Japan, Other Asia Pacific, Canada, Latin America 1,173 1,240 824
Eliminations and corporate (686) (861) (407)
-------- -------- --------
$ 3,726 $ 3,568 $ 2,549
======== ======== ========
IDENTIFIABLE ASSETS
United States $ 14,321 $ 12,347 $ 9,848
Europe 7,991 7,168 4,991
Japan, Other Asia Pacific, Canada, Latin America 7,200 5,854 4,052
Eliminations and corporate (1,813) (942) 676
-------- -------- --------
$ 27,699 $ 24,427 $ 19,567
======== ======== ========
</TABLE>
Net revenue from sales to unaffiliated customers is based on the location of the
customer. Interarea transfers are sales among HP affiliates principally made at
market price, less an allowance primarily for subsequent manufacturing and/or
marketing costs. Earnings from operations and identifiable assets are classified
based on the location of the company's facilities. Identifiable corporate
assets, which are net of eliminations, comprise primarily cash and cash
equivalents, property, plant and equipment, and other assets, and aggregate
$4,810 million in 1996, $4,343 million in 1995 and $4,594 million in 1994.
<PAGE> 24
STATEMENT OF MANAGEMENT RESPONSIBILITY
The company's management is responsible for the preparation, integrity and
objectivity of the consolidated financial statements and other financial
information presented in this report. The accompanying consolidated financial
statements have been prepared in conformity with generally accepted accounting
principles and reflect the effects of certain estimates and judgments made by
management.
The company's management maintains an effective system of internal control that
is designed to provide reasonable assurance that assets are safeguarded and
transactions are properly recorded and executed in accordance with management's
authorization. The system is continuously monitored by direct management review
and by internal auditors who conduct an extensive program of audits throughout
the company. The company selects and trains qualified people who are provided
with and expected to adhere to the company's standards of business conduct.
These standards, which set forth the highest principles of business ethics and
conduct, are a key element of the company's control system.
The company's consolidated financial statements have been audited by Price
Waterhouse LLP, independent accountants. Their audits were conducted in
accordance with generally accepted auditing standards, and included a review of
financial controls and tests of accounting records and procedures as they
considered necessary in the circumstances.
The Audit Committee of the Board of Directors, which consists of outside
directors, meets regularly with management, the internal auditors and the
independent accountants to review accounting, reporting, auditing and internal
control matters. The committee has direct and private access to both internal
and external auditors.
<TABLE>
<S> <C>
/s/ Lew Platt /s/ Robert Wayman
- ----------------------------- ---------------------------
Lew Platt Robert Wayman
Chairman of the Board, President and Executive Vice President, Finance and Administration
Chief Executive Officer Chief Financial Officer
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF HEWLETT-PACKARD COMPANY
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of earnings, cash flows and shareholders' equity present
fairly, in all material respects, the financial position of Hewlett-Packard
Company and its subsidiaries at October 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended October 31, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ Price Waterhouse LLP
San Jose, California
November 18, 1996
<PAGE> 25
ORDERS AND NET REVENUE BY GROUPINGS OF SIMILAR PRODUCTS AND SERVICES
Unaudited
<TABLE>
<CAPTION>
For the years ended October 31
In millions 1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
ORDERS
Computer products, service and support $31,828 $25,980 $19,882
Electronic test and measurement
instrumentation, systems and service 3,912 3,499 2,759
Medical electronic equipment and service 1,423 1,385 1,170
Chemical analysis and service 895 855 777
Electronic components 831 966 762
------- ------- -------
$38,889 $32,685 $25,350
======= ======= =======
NET REVENUE
Computer products, service and support $31,430 $25,269 $19,632
Electronic test and measurement
instrumentation, systems and service 3,798 3,288 2,722
Medical electronic equipment and service 1,416 1,300 1,141
Chemical analysis and service 858 806 754
Electronic components 918 856 742
------- ------- -------
$38,420 $31,519 $24,991
======= ======= =======
</TABLE>
The table above provides supplemental information showing orders and net revenue
by groupings of similar products and services. In fiscal 1996, the company
changed its order-reporting policies for its support businesses to report orders
when received instead of as services are provided. Fiscal 1995 orders have been
restated to reflect this change, which did not have a material impact on order
growth rates. The groupings are as follows:
COMPUTER PRODUCTS, SERVICE AND SUPPORT Computer equipment and systems (hardware
and software), networking products, desktop and large-format printers and
scanners; extended-storage products; terminals and handheld calculators;
consulting and integration services; support and maintenance services; and parts
and supplies.
ELECTRONIC TEST AND MEASUREMENT INSTRUMENTATION, SYSTEMS AND SERVICE Instruments
and systems used to design, synchronize and produce electronics; instruments and
systems that test, synchronize and extract data from communications networks;
digital communications products; and consulting services.
MEDICAL ELECTRONIC EQUIPMENT AND SERVICE Clinical measurement instrumentation
and information systems used for patient monitoring, diagnostic cardiology and
ultrasound imaging; support, systems-integration and equipment-maintenance
services; and medical supplies.
CHEMICAL ANALYSIS AND SERVICE Gas and liquid chromatographs, mass spectrometers
and spectrophotometers used to analyze chemical compounds; laboratory data and
information management systems; support and maintenance services; and
consumables and supplies.
ELECTRONIC COMPONENTS Microwave semiconductor and optoelectronic devices.
<PAGE> 26
QUARTERLY SUMMARY
Unaudited
<TABLE>
<CAPTION>
For the three months ended
In millions except per share amounts January 31 April 30 July 31 October 31
---------- -------- ------- ----------
1996
<S> <C> <C> <C> <C>
U.S. orders $ 3,923 $ 4,672 $3,888 $ 4,698
International orders 6,179 5,438 4,784 5,307
------- ------- ------ -------
Total orders $10,102 $10,110 $8,672 $10,005
------- ------- ------ -------
Net revenue $ 9,288 $ 9,880 $9,105 $10,147
Cost of products sold
and services $ 5,988 $ 6,498 $6,194 $ 6,819
Earnings from operations $ 1,195 $ 1,041 $ 611 $ 879
Net earnings $ 790 $ 723 $ 425 $ 648
Per share amounts, restated for
1996 stock split:
Net earnings $ .75 $ .69 $ .40 $ .62
Cash dividends $ .10 $ .10 $ .12 $ .12
Range of stock prices $37 7/8-47 1/2 $43 1/8-55 $38 5/8-56 7/8 $ 40-49
============ ========= ============ =======
1995
U.S. orders $ 3,167 $ 3,523 $3,733 $ 4,263
International orders 4,668 4,609 4,317 4,405
------- ------- ------ -------
Total orders $ 7,835 $ 8,132 $8,050 $ 8,668
------- ------- ------ -------
Net revenue $ 7,304 $ 7,428 $7,739 $ 9,048
Cost of products sold
and services $ 4,547 $ 4,654 $4,907 $ 5,906
Earnings from operations $ 932 $ 875 $ 824 $ 937
Net earnings $ 602 $ 577 $ 576 $ 678
Per share amounts, restated for
1996 stock split:
Net earnings $ .57 $ .55 $ .55 $ .64
Cash dividends $ .075 $ .075 $ .10 $ .10
Range of stock prices $23-26 5/8 $25 1/4-33 $32 1/8-41 3/4 $36 1/4-48
============ ========= ============ =========
</TABLE>
- ---------------
Graphs
A bar chart entitled "Net Earnings Per Share (In dollars)" at the top right of
page 54 of the Annual Report shows that for the fiscal quarters in the years
1995 and 1996 (shown on the x-axis) the Company had net earnings per share
(shown on the y-axis) in the respective amounts provided in the table entitled
"Quarterly Summary (Unaudited)" on page 54 of the Annual Report. In addition, a
note to the bar chart states that these amounts have been restated for the
effect of a 2-for-1 stock split in 1996.
A bar chart entitled "Range of Common Stock Prices (In dollars per share)" at
the bottom right of page 54 of the Annual Report shows that for the fiscal
quarters in the years 1995 and 1996 (shown on the x-axis) the range of stock
prices (shown on the y-axis) was in the respective amounts provided in the
table entitled "Quarterly Summary (Unaudited)" on page 54 of the Annual
Report. In addition, a note to the bar chart states that these amounts have
been restated for the effect of a 2-for-1 stock split in 1996.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES AND AFFILIATES
OF HEWLETT-PACKARD COMPANY
- --------------------------------------------------------------------------------
Organized Under
Laws of
- --------------------------------------------------------------------------------
DOMESTIC SUBSIDIARIES OF HEWLETT-PACKARD COMPANY
Hewlett-Packard Chesapeake Inc. Delaware
Hewlett-Packard Delaware, Inc. Delaware
Hewlett-Packard Delaware Capital, Inc. Delaware
Hewlett-Packard Delaware Funding, Inc. Delaware
Hewlett-Packard Delaware Holding, Inc. Delaware
Hewlett-Packard Delaware Investment, Inc. Delaware
Hewlett-Packard Finance Company California
Hewlett-Packard Global Trading, Inc. California
Hewlett-Packard Hellas California
Hewlett-Packard Inter-Americas California
Hewlett-Packard Laboratories Japan, Inc. Delaware
Hewlett-Packard Little Falls, Inc. Delaware
Hewlett-Packard Pipeline Company Colorado
Hewlett-Packard World Trade, Inc. Delaware
Apollo World Trade, Inc. Delaware
Convex Computer Corporation Delaware
ElseWare Corporation Washington
The Tall Tree Insurance Company Vermont
Versatest, Inc. California
DOMESTIC SUBSIDIARY OF HEWLETT-PACKARD CHESAPEAKE INC.
Hewlett-Packard Puerto Rico California
DOMESTIC SUBSIDIARY OF HEWLETT-PACKARD LITTLE FALLS, INC.
Fleet Systems, Inc. California
DOMESTIC SUBSIDIARY OF HEWLETT-PACKARD WORLD TRADE, INC.
Hewlett-Packard Export Trade Co. California
DOMESTIC SUBSIDIARIES OF CONVEX COMPUTER CORPORATION
Convex Computer (China) Inc. Delaware
Convex International, Inc. Delaware
1
<PAGE> 2
FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD COMPANY
China Hewlett-Packard Company, Ltd. PRC
Grupo Hewlett-Packard Latin America S.A. de C.V. Mexico
Hewlett-Packard Asia Pacific Ltd. Hong Kong
Hewlett-Packard Australia Ltd. Australia
Hewlett-Packard Bilgisayar Ve Olcum Sistemleri
Anonim Sirketi Turkey
Hewlett-Packard Hong Kong Ltd. Hong Kong
Hewlett-Packard Korea Ltd. Korea
Hewlett-Packard Medical Products (Qingdao) Ltd. PRC
Hewlett-Packard Penang Sdn. Bhd. Malaysia
Hewlett-Packard Portugal-Sistemas De Informatica
E De Medida S.A. Portugal
Hewlett-Packard Sales (Malaysia) Snd. Bhd. Malaysia
Hewlett-Packard Taiwan, Ltd. ROC
Edisa Hewlett-Packard S.A. Brazil
EEsof K.K. Japan
EEsof Pte. Ltd. Singapore
P.T. Hewlett-Packard Berca Servisindo Indonesia
FOREIGN SUBSIDIARIES OF CONVEX COMPUTER CORPORATION
Convex Computer Australia Pty Ltd. Australia
Convex Computer Barbados Ltd. Barbados
Convex Computer Canada Ltd. Canada
Convex S.p.A. Italy
Convex Computer Japan K.K. Japan
Convex Computer Pte. Ltd. Singapore
Convex Computer AG Switzerland
Convex Computer B.V. The Netherlands
Convex Computer Ltd. U.K.
FOREIGN SUBSIDIARIES OF GRUPO HEWLETT-PACKARD LATIN AMERICA S.A. DE C.V.
Arrendadora Hewlett-Packard S.A. de C.V. Mexico
Hewlett-Packard de Mexico S.A. de C.V. Mexico
FOREIGN SUBSIDIARY OF HEWLETT-PACKARD ASIA PACIFIC LTD.
Hewlett-Packard Australia Finance Ltd. Australia
FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD AUSTRALIA LTD.
Hewlett-Packard New Zealand Ltd. New Zealand
Telstra Hewlett-Packard (R&D) Pty. Inc. Australia
2
<PAGE> 3
FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD DELAWARE, INC.
Hewlett-Packard Chile, S.A. Chile
Hewlett-Packard de Venezuela, C.A. Venezuela
Hewlett-Packard do Brasil, S.A. Brazil
Hewlett-Packard Malaysia Technology, Sdn. Bhd. Malaysia
Hewlett-Packard (Thailand) Ltd. Thailand
FOREIGN SUBSIDIARY OF HEWLETT-PACKARD DELAWARE HOLDING, INC.
Hewlett-Packard (India) Software Operation Pte. Ltd. India
FOREIGN SUBSIDIARY OF EDISA HEWLETT-PACKARD S.A.
HP Computadores Brazil
FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD HOLDING GMBH
Hewlett-Packard GmbH Germany
CoCreate Software GmbH Germany
IDACOM Electronics GmbH Germany
Leasametric GmbH Germany
FOREIGN SUBSIDIARIES OF COCREATE SOFTWARE GMBH
CoCreate Software, Inc. California
CoCreate Software Ltd. U.K.
FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD EUROPE B.V.
Hewlett-Packard Belgium S.A./N.V. Belgium
Hewlett-Packard (Canada) Ltd. Canada
Hewlett-Packard Caribe B.V. Netherlands
Hewlett-Packard (China) Investment Co., Ltd. PRC
Hewlett-Packard Colombia Limitada Columbia
Hewlett-Packard Coordination Center SC Belgium
Hewlett-Packard Far East Pte. Ltd. Singapore
Hewlett-Packard Holding GmbH Germany
Hewlett-Packard Holding B.V. Netherlands
Hewlett-Packard Holdings (M) Sdn. Bhd. Malaysia
Hewlett-Packard India Ltd. India
Hewlett-Packard Ireland Ltd. Ireland
Hewlett-Packard Ireland (Holdings) Ltd. Ireland
3
<PAGE> 4
FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD EUROPE B.V. (Continued)
Hewlett-Packard Israel Science Center Ltd. Israel
Hewlett-Packard Italiana S.p.A. Italy
Hewlett-Packard Japan, Ltd. Japan
Hewlett-Packard Ltd. U.K.
Hewlett-Packard Netherland B.V. Netherlands
Hewlett-Packard Philippines Philippines
Hewlett-Packard S.A. Switzerland
Hewlett-Packard Singapore (Sales) Pte. Ltd. Singapore
Hewlett-Packard Vietnam, Ltd. Vietnam
Technologies et Participations S.A. France
FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD (CHINA) INVESTMENT CO., LTD.
Hewlett-Packard Computer Products (Shanghai) Co., Ltd. PRC
Hewlett-Packard Shanghai Analytical Products Co. Ltd. PRC
FOREIGN SUBSIDIARY OF HEWLETT-PACKARD HOLDINGS (M) SDN. BHD.
Hewlett-Packard Storage Products (M) Sdn. Bhd. Malaysia
FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD IRELAND (HOLDINGS) LTD.
Hewlett-Packard (Manufacturing) Ltd. Ireland
Hewlett-Packard Europe Finance Ltd. Ireland
FOREIGN SUBSIDIARY OF HEWLETT-PACKARD ITALIANA S.P.A.
Hewlett-Packard Servizi Finanziari S.p.A. Italy
FOREIGN SUBSIDIARY OF HEWLETT-PACKARD JAPAN, LTD.
SYC Ltd. Japan
FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD LTD.
Hewlett-Packard Finance Ltd. U.K.
Hewlett-Packard Product Leasing Ltd. U.K.
Apollo Computer (UK) Ltd. U.K.
BT&D Technologies Ltd. U.K.
4
<PAGE> 5
FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD S.A.
Hewlett-Packard Argentina S.A. Argentina
Hewlett-Packard A/S Denmark
Hewlett-Packard Ges.m.b.H Austria
Hewlett-Packard Espanola, S.A. Spain
Hewlett-Packard (Malaysia) Sdn. Bhd. Malaysia
Hewlett-Packard Norge AS Norway
Hewlett-Packard OY Finland
Hewlett-Packard (Schweiz) AG Switzerland
Hewlett-Packard Singapore Pte. Ltd. Singapore
Hewlett-Packard Sverige AB Sweden
Hewlett-Packard Technical B.V. Netherlands
Hewlett-Packard Trading S.A. Switzerland
FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD SINGAPORE PTE. LTD.
Hewlett-Packard Investment Ltd. Liberia
Geneva Investments N.V. Netherlands Antilles
W.W. Investment Holding Pte. Ltd. Singapore
FOREIGN SUBSIDIARY OF HEWLETT-PACKARD INVESTMENT LTD.
Banque de Savoie S.A. France
FOREIGN SUBSIDIARY OF W.W. INVESTMENT HOLDING PTE. LTD.
W.W. Real Estate and Development Pte. Ltd. Singapore
FOREIGN SUBSIDIARIES OF W.W. REAL ESTATE AND DEVELOPMENT PTE. LTD.
W-Wide Offshore Ventures Pte. Ltd. Singapore
CB Pierre France
FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD WORLD TRADE, INC.
Hewlett-Packard AO Russia
Hewlett-Packard Europe B.V. Netherlands
Hewlett-Packard International Sales Corporation B.V. Netherlands
Hewlett-Packard Magyarorszag Kft. Hungary
Hewlett-Packard Polska spol.z.o.o. Poland
Hewlett-Packard RE Ltd. Ireland
Hewlett-Packard s.r.o. Czech Republic
P.T. Hewlett-Packard Finance Indonesia Indonesia
Yokogawa Analytical Systems, Inc. Japan
5
<PAGE> 6
FOREIGN SUBSIDIARY OF LEASAMETRIC GmbH
Leasametric S.A. France
FOREIGN SUBSIDIARIES OF TECHNOLOGIES et PARTICIPATIONS S.A.
Hewlett-Packard France France
Technologies et Participations Immobilieres France
FOREIGN SUBSIDIARY OF HEWLETT-PACKARD FRANCE
Hewlett-Packard France Finance France
6
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the following
Registration Statements on Form S-8 of our report dated November 18, 1996 which
appears on page 52 of the 1996 Annual Report to Shareholders of Hewlett-Packard
Company which is incorporated in this Annual Report on Form 10-K.
Registration No. 2-66780 through Post-Effective Amendment No. 6
Registration No. 2-90239
Registration No. 2-92331 through Post-Effective Amendment No. 3
Registration No. 2-96361 through Post-Effective Amendment No. 1
Registration No. 33-30769
Registration No. 33-31496
Registration No. 33-31500
Registration No. 33-38579
Registration No. 33-50699
Registration No. 33-52291
Registration No. 33-58447
Registration No. 33-65179
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
San Jose, California
January 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheer and the consolidated statement of earnings and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,885
<SECURITIES> 442
<RECEIVABLES> 7,126
<ALLOWANCES> 0
<INVENTORY> 6,401
<CURRENT-ASSETS> 17,991
<PP&E> 10,198
<DEPRECIATION> 4,662
<TOTAL-ASSETS> 27,699
<CURRENT-LIABILITIES> 10,623
<BONDS> 2,579
0
0
<COMMON> 1,014
<OTHER-SE> 12,424
<TOTAL-LIABILITY-AND-EQUITY> 27,699
<SALES> 33,114
<TOTAL-REVENUES> 38,420
<CGS> 22,013
<TOTAL-COSTS> 25,499
<OTHER-EXPENSES> 9,195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 327
<INCOME-PRETAX> 3,694
<INCOME-TAX> 1,108
<INCOME-CONTINUING> 2,586
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,586
<EPS-PRIMARY> 2.46
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended October 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to _______________
Commission File Number: 1-4423
A. Full title of the plan and address of the plan, if different from that
of the issuer named below:
HEWLETT-PACKARD COMPANY
EMPLOYEE STOCK PURCHASE PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
HEWLETT-PACKARD COMPANY
3000 HANOVER STREET
PALO ALTO, CALIFORNIA 94304
REQUIRED INFORMATION
Not applicable.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
ADMINISTRATOR OF THE PLAN HAS DULY CAUSED THIS ANNUAL REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
HEWLETT-PACKARD COMPANY
EMPLOYEE STOCK PURCHASE PLAN
By: /s/ Ann O. Baskins
---------------------------------------
Ann O. Baskins
Managing Counsel and Assistant Secretary
Date: January 28, 1997
