<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended July 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number: 1-4423
HEWLETT-PACKARD COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-1081436
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3000 Hanover Street, Palo Alto, California 94304
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (650) 857-1501
--------------
______________________________________________________________________________
Former name, former address and former fiscal year, if changed since last
report)
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 31, 1999
- ----------------------------- ----------------------------
Common Stock, $0.01 par value 1.019 billion shares
<PAGE>
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
INDEX
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Page No.
--------
Part I. Financial Information
Item 1. Financial Statements.
Consolidated Condensed Balance Sheet
July 31, 1999 (Unaudited) and October 31, 1998 3
Consolidated Condensed Statement of Earnings
Three and nine months ended July 31, 1999
and 1998 (Unaudited) 4
Consolidated Condensed Statement of Cash Flows
Nine months ended July 31, 1999 and 1998 (Unaudited) 5
Notes to Consolidated Condensed Financial Statements
(Unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition, Results of Operations and Factors That May
Affect Future Results (Unaudited) 8-20
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 21
Part II Other Information 21
Item 6. Exhibits and Reports on Form 8-K. 21
Signature 22
Exhibit Index 23
<PAGE>
Item 1. Financial Statements.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
------------------------------------
(Millions except par value and number of shares)
<TABLE>
<CAPTION>
July 31 October 31
1999 1998
---------- ----------
(Unaudited)
<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 6,052 $ 4,046
Short-term investments 54 21
Accounts receivable 4,880 5,104
Financing receivables 1,886 1,494
Inventory 5,040 4,699
Other current assets 2,773 3,143
---------- ----------
Total current assets 20,685 18,507
---------- ----------
Property, plant and equipment (less accumulated
depreciation: July 31, 1999 - $4,476;
October 31, 1998 - $4,160) 4,497 4,877
Long-term investments and other assets 5,466 5,240
Net assets of discontinued operations 3,422 3,084
---------- ----------
$ 34,070 $ 31,708
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Notes payable and short-term borrowings $ 2,366 $ 1,245
Accounts payable 2,986 2,768
Employee compensation and benefits 1,162 1,195
Taxes on earnings 1,425 2,796
Deferred revenues 1,409 1,248
Other accrued liabilities 3,001 2,622
---------- ----------
Total current liabilities 12,349 11,874
---------- ----------
Long-term debt 1,824 2,063
Other liabilities 888 852
Stockholders' equity:
Preferred stock, $0.01 par value; 300,000,000
shares authorized; none issued - -
Common stock, $0.01 par value;
4,800,000,000 shares authorized;
1,018,876,000 and 1,015,403,000 shares
issued and outstanding at July 31, 1999
and October 31, 1998, respectively 10 10
Common stock in excess of par value 284 -
Retained earnings 18,715 16,909
---------- ----------
Total stockholders' equity 19,009 16,919
---------- ----------
$ 34,070 $ 31,708
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
--------------------------------------------
(Unaudited)
(Millions except per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31 July 31
---------------------- ----------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net revenue:
Products $ 8,697 $ 7,717 $26,374 $24,879
Services 1,621 1,465 4,634 4,244
------- ------- ------- -------
10,318 9,182 31,008 29,123
Costs and expenses:
Cost of products sold and
services 7,251 6,507 21,618 20,506
Research and development 619 585 1,828 1,776
Selling, general and
administrative 1,661 1,417 4,783 4,369
------- ------- ------- -------
9,531 8,509 28,229 26,651
------- ------- ------- -------
Earnings from operations 787 673 2,779 2,472
Interest income and other, net 204 155 547 392
Interest expense 45 54 137 180
------- ------- ------- -------
Earnings from continuing
operations before taxes 946 774 3,189 2,684
Provision for taxes 250 220 845 765
------- ------- ------- -------
Net earnings from
continuing operations 696 554 2,344 1,919
------- ------- ------- -------
Discontinued Operations:
Earnings from discontinued
operations, net of taxes 157 67 387 316
------- ------- ------- -------
Net earnings $ 853 $ 621 $ 2,731 $ 2,235
======= ======= ======= =======
Basic net earnings per share:
Continuing operations $ 0.69 $ 0.53 $ 2.32 $ 1.84
Discontinued operations 0.15 0.07 0.38 0.31
------- ------- ------- -------
$ 0.84 $ 0.60 $ 2.70 $ 2.15
======= ======= ======= =======
Diluted net earnings per share:
Continuing operations $ 0.66 $ 0.52 $ 2.24 $ 1.79
Discontinued operations 0.15 0.06 0.37 0.30
------- ------- ------- -------
$ 0.81 $ 0.58 $ 2.61 $ 2.09
======= ======= ======= =======
Cash dividends declared
per share $ 0.32 $ 0.32 $ 0.64 $ 0.60
======= ======= ======= =======
Average shares used in
computing basic net
earnings per share 1,010 1,035 1,011 1,039
======= ======= ======= =======
Average shares and equivalents
used in computing diluted net
earnings per share 1,056 1,076 1,054 1,081
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
----------------------------------------------
(Unaudited)
(Millions)
<TABLE>
<CAPTION>
Nine months ended
July 31
----------------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings from continuing operations $ 2,344 $ 1,919
Adjustments to reconcile net earnings from
continuing operations to net cash provided
by operating activities:
Depreciation and amortization 965 975
Deferred taxes on earnings 583 (173)
Change in assets and liabilities:
Accounts and financing receivables (467) (193)
Inventory (348) 180
Accounts payable 220 (264)
Taxes on earnings (1,333) 370
Other current assets and liabilities 162 108
Other, net 230 161
--------- ---------
Net cash provided by operating activities 2,356 3,083
--------- ---------
Cash flows from investing activities:
Investment in property, plant and equipment (757) (1,199)
Disposition of property, plant and equipment 307 216
Purchase of short-term investments (901) (2,750)
Maturities of short-term investments 965 4,086
Other, net (101) (65)
--------- ---------
Net cash provided by (used in) investing
activities (487) 288
--------- ---------
Cash flows from financing activities:
Increase in notes payable and short-term borrowings 1,528 290
Issuance of long-term debt 245 206
Payment of long-term debt (854) (569)
Issuance of common stock under employee stock plans 548 369
Repurchase of common stock (891) (1,121)
Dividends (488) (457)
Other, net - 1
--------- ---------
Net cash provided by (used in)
financing activities 88 (1,281)
--------- ---------
Net cash provided by discontinued operations 49 149
--------- ---------
Increase in cash and cash equivalents 2,006 2,239
Cash and cash equivalents at beginning of period 4,046 3,072
--------- ---------
Cash and cash equivalents at end of period $ 6,052 $ 5,311
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. In the opinion of the Company's management, the accompanying consolidated
condensed financial statements contain all adjustments (which comprise only
normal and recurring accruals) necessary to present fairly the financial
position as of July 31, 1999 and October 31, 1998, the results of
operations for the three and nine months ended July 31, 1999 and 1998, and
the cash flows for the nine months ended July 31, 1999 and 1998.
The results of operations for the three and nine months ended July 31, 1999
are not necessarily indicative of the results to be expected for the full
year. The information included in this Form 10-Q should be read in
conjunction with Management's Discussion and Analysis and the consolidated
financial statements and notes thereto included in the Hewlett-Packard
Company 1998 annual report on Form 10-K.
2. On March 2, 1999, the Company announced its intention, subject to certain
conditions, to launch a new company (which has been named Agilent
Technologies, Inc., "Agilent Technologies"), through a distribution of
Agilent Technologies' common stock to the Company's stockholders in the
form of a tax-free spin-off. Agilent Technologies is composed of the
Company's test-and-measurement, semiconductor products, chemical analysis
and healthcare solutions businesses. The spin-off is expected to be
completed by July 31, 2000, and will follow a planned initial public
offering of approximately 15 percent of Agilent Technologies' common stock.
Subsequent to the end of the fiscal third quarter, the Company's management
and Board of Directors completed the plan of disposition for Agilent
Technologies. In addition, the Company received a ruling from the
Internal Revenue Service that the spin-off would be tax-free to the Company
and its stockholders. Accordingly, because the disposition plans were
finalized before the Company's Form 10-Q was filed for the third quarter,
the Company's consolidated condensed financial statements and notes
included herein reflect Agilent Technologies' businesses as a discontinued
operation in accordance with Accounting Principles Board Opinion No. 30.
Net revenue and net earnings from Agilent Technologies' operations, which
include results through July 31, 1999, are summarized below. Net earnings
from Agilent Technologies' operations for the period from August 1, 1999
through the spin-off are expected to exceed the estimated costs to effect
the spin-off.
<TABLE>
<CAPTION>
(In Millions) Three Months Ended Nine Months Ended
July 31 July 31
-------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenue, including revenue from Hewlett-Packard Co. $ 2,087 $ 1,875 $ 5,883 $ 5,965
--------- --------- --------- ---------
Earnings from discontinued operations before taxes $ 222 $ 99 $ 553 $ 464
Provision for taxes 65 32 166 148
--------- --------- --------- ---------
Earnings from discontinued
operations, net of taxes $ 157 $ 67 $ 387 $ 316
--------- --------- --------- ---------
</TABLE>
Net assets of discontinued operations at July 31, 1999 and October 31, 1998 are
summarized below:
<TABLE>
<CAPTION>
(In Millions) July 31 October 31
1999 1998
--------- ----------
<S> <C> <C>
Current assets $ 3,323 $ 3,075
Property, plant and equipment,
net 1,448 1,481
Other assets 481 493
Current liabilities (1,467) (1,599)
Other liabilities (363) (366)
--------- ----------
Net assets of discontinued
operations $ 3,422 $ 3,084
--------- ----------
</TABLE>
<PAGE>
3. The Company's basic EPS is calculated based on net earnings available to
common stockholders and the weighted-average number of shares outstanding
during the reported period. Diluted EPS includes additional dilution from
potential common stock, such as stock issuable pursuant to the exercise of
stock options outstanding and the conversion of debt.
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31 July 31
--------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- --------
<S> <C> <C> <C> <C>
(in millions except
per share data)
Numerator:
Net earnings from
continuing operations $ 696 $ 554 $ 2,344 $ 1,919
Adjustment for interest
expense, net of income
tax effect 5 6 16 19
--------- --------- --------- --------
Net earnings from
continuing operations,
adjusted 701 560 2,360 1,938
Net earnings from discontinued
operations 157 67 387 316
--------- --------- --------- --------
Net earnings, adjusted $ 858 $ 627 $ 2,747 $ 2,254
========= ========= ========= ========
Denominator:
Weighted-average shares
outstanding 1,010 1,035 1,011 1,039
Effect of dilutive securities:
Dilutive options 35 31 32 32
Convertible zero-coupon
notes due 2017 11 10 11 10
--------- --------- --------- --------
Dilutive potential
common shares 46 41 43 42
--------- --------- --------- --------
Weighted-average shares and
dilutive potential
common shares 1,056 1,076 1,054 1,081
========= ========= ========= ========
Basic earnings per share:
Continuing operations $ 0.69 $ 0.53 $ 2.32 $ 1.84
Discontinued operations 0.15 0.07 0.38 0.31
--------- --------- --------- --------
$ 0.84 $ 0.60 $ 2.70 $ 2.15
========= ========= ========= ========
Diluted earnings per share:
Continuing operations $ 0.66 $ 0.52 $ 2.24 $ 1.79
Discontinued operations 0.15 0.06 0.37 0.30
--------- --------- --------- --------
$ 0.81 $ 0.58 $ 2.61 $ 2.09
========= ========= ========= ========
</TABLE>
<PAGE>
4. Income tax provisions for interim periods are based on estimated effective
annual income tax rates. The effective income tax rate varies from the U.S.
federal statutory income tax rate primarily because of variations in the tax
rates on foreign income.
5. Inventory
(In Millions)
<TABLE>
<CAPTION>
July 31 October 31
1999 1998
------- -------
<S> <C> <C>
Finished goods $ 3,715 $ 3,553
Purchased parts and fabricated
assemblies 1,325 1,146
------- -------
$ 5,040 $ 4,699
======= =======
</TABLE>
6. The Company paid interest of $163 million and $177 million during the nine
months ended July 31, 1999 and 1998, respectively. During the same periods,
the Company paid income taxes of $1,580 million and $728 million,
respectively. The effect of foreign currency exchange rate fluctuations on
cash balances held in foreign currencies was not material.
7. In June 1998, the Financial Accounting Standards Board (FASB)issued
Statement of Financial Accounting Standards No. 133 (SFAS No. 133),
"Accounting for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments and requires recognition of all derivatives as assets or
liabilities in the statement of financial position and measurement of those
instruments at fair value. The statement, as amended, is effective for
fiscal years beginning after June 15, 2000. At this time, the Company is
evaluating when to adopt the standard and is in the process of determining
the impact that adoption will have on its consolidated financial
statements.
In July 1997, FASB's Emerging Issues Task force (EITF) reached a final
consensus on Issue 96-16, "Investor's Accounting for an Investee When the
Investor Has a Majority of the Voting Interest but the Minority Stockholder
or Stockholders Have Certain Approval or Veto Rights." This consensus
precludes investors from consolidating majority-owned investees when a
minority stockholder or stockholders hold substantive participating rights,
which, individually or in the aggregate, would allow such minority
stockholders to participate in significant decisions made in the ordinary
course of business. This standard has no impact on the Company's financial
statements.
In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of
an Enterprise and Related Information." The statement changes standards for
the way that public business enterprises identify and report operating
segments in annual and interim financial statements. This statement
requires selected information about an enterprise's operating segments and
related disclosure about products and services, geographic areas and major
customers. The Company expects to report multiple segments when it adopts
the standard for fiscal year-end 1999.
8. On May 20, 1999, the Company's Board of Directors authorized the future
repurchase of an additional $1 billion of the Company's common stock under
the systematic program used to manage the dilution created by shares issued
under employee stock plans. The Board of Directors also authorized the
repurchase of an additional $1 billion of the Company's common stock in the
open market or in private transactions under the Company's separate
incremental plan. Including the additional authorizations, the remaining
future repurchases in the systematic program and the separate incremental
plan are $1.6 billion and $1.6 billion, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition,
Results of Operations and Factors That May Affect Future
Results (Unaudited).
<PAGE>
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
On March 2, 1999, the Company announced its intention, subject to certain
conditions, to launch a new company (which has been named Agilent Technologies,
Inc., "Agilent Technologies"), through a distribution of Agilent Technologies'
common stock to the Company's stockholders in the form of a tax-free spin-off.
Agilent Technologies is composed of the Company's test-and-measurement,
semiconductor products, chemical analysis and healthcare solutions businesses.
The spin-off is expected to be completed by July 31, 2000, and will follow a
planned public offering of approximately 15 percent of Agilent Technologies'
common stock.
Subsequent to the end of the fiscal third quarter, the Company's management and
Board of Directors completed the plan of disposition for Agilent Technologies.
In addition, the Company received a ruling from the Internal Revenue
Service that the spin-off would be tax-free to the Company and its stockholders.
Accordingly, because the disposition plans were finalized before the Company's
Form 10-Q was filed for the third quarter, the Company's consolidated condensed
financial statements and notes included herein reflect Agilent Technologies'
businesses as a discontinued operation in accordance with Accounting Principles
Board Opinion No. 30.
Unless otherwise indicated, the following discussion is on a continuing
operations basis.
RESULTS OF OPERATIONS
- ---------------------
Net Revenue - Net revenue for the quarter ended July 31, 1999 was $10.3 billion,
an increase of 12 percent from the same period of fiscal 1998. Product sales
increased 13 percent and service revenue grew 11 percent over the corresponding
period of fiscal 1998. Net revenue grew 15 percent to $5.6 billion
internationally and 10 percent to $4.7 billion in the U.S.
Net revenue for the first nine months of fiscal 1999 was $31.0 billion, an
increase of 6 percent from the same period of fiscal 1998. Product sales
increased 6 percent and service revenue grew 9 percent over the corresponding
period of fiscal 1998. Net revenue grew 8 percent to $17.3 billion
internationally and 5 percent to $13.7 billion in the U.S.
Currency fluctuations did not have a material impact on the Company's net
revenue growth in either the third quarter or the first nine months of fiscal
1999.
Net revenue growth for the third quarter and first nine months of fiscal 1999
was primarily attributable to strong demand for the Company's home personal
computers, PC servers and information storage products, as well as color
LaserJet and home inkjet printers, scanners and related printer supplies. Solid
growth in service revenue, primarily in customer support, contributed to overall
net revenue growth. Net revenue growth in the third quarter also was bolstered
by a turnaround in several product areas including commercial desktop and
notebook PCs and midrange UNIX servers, fueled by the introduction
<PAGE>
of the N-class server. The strong growth in the aforementioned product areas was
partially offset by weakness in enterprise storage, reflecting the Company's
transition to a new high-end storage strategy.
Costs of Products Sold and Services - Cost of products sold and services as a
percentage of net revenue was 70.3 percent for the third quarter and 69.7
percent for the first nine months of fiscal 1999, compared to 70.9 percent for
the third quarter and 70.4 percent for the first nine months of fiscal 1998. The
decrease in the ratio compared to the third quarter and first nine months of
fiscal 1998 was primarily attributable to a more stable pricing environment for
PCs and improvements in supply chain management. In addition, increased volume
in printer supplies had a favorable impact on the cost of sales ratio for the
first nine months of fiscal 1999. These decreases in the cost of sales ratios
were partially offset by higher costs on certain components purchased from
Japanese suppliers as a result of the strengthening Yen. The Company expects
continued variability in the cost of sales trend over time as competitive
pricing pressures and mix shifts to lower gross margin products continue.
Operating Expenses - Operating expenses as a percentage of net revenue were 22.1
percent for the third quarter and 21.3 percent for the first nine months of
fiscal 1999, compared to 21.8 percent for the third quarter and 21.1 percent for
the first nine months of fiscal 1998. Year-over-year growth in operating
expenses was 14 percent for the third quarter and 8 percent for the first nine
months of fiscal 1999. The growth in operating expenses reflected the Company's
increased marketing expenses incurred to support new product introductions in
several businesses, as well as promotions relating to e-services. In addition,
growth in selling, general and administrative expenses was impacted by costs
associated with the realignment of Hewlett-Packard Co. into two companies and
higher than normal compensation expense for stock appreciation rights, which
reflected the rise in the Company's stock price during the third quarter.
Excluding these additional costs and expenses, operating expenses would have
increased 9 percent and would have decreased approximately 0.6 percentage points
as a percentage of revenue when compared to the third quarter of fiscal 1998.
Reducing the rate of operating expense growth below the rate of net revenue
growth remains a major focus of the Company.
Provision for Taxes - The provision for taxes as a percentage of earnings before
taxes was 26.5 percent for the third quarter and first nine months of fiscal
1999 compared to 28.5 percent for the third quarter and first nine months of
fiscal 1998. The annual effective tax rate decreased to 26.5 percent in the
first quarter of fiscal 1999, primarily as a result of changes in the expected
geographic mix of the Company's earnings.
Net Earnings from Continuing Operations - Net earnings from continuing
operations for the third quarter of fiscal 1999 were $696 million compared to
net earnings of $554 million for the third quarter of fiscal 1998. For the nine
months ended July 31, 1999, net earnings were $2.3 billion compared to net
earnings of $1.9 billion for the first nine months of fiscal 1998. Earnings per
share for the third quarter and first nine months of fiscal 1999 on a diluted
basis were 66 cents and $2.24 per share, respectively, on 1.06 and 1.05 billion
weighted average shares and equivalents, compared to 52 cents and $1.79 per
share on 1.08 billion weighted average shares for the corresponding periods of
fiscal 1998.
<PAGE>
Discontinued Operations - Net earnings from discontinued operations for the
third quarter of fiscal 1999 were $157 million compared to $67 million for the
third quarter of fiscal 1998. For the nine months ended July 31, 1999, net
earnings from discontinued operations were $387 million compared to $316 million
for the first nine months of fiscal 1998. Net earnings from discontinued
operations include the results of the businesses that comprise Agilent
Technologies. Refer to the Notes To Consolidated Condensed Financial Statements
for a summary of Agilent Technologies net revenue and net earnings for the
three and nine months ended July 31, 1999 and 1998, and net assets as of July
31, 1999, and October 31, 1998.
FINANCIAL CONDITION
- -------------------
Liquidity and Capital Resources - The Company's financial position remains
strong, with cash and cash equivalents and short-term investments of $6.1
billion at July 31, 1999, compared with $4.1 billion at October 31, 1998. In
addition, other long-term investments, relatively low levels of debt compared to
assets, and a large equity base contribute to the Company's financial
flexibility.
Cash flows from operating activities were $2.4 billion during the first nine
months of fiscal 1999, compared to $3.1 billion for the corresponding period of
fiscal 1998. The decrease in cash flows from operating activities in fiscal 1999
was attributable primarily to tax payments made during the first nine months of
fiscal 1999, partially offset by increased net earnings and a decrease in net
deferred tax assets. Inventory as a percentage of net revenue declined to 12.2
percent at July 31, 1999 from 13.3 percent in the corresponding prior period.
The decline in the ratio is attributable to continued progress in supply-chain
management. Overall, there was an increase in accounts and financing receivables
as a percentage of net revenue, from 15.2 percent in the prior-year period to
16.4 percent as of July 31, 1999. The change in this ratio reflected an increase
in sales-type lease financing receivables, which increased 26 percent during the
first nine months of fiscal 1999.
Property, plant and equipment as a percentage of net revenue declined to 10.9
percent at July 31, 1999 from 12.5 percent in the corresponding period. Capital
expenditures for the first nine months of fiscal 1999 were $757 million,
compared to $1.2 billion for the corresponding period in fiscal 1998. The
decrease in the fixed asset ratio and related capital expenditures in 1999 was
due in part to a Company-wide emphasis to reduce non-essential expenditures,
increase outsourcing of certain production processes and lease more facilities
to provide operational flexibility.
The change in short-term borrowing activities during the first nine months of
fiscal 1999 compared to the same period in fiscal 1998 resulted from increases
in the use of short-term borrowings in fiscal 1999 to maintain short-term
working capital requirements. In 1998, net receipts from maturities of short-
term investments were used to pay down both short- and long-term debt and to
repurchase stock.
<PAGE>
Shares of the Company's common stock are repurchased under a systematic program
to manage the dilution created by shares issued under employee stock plans. In
May 1999, the Company's Board of Directors authorized the repurchase of an
additional $1 billion of the Company's common stock under the systematic
program. The Board of Directors also authorized the repurchase of an additional
$1 billion of the Company's common stock in the open market or in private
transactions under a separate incremental plan. Under both these plans, during
the nine months ended July 31, 1999, the Company purchased and retired
approximately 12.7 million shares for an aggregate price of $891 million. During
the nine months ended July 31, 1998, the Company purchased and retired
approximately 18.2 million shares for an aggregate price of $1.1 billion. As of
July 31, 1999, the Company has remaining authorization from the Board of
Directors for future repurchases under both plans of approximately $3.2 billion.
FACTORS THAT MAY AFFECT FUTURE RESULTS
- --------------------------------------
Competition. The Company encounters aggressive competition in all areas of
its business activity. The Company's competitors are numerous, ranging from
some of the world's largest corporations to many relatively small and highly
specialized firms. The Company competes primarily on the basis of technology,
performance, price, quality, reliability, distribution and customer service
and support. 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 on the basis of the factors
described above. In particular, the Company anticipates that it will have to
continue to adjust prices of many of its products to stay competitive and it
will have to effectively manage financial returns with reduced gross margins.
New Product Introductions. The Company's future operating results may be
adversely affected if the Company is unable to continue to develop,
manufacture and market innovative products and services rapidly that meet
customer requirements for performance and reliability. The process of
developing new high technology products and solutions is inherently complex
and uncertain. It requires accurate anticipation of customer's changing
needs and emerging technological trends. The Company consequently 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
manufacture 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
customers' demand and timing for the particular product or service. Given the
<PAGE>
wide variety of systems, products and services the Company offers, the process
of planning production and managing inventory levels becomes increasingly
difficult.
Inventory Management. Inventory management has become increasingly complex
as the Company continues to sell a greater mix of products, especially
printers and personal computers, through third-party distribution channels.
Channel partners constantly adjust their ordering patterns in response to the
supply of the Company and its competitors 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. Channel partners 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.
Short Product Life Cycles. 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 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 introductions by suppliers and competitors of new
products and services may negatively affect future operating results of the
Company, especially when competitive product 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 may replace or
compete with certain of the Company's current products.
Intellectual Property. The Company generally relies upon patent, copyright,
trademark and trade secret laws in the United States and in selected other
countries to establish and maintain its proprietary rights in its technology
and products. However, there can be no assurance that any of the Company's
proprietary rights will not be challenged, invalidated or circumvented, or
that any such rights will provide significant competitive advantages.
Moreover, because of the rapid pace of technological change in the
information technology industry, many of the Company's products rely on key
technologies developed by others. There can be no assurance that the Company
will be able to continue to obtain licenses to such technologies. In
addition, from time to time, the Company receives notices from third parties
regarding patent or copyright claims. Any such claims, with or without merit,
could be time-consuming to defend, result in costly litigation, divert
management's attention and resources and cause the Company to incur
significant expenses. In the event of a successful claim of infringement
against the Company and failure or inability of the Company to license the
<PAGE>
infringed technology or to substitute similar non-infringing technology, the
Company's business could be adversely affected.
Reliance on Suppliers. Portions of the Company's manufacturing operations are
dependent on the ability of suppliers to deliver quality 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 can be
developed. In order to secure components for production and introduction of new
products, the Company at times makes advance payments to certain suppliers, and
often enters into noncancellable 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.
Reliance on Third-Party Distribution Channels. The Company continues to expand
into third-party distribution channels to accommodate changing customer
preferences. As a result, the financial health of wholesale and retail
distributors of the Company's products, and the Company's continuing
relationships with such distributors, are becoming 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 certain of
these third parties substantially weakens or if the Company's relationship with
them deteriorates.
International. 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 a specific country's or
region's political conditions or changes or continued weakness in economic
conditions, trade protection measures, import or export licensing requirements,
the overlap of different tax structures, unexpected changes in regulatory
requirements and natural disasters.
Derivative Financial Instruments. The Company is also exposed to foreign
currency exchange rate risk inherent in its sales commitments, anticipated sales
and assets and liabilities denominated in currencies other than the U.S. dollar,
as well as interest rate risk inherent in the Company's debt, investment and
finance receivable portfolio. As more fully described in the notes to the
Company's 1998 annual report to stockholders, the Company's risk management
strategy utilizes derivative financial instruments, including
<PAGE>
forwards, swaps and purchased options to hedge certain foreign currency and
interest rate exposures, with the intent of offsetting gains and losses that
occur on the underlying exposures with gains and losses on the derivative
contracts hedging them. The Company does not enter into derivatives for
trading purposes.
The Company has performed a sensitivity analysis assuming a hypothetical 10%
adverse movement in foreign exchange rates and interest rates applied to the
hedging contracts and underlying exposures described above. As of July 31,
1999 and 1998, the analysis indicated that such market movements would not
have a material effect on the Company's consolidated financial position,
results of operations or cash flows. Actual gains and losses in the future
may differ materially from that analysis, however, based on changes in the
timing and amount of interest rate and foreign currency exchange rate
movements and the Company's actual exposures and hedges.
Acquisitions, Strategic Alliances, Joint Ventures and Divestitures. In
addition to the spin-off of Agilent Technologies, which is described above, the
Company, as a matter of course, frequently engages in discussions with a variety
of parties relating to possible acquisitions, strategic alliances, joint
ventures and divestitures. Although consummation of any transaction is unlikely
to have a material effect on the Company's financial statements taken as a
whole, the implementation or integration of a 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 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.
Earthquake. 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 uninsured for losses and
interruptions caused by earthquakes.
Environmental. Certain of the Company's operations involve the use of
substances regulated under various federal, state, and international laws
<PAGE>
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.
Profit Margin. The profit margins realized by the Company vary somewhat among
its products, its customer segments and its geographic markets. Consequently,
the overall profitability of the Company's operations in any given period is
partially dependent on the product, customer and geographic mix reflected in
that period's net sales.
Year 2000. The information provided below constitutes a "Year 2000
Readiness Disclosure" for purposes of the Year 2000 Information and
Readiness Disclosure Act.
The Year 2000 ("Y2K") problem arises from the use of a two-digit field to
identify years in computer programs, e.g., 85=1985, and the assumption of a
single century, the 1900s. Any program so created may read, or attempt to read,
"00" as the year 1900. Another related issue which could also lead to incorrect
calculations or failure, is the fact that the year 2000 is a leap year.
Accordingly, some computer hardware and software, including programs embedded
within machinery and parts, will need to be modified prior to the year 2000 to
remain functional. The Company's Y2K initiatives are focusing primarily on four
areas of potential impact: internal information technology (IT) systems;
internal non-IT systems and processes, including services and embedded chips
(controllers); the Company's products and services;and the readiness of
significant third parties with whom the Company has material business
relationships. The Company established a Y2K Program Office in 1997 to
coordinate these programs across the enterprise and to provide a single point of
contact for information about the Company's Y2K programs. The Company's Y2K
efforts in these areas are led by the Year 2000 General Manager who reports
directly to the Company's senior management.
The costs associated with the Company's IT internal readiness actions are a
combination of incremental external spending and use of existing internal
resources. The Company estimates that over the life of its IT internal readiness
effort for those businesses that comprise its continuing operations, it will
have spent a total of approximately $160 million over a multi-year period. The
Company expects to implement successfully the systems and programming changes
necessary to address Y2K internal IT and non-IT readiness issues and material
third party relationships, and based on current estimates, does not believe that
<PAGE>
the costs associated with such actions will have a material effect on the
Company's results of operations or financial condition. However, the costs of
such actions may vary from quarter to quarter. There can be no assurance,
however, that there will not be a delay in, or increased costs associated with
the implementation of such changes. In addition, failure to achieve Y2K
readiness for the Company's internal systems could delay its ability to
manufacture and ship products and deliver services, disrupt its customer service
and technical support facilities, and interrupt customer access to its online
products and services. The Company's inability to perform these functions could
have an adverse effect on future results of operations or financial condition.
Internal IT Systems. The Company has established a dedicated Y2K IT Internal
Readiness Program Organization to oversee the Company's worldwide Y2K internal
IT application and infrastructure readiness activities. The Internal Readiness
IT Program Organization provides monthly progress reports to the Company's
senior management. The Internal Readiness IT Program Organization is charged
with raising awareness throughout the Company, developing tools and
methodologies for addressing the Y2K issue, monitoring the development and
implementation of business and infrastructure plans to bring non-compliant
applications into compliance on a timely basis and identifying and assisting in
resolving high-risk issues.
The Company approached its Y2K IT internal readiness program in the following
four phases: (1) assessment, (2) planning, (3) preparation and (4)
implementation. The assessment phase involved taking an inventory of the
Company's internal IT applications to prioritize risk, identifying failure
dates, defining a solution strategy, estimating repair costs and communicating
across and within business units regarding the magnitude of the problem and the
need to address Y2K issues. The planning phase consisted of identifying the
tasks necessary to ensure readiness, scheduling remediation plans for
applications and infrastructure, and determining resource requirements and
allocations. The third phase, preparation, involved readying the development and
testing environments, and piloting the remediation process. Implementation, the
last phase, consists of executing the Company's plans to fix, test and implement
critical applications and associated infrastructure, and putting in place
contingency plans for processes that have a high impact on the Company's
businesses.
The Company set July 31, 1999 as the target date by which its critical IT
applications would be Y2K compliant. The assessment, planning and preparation
phases have been completed. As of August 31, 1999, the implementation phase is
nearly 100 percent complete. For the handful of remaining applications, the work
is pending a third-party patch or upgrade to complete Y2K readiness. For each of
these cases, target completion dates in the near future are documented and there
are back-up plans to ensure Y2K readiness.
Internal Non-IT Systems and Processes. Non-IT systems include, but are not
limited to, those systems that are not commonly thought of as IT systems,
<PAGE>
such as telephone/PBX systems; fax machines; facilities systems regulating
alarms, building access and sprinklers; manufacturing, assembly and
distribution equipment; and other miscellaneous systems and processes. Y2K
readiness for these internal non-IT systems is the responsibility of the
Company's worldwide operating units and their respective functions and
operations, e.g., facilities, research and development, manufacturing,
distribution, logistics, sales and customer support.
The Company's Y2K Program Office has developed a comprehensive process to
assure all Company operations and global business units use a structured and
standardized methodology to organize, plan and implement their Y2K
readiness.
The Company has also established a Year 2000 Council to coordinate its
overall internal readiness and its business continuity planning efforts. It
is composed of representatives from the major business units within the
Company and the critical corporate and infrastructure functions that support
them. The Council is chaired by the Company's Year 2000 General Manager and
has initiated a comprehensive program to ensure timely and consistent
business continuity planning by all of the Company's business units.
Substantially all Y2K testing, internal mitigation and remediation activities,
and business contingency plans have been completed by July 31, 1999. From July
31, 1999, until November 30, 1999, the Company's Y2K internal readiness
solutions, contingency plans, crisis management and recovery mechanisms are
being further stress-tested to ensure full preparation.
Product and Customer Readiness. The Company's newly introduced products are
Y2K compliant. However, certain hardware and software products currently
installed at customer sites will require upgrade or other remediation. Some
of these products are used in critical applications where the impact of
non-performance to these customers and other parties could be significant.
While the Company believes its customers are responsible for the Y2K
readiness of their IT and business environments, the Company is taking
significant steps to enable customers to achieve their readiness goals,
thereby preserving customer satisfaction and brand reputation. In 1997, the
Company established a dedicated Y2K Product Compliance Program Office to
coordinate the Company's worldwide Y2K product compliance activities. The
Product Compliance Program Office is charged with developing and overseeing
implementation of plans to identify all standard products delivered since
January 1, 1995; to evaluate those products for compliance; to identify an
appropriate path to compliance for non-compliant standard products; and to
communicate the status and necessary customer action for non-compliant
standard products.
The Company has an internet website dedicated to communicating Y2K issues to
a broad customer base. This website includes a product compliance search
page that allows customers to look up the status of the Company's products
<PAGE>
they have installed. In certain areas, the Company is taking additional steps to
identify affected customers, raise customer awareness related to non-compliance
of certain Company products and help customers to assess their risks. The
Company has plans to accommodate increased levels of customer assistance in the
last months of calendar 1999 and the first months of 2000 and currently
anticipates that a significant portion of the costs related to such actions
would occur in the fourth quarter of fiscal 1999 and the first half of fiscal
2000.
All of these efforts are coordinated by the HP Year 2000 Products and Customers
Board of Directors ("Board"), which is composed of representatives for all of
the Company's product and service business units, and which works in conjunction
with the Product Compliance Program Office to develop and implement the
Company's Year 2000 policies for products and services. The Company's Year 2000
General Manager chairs the Board.
The costs of the readiness program for products are primarily costs of existing
internal resources largely absorbed within existing engineering spending levels.
These costs were incurred primarily in fiscal 1998 and earlier years and were
not broken out from other product engineering costs. Historical Y2K customer
satisfaction costs were not material. Future product readiness costs, including
those for customer satisfaction, are not anticipated to be material. The Company
is aware of the potential for legal claims against it and other companies for
damages arising from products that are not Y2K compliant; management believes
that reasonable communication and customer satisfaction steps are under way so
that any such claims against the Company would be without merit or would not
otherwise result in material liability for the Company.
It is unknown how significantly Y2K issues may affect customer spending
patterns. As customers focus their attention in the near term on preparing their
own businesses for the year 2000, they may delay purchases of new applications,
services and systems from the Company. As a result, this may affect the
Company's future revenues and revenue patterns. However, there is no information
to date that any such impact would materially affect the Company's revenue
growth.
Material Third-Party Relationships. The Company has developed a Y2K process for
dealing with its key suppliers, contract manufacturers, distributors, vendors
and partners. The process generally involves the following steps: (i) initial
supplier survey, (ii) risk assessment and contingency planning, (iii) follow-up
supplier reviews and escalation, if necessary, and where relevant, (iv) testing.
To date, the Company has received formal responses from all of its critical
suppliers. Most of them have responded that they
<PAGE>
expect to address all their significant Y2K issues on a timely basis. The
Company regularly reviews and monitors the suppliers' Y2K readiness plans and
performance. Based on the Company's risk assessment, selective on-site reviews
have been performed. Risk analyses were completed with the Company's base of
suppliers and contingency plans are now being developed and tested. All critical
surveys and testing efforts were completed by June 1, 1999. In some cases, to
meet Y2K readiness, the Company has replaced suppliers or eliminated suppliers
from consideration for new business. Where efforts to work with critical
suppliers have not been successful, contingency planning generally emphasizes
the identification of substitute and second-source suppliers, or in certain
situations includes a planned increase in the level of inventory held (e.g., in
the case of sole sources). The Company has also contracted with multiple
transportation companies to provide product-delivery alternatives. The Company
has also completed substantially all Electronic Data Interchange (EDI) migration
and testing with its supply base.
The Company has been identifying and analyzing the most reasonably likely worst-
case scenarios for third-party relationships affected by Y2K. These scenarios
include possible infrastructure collapse, the failure of power and water
supplies, major transportation disruptions, unforeseen product shortages due to
hoarding of products and sub-assemblies and failures of communications and
financial systems. Any one of these scenarios could have a major and material
effect on the Company's ability to build its products and deliver services to
its customers. While the Company has contingency plans in place to address most
issues under its control, an infrastructure problem outside of its control or
some combination of several of these problems could result in a delay in product
shipments depending on the nature and severity of the problems. The Company
would expect that most utilities and service providers would be able to restore
service within days although more pervasive system problems involving multiple
providers could last two to four weeks or more depending on the complexity of
the systems and the effectiveness of their contingency plans.
Although the Company is dedicating substantial resources towards attaining Y2K
readiness, there is no assurance it will be successful in its efforts to
identify and address all Y2K issues. Even if the Company acts in a timely manner
to complete all of its assessments; identifies, develops and implements
remediation plans believed to be adequate; and develops contingency plans
believed to be adequate, some problems may not be identified or corrected in
time to prevent material adverse consequences to the Company.
The discussion above regarding estimated completion dates, costs, risks and
other forward-looking statements regarding Y2K is based on the Company's best
estimates given information that is currently available and is subject
<PAGE>
to change. As the Company continues to progress with its Y2K initiatives, it
may discover that actual results will differ materially from these
estimates.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
A discussion of the Company's exposure to, and management of, market risk
appears in Item 2 of this Form 10-Q under the heading "Factors That May Affect
Future Results."
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
A list of exhibits is set forth in the Exhibit Index found on page 23
of this report.
(b) Reports on Form 8-K:
None
<PAGE>
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SIGNATURE
---------
Pursuant to the requirements 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
(Registrant)
Dated: September 20, 1999 By: /s/Robert P. Wayman
--------------------------
Robert P. Wayman
Executive Vice President,
Finance and Administration
(Chief Financial Officer)
<PAGE>
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
EXHIBIT INDEX
-------------
Exhibits:
1. Not applicable.
2. None.
3(b). Registrant's Amended Bylaws
4. None
5-9. Not applicable.
10(ee). Transition Agreement, dated May 20, 1999, between Registrant
and Lewis E. Platt
10(ff). Employment Agreement, dated May 20, 1999, between Registrant
and Robert P. Wayman
10(gg). Employment Agreement, dated July 17, 1999, between Registrant
and Carleton S. Fiorina
10(hh). Executive Transition Program
10(ii). Incentive Stock Plan Stock Option Agreement (Non-Qualified),
dated July 17, 1999, between Registrant and Carleton S. Fiorina
10(jj). Restricted Stock Agreement, dated July 17, 1999, between
Registrant and Carleton S. Fiorina
10(kk). Restricted Stock Unit Agreement, dated July 17, 1999, between
Registrant and Carleton S. Fiorina
11. See Item 3 in Notes to Consolidated Condensed Financial
Statements on Page 7.
12-14. Not applicable.
15. None.
16-17. Not applicable.
18-19. None.
20-21. Not applicable.
22-24. None.
25-26. Not applicable.
27. Financial Data Schedule.
28. Not applicable.
99. None.
26
<PAGE>
EXHIBIT 3(b)
BYLAWS
OF
HEWLETT-PACKARD COMPANY
(A DELAWARE CORPORATION)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE. The registered office of the corporation shall be
fixed in the Certificate of Incorporation of the corporation.
1.2 OTHER OFFICES. The board of directors may at any time establish branch
or subordinate offices at any place or places where the corporation is qualified
to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 Place of Meetings. Meetings of stockholders shall be held at any place
within or outside the State of Delaware designated by the board of directors.
In the absence of any such designation, stockholders' meetings shall be held at
the registered office of the corporation.
2.2 Annual Meeting.
(a) The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. At the meeting,
directors shall be elected, and any other proper business may be
transacted.
(b) At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To
be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the board of directors, (B) otherwise
properly brought before the meeting by or at the direction of the
board of directors, or (C) otherwise properly brought before the
meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the secretary of the corporation.
To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the corporation not
less than one hundred twenty (120) calendar days in advance of the
date specified in the corporation's proxy statement released to
stockholders in connection with the previous year's annual meeting of
stockholders; provided, however, that in the event that no annual
meeting was held in the previous year or the date of the annual
meeting has been changed by more than thirty (30) days from the date
1
<PAGE>
contemplated at the time of the previous year's proxy statement,
notice by the stockholder to be timely must be so received not later
than the close of business on the later of one hundred twenty (120)
calendar days in advance of such annual meeting or ten (10) calendar
days following the date on which public announcement of the date of
the meeting is first made. A stockholder's notice to the secretary
shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business
desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and
address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the
corporation which are beneficially owned by the stockholder, (iv) any
material interest of the stockholder in such business, and (v) any
other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "1934 Act"), in his capacity as a proponent to a
stockholder proposal. Notwithstanding the foregoing, in order to
include information with respect to a stockholder proposal in the
proxy statement and form of proxy for a stockholder's meeting,
stockholders must provide notice as required by the regulations
promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual
meeting except in accordance with the procedures set forth in this
paragraph (b). The chairman of the annual meeting shall, if the facts
warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the
provisions of this paragraph (b), and, if he should so determine, he
shall so declare at the meeting that any such business not properly
brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the procedures set
forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the board of
directors of the corporation may be made at a meeting of stockholders
by or at the direction of the board of directors or by any stockholder
of the corporation entitled to vote in the election of directors at
the meeting who complies with the notice procedures set forth in this
paragraph (c). Such nominations, other than those made by or at the
direction of the board of directors, shall be made pursuant to timely
notice in writing to the secretary of the corporation in accordance
with the provisions of paragraph (b) of this Section 2.2. Such
stockholder's notice shall set forth (i) as to each person, if any,
whom the stockholder proposes to nominate for election or re-election
as a director: (A) the name, age, business address and residence
address of such person, (B) the principal occupation or employment of
such person, (C) the class and number of shares of the corporation
which are beneficially owned by such person, (D) a description of all
arrangements or
2
<PAGE>
understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which
the nominations are to be made by the stockholder, and (E) any other
information relating to such person that is required to be disclosed
in solicitations of proxies for elections of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
1934 Act (including without limitation such person's written consent
to being named in the proxy statement, if any, as a nominee and to
serving as a director if elected); and (ii) as to such stockholder
giving notice, the information required to be provided pursuant to
paragraph (b) of this Section 2.2. At the request of the board of
directors, any person nominated by a stockholder for election as a
director shall furnish to the secretary of the corporation that
information required to be set forth in the stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible
for election as a director of the corporation unless nominated in
accordance with the procedures set forth in this paragraph (c). The
chairman of the meeting shall, if the facts warrants, determine and
declare at the meeting that a nomination was not made in accordance
with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare at the meeting, and the defective
nomination shall be disregarded.
2.3 Special Meeting. A special meeting of the stockholders may be called
at any time by the board of directors, the chairman of the board, the vice
chairman of the board, the chairman of the executive committee, or the
president, but such special meetings may not be called by any other person or
persons. Only such business shall be considered at a special meeting of
stockholders as shall have been stated in the notice for such meeting.
2.4 Organization. Meetings of stockholders shall be presided over by the
chairman of the board, if any, or in his or her absence by the vice chairman of
the board, if any, or in his or her absence by the chairman of the executive
committee, if any, or in his or her absence by the president, if any, or in his
or her absence by an executive vice president, if any, or in his her absence by
a senior vice president, if any, or in his or her absence by a vice president,
or in the absence of the foregoing persons by a chairman designated by the board
of directors, or in the absence of such designation by a chairman chosen at the
meeting by the vote of a majority in interest of the stockholders present in
person or represented by proxy and entitled to vote thereat. 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 corporation shall be entitled to make such
rules or regulations for the conduct of meetings of stockholders 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
3
<PAGE>
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 stockholders of
record of the corporation 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 and 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 stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
2.5 Notice of Stockholders' Meetings. All notices of meetings of
stockholders shall be sent or otherwise given in accordance with Section 2.6 of
these Bylaws not less than ten (10) nor more than sixty (60) days before the
date of the meeting. The notice shall specify the place, date, and hour of the
meeting and (i) in the case of a special meeting, the general nature of the
business to be transacted (no business other than that specified in the notice
may be transacted) or (ii) in the case of the annual meeting, those matters
which the board of directors, at the time of giving the notice, intends to
present for action by the stockholders (but 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 name of any nominee or nominees who, at the
time of the notice, the board intends to present for election.
2.6 Manner of Giving Notice; Affidavit of Notice. Notice of any meeting of
stockholders shall be given either personally or by mail, telecopy, telegram or
other electronic or wireless means. Notices not personally delivered shall be
sent charges prepaid and shall be addressed to the stockholder at the address of
that stockholder appearing on the books of the corporation or given by the
stockholder to the corporation for the purpose of notice. Notice shall be deemed
to have been given at the time when delivered personally or deposited in the
mail or sent by telecopy, telegram or other electronic or wireless means.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice or report.
2.7 Quorum. The holders of a majority in voting power of the stock issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the stockholders by the vote of the holders of a majority of
the stock, present in person or represented by proxy shall have power to adjourn
the meeting in accordance with Section 2.8 of these Bylaws.
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When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the Certificate of Incorporation or these Bylaws, a vote of a greater number
or voting by classes is required, in which case such express provision shall
govern and control the decision of the question.
If a quorum be initially present, the stockholders may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8 Adjourned Meeting; Notice. Any stockholders' meeting, annual or
special, whether or not a quorum is present, may be adjourned from time to time
by the vote of the majority of the voting power of the shares represented at
that meeting, either in person or by proxy. In the absence of a quorum, no other
business may be transacted at that meeting except as provided in Section 2.7 of
these Bylaws.
When any meeting of stockholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at the meeting at which the adjournment is taken.
However, if a new record date for the adjourned meeting is fixed or if the
adjournment is for more than thirty (30) days from the date set for the original
meeting, then notice of the adjourned meeting shall be given. Notice of any such
adjourned meeting shall be given to each stockholder of record entitled to vote
at the adjourned meeting in accordance with the provisions of Sections 2.5 and
2.6 of these Bylaws. At any adjourned meeting the corporation may transact any
business which might have been transacted at the original meeting.
2.9 Voting. The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the provisions of Section
2.12 of these Bylaws, subject to the provisions of Sections 217 and 218 of the
General Corporation Law of Delaware (relating to voting rights of fiduciaries,
pledgers and joint owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the Certificate of Incorporation, by
these Bylaws or required by law, each stockholder shall be entitled to one vote
for each share of capital stock held by such stockholder.
Any stockholder 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, except
when the matter is the election of directors, may vote them against the
proposal; but if the stockholder fails to specify the number of shares which the
stockholder is voting affirmatively, it will be conclusively presumed that the
stockholder's approving vote is with respect to all shares which the stockholder
is entitled to vote.
2.10 Validation of Meetings; Waiver of Notice; Consent. The transactions
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of any meeting of stockholders, either annual or special, however called and
noticed, and wherever held, shall be as valid as though they had been taken at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that 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. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.11 Action by Written Consent. Subject to the rights of the holders of the
shares of any series of Preferred Stock or any other class of stock or series
thereof having a preference over the Common Stock as dividend or upon
liquidation, any action required or permitted to be taken by the stockholders of
the corporation must be effected at a duly called annual or special meeting of
stockholders of the corporation and may not be effected by any consent in
writing by such stockholders.
2.12 Record Date for Stockholder Notice; Voting; Giving Consents. For
purposes of determining the stockholders entitled to notice of any meeting or to
vote thereat, the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days nor less than ten (10) days before the
date of any such meeting, and in such event only stockholders of record on the
date so fixed are entitled to notice and to vote, notwithstanding any transfer
of any shares on the books of the corporation after the record date, except as
otherwise provided in the Certificate of Incorporation, by these Bylaws, by
agreement or by applicable law.
If the board of directors does not so fix a record date, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders 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.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned meeting,
but the board of directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.
The record date for any other purpose shall be as provided in Section 8.1
of these Bylaws.
2.13 Proxies. Every person entitled to vote for directors, or on any other
matter, shall have the right to do so either in person or by one or more agents
authorized by a written proxy, which may be in the form of a telegram,
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cablegram, or other means of electronic transmission, signed by the person and
filed with the secretary of the corporation, but no such proxy shall be voted or
acted upon after three (3) years from its date, unless the proxy provides for a
longer period. A proxy shall be deemed signed if the stockholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the stockholder or the stockholder's attorney-in-
fact. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or by filing another duly
executed proxy bearing a later date with the secretary of the corporation.
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.
2.14 Inspectors of Election. Before any meeting of stockholders, the
board of directors shall appoint an inspector or inspectors of election to act
at the meeting or its adjournment. The number of inspectors shall be either one
(1) or three (3). If any person appointed as inspector fails to appear or fails
or refuses to act, then the chairman of the meeting may, and upon the request of
any stockholder or a stockholder's proxy shall, appoint a person to fill that
vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of
each, the number of shares represented at the meeting, the existence
of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising in
connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or vote
with fairness to all stockholders.
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
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evidence of the facts stated therein.
ARTICLE III
DIRECTORS
3.1 Powers. Subject to the provisions of the General Corporation Law of
Delaware and to any limitations in the Certificate of Incorporation or these
Bylaws relating to action required to be approved by the stockholders or by the
outstanding shares, 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.
3.2 Number and Term of Office. The authorized number of directors shall be
not less than eleven (11) nor more than twenty-one (21). Within such limits, the
exact number of directors shall be fourteen (14). An indefinite number of
directors may be fixed, or the definite number of directors may be changed, by a
duly adopted amendment to the Certificate of Incorporation or by an amendment to
this bylaw duly adopted by the stockholders or board of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires. If for any
cause, the directors shall not have been elected at an annual meeting, they may
be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws.
3.3 Election and Term of Office of Directors. Except as provided in
Section 3.4 of these Bylaws, directors shall be elected at each annual meeting
of stockholders to hold office until the next annual meeting. Each director,
including a director elected or appointed to fill a vacancy, shall hold office
until the expiration of the term for which elected and until a successor has
been elected and qualified.
Directors need not be stockholders unless so required by the Certificate of
Incorporation or by these Bylaws; wherein other qualifications for directors may
be prescribed.
3.4 Resignation and Vacancies. Any director may resign effective on giving
written notice to the chairman of the board, the president, the secretary or the
board of directors, unless the notice specifies a later time for that
resignation to become effective. If the resignation of a director is effective
at a future time, the board of directors may elect a successor to take office
when the resignation becomes effective.
Unless otherwise provided in the Certificate of Incorporation or by these
Bylaws, vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the voting power of shares represented and voting at a duly held
meeting at which a quorum is present (which shares voting affirmatively
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also constitute a majority of the required quorum). Each director so elected
shall hold office until the next annual meeting of the stockholders and until a
successor has been elected and qualified.
Unless otherwise provided in the Certificate of Incorporation or these
Bylaws:
(i) Vacancies and newly created directorships resulting from any increase
in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled
by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions
of the Certificate of Incorporation, vacancies and newly created
directorships of such class or classes or series may be filled by a
majority of the directors elected by such class or classes or series
thereof then in office, or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the Certificate of Incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent (10%) of the total number of the then outstanding shares
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 Removal. Unless otherwise restricted by statute, by the Certificate of
Incorporation or by these Bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, if and so long as stockholders of the corporation are entitled to
cumulative voting, if less than the entire board is to be removed, no director
may be removed without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
board of directors.
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3.6 Place of Meetings; Meetings by Telephone. Regular meetings of the
board of directors may be held at any place within or outside the State of
Delaware that has been designated from time to time by resolution of the board
of directors. In the absence of such a designation, regular meetings shall be
held at the principal executive office of the corporation. Special meetings of
the board of directors may be held at any place within or outside the State of
Delaware that has been designated in the notice of the meeting or, if not stated
in the notice or if there is no notice, at the principal executive office of the
corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.7 Regular Meetings. Regular meetings of the board of directors may be
held without notice if the times of such meetings are fixed by the board of
directors.
3.8 Special Meetings; Notice. Special meetings of the board of directors
for any purpose or purposes 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.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by mail, telecopy, telegram
or other electronic or wireless means, charges prepaid, addressed to each
director at that director's address as it is shown on the records of the
corporation or if the address is not readily ascertainable, notice shall be
addressed to the director at the city or place in which the meetings of
directors are regularly held. If the notice is mailed, it shall be deposited in
the United States mail at least four (4) days before the time of the holding of
the meeting. If the notice is delivered personally or by telephone, telecopy,
telegram or other electronic or wireless means, it shall be delivered personally
or by telephone or other electronic or wireless means or to the telegraph
company at least twenty-four (24) hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving the notice has reason to believe will promptly communicate it to
the director. If the meeting is to be held at the principal executive office of
the corporation, the notice need not specify the place of the meeting. Moreover,
a notice of special meeting need not state the purpose of such meeting, and,
unless indicated in the notice thereof, any and all business may be transacted
at a special meeting.
3.9 Quorum. A majority of the authorized number of directors shall
constitute a quorum for the transaction of business, except to fill vacancies in
the board of directors as provided in Section 3.4 and to adjourn as provided in
Section 3.11 of these Bylaws. Every act or decision done or made by a majority
of the directors present at a duly held meeting at which a quorum is
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present shall be regarded as the act of the board of directors, subject to the
provisions of the Certificate of Incorporation and applicable law.
A meeting at 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 that meeting.
3.10 Waiver of Notice. Notice of a meeting need not be given to any
director (i) who signs a waiver of notice or a consent to holding the meeting or
an approval of the minutes thereof, whether before or after the meeting, or (ii)
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such directors. 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 or after the meeting, each of the directors not
present signs a written waiver of notice. All such waivers shall be filed with
the corporate records or made part of the minutes of the meeting. A waiver of
notice need not specify the purpose of any regular or special meeting of the
board of directors.
3.11 Adjournment. A majority of the directors present, whether or not
constituting a quorum, may adjourn any meeting to another time and place.
3.12 Notice of Adjournment. Notice of the time and place of holding an
adjourned meeting need not be given if announced unless the meeting is adjourned
for more than twenty-four (24) hours. If the meeting is adjourned for more than
twenty-four (24) hours, then notice of the time and place of the adjourned
meeting shall be given before the adjourned meeting takes place, in the manner
specified in Section 3.8 of these Bylaws, to the directors who were not present
at the time of the adjournment.
3.13 Board Action by Written Consent Without a Meeting. Any action required
or permitted to be taken by the board of directors may be taken without a
meeting, provided that all members of the board of directors individually or
collectively consent in writing to that action. Such action by written consent
shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent and any counterparts thereof shall be filed with
the minutes of the proceedings of the board.
3.14 Organization. Meetings of the board of directors shall be presided
over by the chairman of the board, if any, or in his or her absence by the vice
chairman of the board, if any, or in his or her absence by the chairman of the
executive committee, if any, or in his or her absence by the president, if any,
or in his or her absence by the 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. The secretary shall act as secretary of
the meeting, but in his or her absence the chairman of the meeting may appoint
any person to act as secretary of the meeting.
3.15 Fees and Compensation of Directors. Directors and members of
committees may receive such compensation, if any, for their services and such
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reimbursement of expenses as may be fixed or determined by resolution of the
board of directors. This Section 3.15 shall not be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee or otherwise and receiving compensation for those services.
ARTICLE IV
COMMITTEES
4.1 Committees of Directors. The board of directors may designate one (1)
or more committees, each consisting of two or more directors, to serve at the
pleasure of the board of directors. The board of directors 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. Any committee, to the extent
provided in the resolution of the board, shall have all the authority of the
board, but no such committee shall have the power or authority to (i) approve or
adopt or recommend to the stockholders any action or matter that requires the
approval of the stockholders or (ii) adopt, amend or repeal any Bylaw of the
corporation.
4.2 Meetings and Action of Committees. Meetings and actions of committees
shall be governed by, and held and taken in accordance with, the provisions of
Article III of these Bylaws, Section 3.6 (place of meetings), Section 3.7
(regular meetings), Section 3.8 (special meetings and notice), Section 3.9
(quorum), Section 3.10 (waiver of notice), Section 3.11 (adjournment), Section
3.12 (notice of adjournment), and Section 3.13 (action without meeting), with
such changes in the context of those Bylaws as are necessary to substitute the
committee and its members for the board of directors and its members; provided,
however, that the time of regular meetings of committees may be determined
either by resolution of the board of directors or by resolution of the
committee, that special meetings of committees may also be called by resolution
of the board of directors, and that notice of special meetings of committees
shall also be given to all alternate members, who shall have the right to attend
all meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
Bylaws.
4.3 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 4.1 hereof) in such manner as the executive committee may
deem in the best interests of the corporation.
ARTICLE V
OFFICERS
5.1 Officers. The officers of this corporation shall consist of a
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president, one or more vice presidents, a secretary and a chief financial
officer who shall be chosen by the Board of Directors and such other officers,
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 Bylaws or the board of directors.
5.2 Election of Officers. In addition to officers elected by the board of
directors in accordance with Sections 5.1 and 5.3, 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 5.2 may be removed in accordance with Section 5.4.
5.3 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.
5.4 Removal; Resignation of Officers 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 stockholders 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 a 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.
5.5 Chairman of the Board. The chairman of the board, if such an officer
be elected, shall provide advisory services to the President when and as
requested by the President; shall, if present, preside at meetings of the board
of directors and stockholders; may call meeting of the stockholders and also of
the board of directors to be held, subject to the limitations prescribed by law
or by these Bylaws, at such times and at such places as the chairman may deem
proper; and shall exercise and perform such other duties as may from time to
time be agreed to by the chairman and the President. The chairman of the
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board shall report to the board of directors.
5.6 Vice Chairman of the Board. 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.
5.7 Chairman of Executive Committee. The chairman of the executive
committee, if there be one, shall have the power to call meetings of the
stockholders and also of the board of directors to be held subject to the
limitations prescribed by law or by these Bylaws, 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.
5.8 President. The powers and duties of the president are:
(a) To have and provide general supervision, direction and control of the
corporation's business and its officers.
(b) To call meetings of the board of directors to be held, subject to the
limitations prescribed by law or by these Bylaws, at such times and at
such places as the president shall deem proper.
(c) 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 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.
(d) To have such other powers and be subjected to such other duties as the
board of directors may from time to time prescribe.
5.9 Vice Presidents. In case of the absence, disability or death of the
president, the elected vice president, or one of the elected vice presidents,
shall exercise all the powers and perform all the duties of the president. If
there is more than one elected vice president, the order in which the elected
vice presidents shall succeed to the powers and duties of the president shall be
as fixed by the board of directors. The elected vice president or elected vice
presidents shall have such other powers and perform such other duties as may be
granted or prescribed by the board of directors.
Vice presidents appointed pursuant to Section 5.2 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.
5.10 Secretary. The powers and duties of the secretary are:
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(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 stockholders 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 stockholders'
meetings and the proceedings thereof.
(b) To keep the seal of the corporation and affix the same to all
instruments which may require it.
(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
stockholders and their addresses, the number of 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 8.5 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.
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(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.
5.11 Chief Financial Officer. 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 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 VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS
6.1 Indemnification of Directors and Officers. The corporation shall, to
the maximum extent and in the manner permitted by the General Corporation Law of
Delaware, indemnify each of its directors and officers against expenses
(including attorneys' fees), judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation;
provided, however, that the corporation may modify the extent of such
indemnification by individual contracts with its directors and executive
officers and, provided, further, that the corporation shall not be required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized in advance by the
board of directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the General Corporation Law of Delaware or (iv) such
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indemnification is required to be made pursuant to an individual contract. For
purposes of this Section 6.1, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the corporation,
(ii) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.2 Indemnification of Others. The corporation shall have the power, to
the maximum extent and in the manner permitted by the General Corporation Law of
Delaware, to indemnify each of its employees and agents (other than directors
and officers) against expenses (including attorneys' fees), judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.2, an "employee" or
"agent" of the corporation (other than a director or officer) includes any
person (i) who is or was an employee or agent of the corporation, (ii) who is or
was serving at the request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (iii) who
was an employee or agent of a corporation which was a predecessor corporation of
the corporation or of another enterprise at the request of such predecessor
corporation.
6.3 Insurance. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify him or her against such liability under the provisions of the General
Corporation Law of Delaware.
6.4 Expenses. The corporation shall advance to any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, prior to the final disposition of the
proceeding, promptly following request therefor, all expenses incurred by any
director or officer in connection with such proceeding, upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Bylaw or otherwise; provided, however, that the corporation shall not be
required to advance expenses to any director or officer in connection with any
proceeding (or part thereof) initiated by such person unless the proceeding was
authorized in advance by the board of directors of the corporation.
Notwithstanding the foregoing, unless otherwise determined pursuant to
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Section 6.5, no advance shall be made by the corporation to an officer of the
corporation (except by reason of the fact that such officer is or was a director
of the corporation in which event this paragraph shall not apply) in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, if
a determination is reasonably and promptly made (i) by the board of directors by
a majority vote of a quorum consisting of directors who were not parties to the
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.
6.5 Non-exclusivity of Rights. The rights conferred on any person by this
Bylaw shall not be exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the General Corporation Law of Delaware.
6.6 Survival of Rights. The rights conferred on any person by this Bylaw
shall continue as to a person who has ceased to be a director, officer, employee
or other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
6.7 Amendments. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
ARTICLE VII
RECORDS AND REPORTS
7.1 Maintenance and Inspection of Records. The corporation shall, either
at its principal executive office or at such place or places as designated by
the board of directors, keep a record of its stockholders listing their names
and addresses and the number and class of shares held by each stockholder, a
copy of these Bylaws as amended to date, accounting books and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of
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attorney or such other writing that authorizes the attorney or other agent to so
act on behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 Inspection by Directory. Any director shall have the right to examine
the corporation's stock ledger, a list of its stockholders and its other books
and records for a purpose reasonably related to his or her position as a
director. The Court of Chancery is hereby vested with the exclusive jurisdiction
to determine whether a director is entitled to the inspection sought. The Court
may summarily order the corporation to permit the director to inspect any and
all books and records, the stock ledger, and the stock list and to make copies
or extracts therefrom. The Court may, in its discretion, prescribe any
limitations or conditions with reference to the inspection, or award such other
and further relief as the Court may deem just and proper.
7.3 Representation of Shares of Other Corporations. The president or any
other officer of this corporation authorized by the board of directors is
authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority herein granted may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.
ARTICLE VIII
GENERAL MATTERS
8.1 Record Date for Purposes Other than Notice and Voting. For purposes of
determining the stockholders entitled to receive payment of any dividend or
other distribution or allotment of any rights or the stockholders 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) days before any such action. In that case, only stockholders of record at
the close of business on the date so fixed are entitled to receive the dividend,
distribution or allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any shares on the books of the corporation
after the record date so fixed, except as otherwise provided in the Certificate
of Incorporation, by these Bylaws, by agreement or by law.
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
8.2 Checks; Drafts; Evidences of Indebtedness. From time to time, the
board of directors shall determine by resolution which person or persons may
sign or endorse all checks, drafts, other orders for payment of money, notes or
other evidences of indebtedness that are issued in the name of or payable to the
corporation, and only the persons so authorized shall sign or endorse those
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instruments.
8.3 Corporate Contracts and Instruments; How Executed. The board of
directors, except as otherwise provided in these Bylaws, may authorize any
officer or officers, or agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation; such authority
may be general or confined to specific instances. Unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
8.4 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.
8.5 Stock Certificates. 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 of the corporation shall be entitled to have
a certificate signed by, or in the name of the corporation by, the chairman or
vice chairman of the board of directors, or the president or a vice president,
and by the treasurer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has 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 he or she were such
officer, transfer agent or registrar at the date of issue.
8.6 Special Designation on Certificates. If the corporation is authorized
to issue more than one class of stock or more than one series of any class, then
the powers, the designations, the preferences, and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights shall be set forth in full or summarized on the face or back of the
certificate that the corporation shall issue to represent such class or series
of stock; provided, however, that, except as otherwise provided in Section 202
of the General Corporation Law of Delaware, in lieu of the foregoing
requirements there may be set forth on the face or back of the certificate that
the corporation shall issue to represent such class or series of stock a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
8.7 Lost Certificates. The corporation may issue a new share certificate
or 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
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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.
8.8 Construction; Definitions. Unless the context requires otherwise, the
general provisions, rules of construction, and definitions in the General
Corporation Law of Delaware shall govern the construction of these Bylaws.
Without limiting the generality of this provision, the singular number includes
the plural, the plural number includes the singular, and the term "person"
includes both a corporation and a natural person.
8.9 Provisions Additional to Provisions of Law. All restrictions,
limitations, requirements and other provisions of these Bylaws 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.
8.10 Provisions Contrary to Provisions of Law. Any article, section,
subsection, subdivision, sentence, clause or phrase of these Bylaws which upon
being construed in the manner provided in Section 8.9 hereof, shall be contrary
to or inconsistent with any applicable provisions 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 Bylaws, it
being hereby declared that these Bylaws 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.
8.11 Notices. Any reference in these Bylaws 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.
ARTICLE IX
AMENDMENTS
Subject to Section 6.7 hereof, the original or other bylaws of the
corporation may be adopted, amended or repealed by the stockholders entitled to
vote; provided, however, that the corporation may, in its certificate of
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incorporation, confer the power to adopt, amend or repeal bylaws upon the
directors. The fact that such power has been so conferred upon the directors
shall not divest the stockholders of the power, nor limit their power to adopt,
amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in the
book of bylaws with the original bylaws, in the appropriate place. If any bylaw
is repealed, the fact of repeal with the date of the meeting at which the repeal
was enacted or the filing of the operative written consent(s) shall be stated in
said book.
As amended effective July 23, 1999
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EXHIBIT 10(ee)
TRANSITION AGREEMENT
--------------------
This Transition Agreement (the "Agreement") is made and entered into
effective as of May 20, 1999 (the "Effective Date") between Lewis E. Platt (the
"Employee") and Hewlett-Packard Company, a Delaware corporation (the "Company").
R E C I T A L S
A. The Employee is currently employed by the Company as its President and
Chief Executive Officer. In addition, the Employee serves as Chairman of the
Company's Board of Directors.
B. The Company and the Employee desire to enter into this Agreement to
provide certain compensation to the Employee under the circumstances described
herein and to encourage the Employee to continue his service to the Company.
C. Capitalized terms used in the Agreement, to the extent not otherwise
defined, are defined in Section 5 below.
A G R E E M E N T
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of the Employee by the Company, the
parties agree as follows:
1. Transition Payment. Except as otherwise provided below, subject to the
------------------
Employee's continued status as Chairman, upon the occurrence of a "Payment Date"
(as defined below), the Employee shall be entitled to receive a transition
payment in an amount equal to one and one half times the Employee's Target Pay,
less applicable withholding (the "Transition Payment"). The Transition Payment
shall be paid to the Employee in a single lump sum cash payment within fifteen
(15) days after the Payment Date. The term "Payment Date" means the earlier of
(i) the second anniversary of the Effective Date, provided the Employee is
Chairman on such date, or (ii) such earlier date as the Board removes the
Employee as Chairman other than for Cause (as defined in Section 5 below),
provided, that for this purpose, the Employee's resignation as Chairman at the
request of the Board shall be treated as removal by the Board. If, on or before
the second anniversary of the Effective Date, the Employee ceases to serve as
Chairman for any other reason, then the Employee shall not be entitled to the
Transition Payment.
2. Termination of Agreement. The terms of this Agreement shall terminate
------------------------
upon the earlier of (i) the date that all obligations of the parties hereunder
have been satisfied, or (ii) the second anniversary of the Effective Date. A
termination of the terms of this Agreement pursuant to the preceding sentence
shall be effective for all purposes, except that such termination shall not
affect the payment or provision of compensation or benefits on account of a
termination of employment occurring prior to the termination of the term of this
Agreement. Notwithstanding the foregoing, the provisions of Sections 7, 8, 9,
10, 11 and 12 shall survive termination of this Agreement.
<PAGE>
3. Obligations. During the term of the Employee's employment with the
-----------
Company, the Employee shall devote substantially all of his business efforts
and time to the Company. The foregoing, however, shall not preclude the
Employee from engaging in such activities and services as do not materially
interfere or conflict with the Employee's duties and responsibilities to the
Company. The Employee shall comply with and be bound by the Company's operating
policies, procedures and practices from time to time in effect during
employment. If, during the term of this Agreement, the Employee remains
Chairman after his employment with the Company terminates, the Employee and the
Board agree to negotiate in good faith the Employee's compensation for his Board
service.
4. Retirement Benefits. The Employee is currently covered under the
-------------------
Company's Excess Benefit Retirement Plan and its Officers Early Retirement Plan
(such programs referred to collectively herein as the "Non-Qualified Retirement
Plans"), in addition to the Company's Retirement Plan and its Deferred Profit-
Sharing Plan. Except as provided below with respect to the Officers Early
Retirement Plan, during the term of this Agreement the Company shall continue to
maintain such Non-Qualified Retirement Plans (or such comparable alternative
non-qualified retirement arrangements as the Company may, in its discretion,
determine to be sufficient to satisfy its obligations to the Employee under this
Section 4), so as to provide benefits to the Employee that are no less favorable
than those available to the Employee under such Plans as of the Effective Date,
it being the Company's intention to deliver benefits to the Employee at a level
that is not less than that currently provided under the Non-Qualified Retirement
Plans. Notwithstanding the preceding sentence, on March 18, 1999 the
Compensation Committee of the Board (the "Compensation Committee") terminated
the Officers Early Retirement Plan effective November 1, 1999. In connection
with such termination, the Company will calculate a lump sum equivalent benefit
for the Employee, and will credit such amount to the Employee's account under
the Company's Executive Deferred Compensation Plan, subject to the terms and
conditions of that Plan. In the event the Employee's employment with the
Company terminates for any reason other than by the Company for Cause, any
employment or other similar requirement applicable to the amount so credited to
the Executive Deferred Compensation Plan (together with any earnings credited
thereto) shall be waived.
5. Definition of Terms. The following terms referred to in this Agreement
-------------------
shall have the following meanings:
(a) Board. "Board" means the Board of Directors of the Company. Where
-----
applicable, the term "Board" shall include a committee of the Board.
(b) Cause. "Cause" means (i) the Employee's willful failure to
-----
substantially perform his material duties (other than as a failure resulting
from the Employee's complete or partial incapacity due to physical or mental
illness or impairment) for a period of thirty (30) days after a written demand
for substantial performance is delivered to the Employee by the Board that
specifically identifies the manner in which the Board believes that the Employee
has not substantially performed his duties, (ii) a material and willful
violation of a federal or state law or regulation applicable to the business of
the Company, and (iii) a willful act by the Employee that constitutes gross
misconduct and that is injurious to the Company. No act, or failure to act, by
the
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Employee shall be considered "willful" unless committed without good faith and
without a reasonable belief that the act or omission was in the Company's best
interests.
(c) Chairman. "Chairman" means Chairman of the Company's Board.
--------
(d) Target Pay. "Target Pay" means the Employee's combined base
----------
salary and variable compensation amount as of the Effective Date as determined
in accordance with the Company's 1999 Variable Pay Plan as in effect as of the
Effective Date.
6. Golden Parachute Payments. In the event it shall be determined that
-------------------------
any payment by the Company to or for the benefit of the Employee, whether paid
or payable under this Agreement or otherwise but determined without regard to
any additional payments required under this Section 6 (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any comparable federal, state or local
excise tax (such excise tax, together with any interest and penalties, is
hereinafter collectively referred to as the "Excise Tax"), then the Employee
shall be entitled to receive an additional payment from the Company (a "Gross-Up
Payment") in such an amount that after the payment of all taxes (including,
without limitation, any interest and penalties on such taxes and the Excise Tax)
on the payment and on the Gross-Up Payment, the Employee shall retain an amount
equal to the Payment minus all applicable taxes on the Payment. The intent of
the parties is that the Company shall be solely responsible for, and shall pay,
any Excise Tax on the Payment and Gross-Up Payment and any income and employment
taxes (including without limitation, penalties and interest) imposed on any
Gross-Up Payment (as well as any loss of tax deduction caused by the Gross-Up
Payment). Unless the Company and the Employee otherwise agree in writing, all
determinations required to be made under this Section and the assumptions to be
utilized in arriving at such determinations shall be made in writing in good
faith by the accounting firm serving as the Company's independent public
accountants immediately prior to the event giving rise to such Payment (the
"Accountants"). For purposes of making the calculations required by this Section
6, the accountants may make reasonable assumptions and approximations concerning
the application of Sections 280G and 4999 of the Code. The Company and the
Employee shall furnish to the Accountants such information and documents as the
Accountants may reasonably request to make a determination under this Section.
The Company shall bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this Section.
7. Non-Compete; Non-Solicit.
------------------------
(a) The parties hereto recognize that the Employee's services are
special and unique and that the level of compensation and the provisions herein
for compensation under Section 1 are partly in consideration of and conditioned
upon the Employee's not competing with the Company, and that the Employee's
covenant not to compete or solicit as set forth in this Section 7 during and
after employment and Board service is essential to protect the business and good
will of the Company.
(b) The Employee agrees that during the term of employment with the
Company and service on the Board and for a period of eighteen (18) months
thereafter (the "Covenant Period"), the Employee shall not render services for
any organization or engage directly or indirectly in any business that, in the
opinion of the Company, competes with or is in conflict with the interests of
the Company.
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<PAGE>
(c) During the Covenant Period, the Employee shall not, directly or
indirectly, induce or attempt to influence any employee of the Company to leave
its employ.
(d) During the Covenant Period, the Employee shall not, without prior
written authorization from the Company, disclose to anyone outside the Company,
or use in other than the Company's business, any confidential information and
material relating to the business of the Company.
(e) The Employee agrees that the Company would suffer an irreparable
injury if the Employee were to breach the covenants contained in Sections 7(b),
(c) or (d) and that the Company would by reason of such breach or threatened
breach be entitled to injunctive relief in a court of appropriate jurisdiction
and the Employee hereby stipulates to the entering of such injunctive relief
prohibiting the Employee from engaging in such breach.
(f) If any of the restrictions contained in this Section 7 shall be
deemed to be unenforceable by reason of the extent, duration or geographical
scope or other provisions thereof, then the parties hereto contemplate that the
court shall reduce such extent, duration, geographical scope or other provision
hereof and enforce this Section 7 in its reduced form for all purposes in the
manner contemplated hereby.
8. Successors.
----------
(a) Company's Successors. Any successor to the Company (whether
--------------------
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and assets shall assume the obligations under this Agreement and agree expressly
to perform the obligations under this Agreement in the same manner and to the
same extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and assets that
executes and delivers the assumption agreement described in this Section 8(a) or
that becomes bound by the terms of this Agreement by operation of law.
(b) Employee's Successors. The terms of this Agreement and all rights
---------------------
of the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, devisees and legatees.
9. Notices. Notices and all other communications contemplated by this
-------
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to him at the home address that he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its General Counsel.
10. Information. The Employee agrees not to disclose to others, or to take
-----------
or use for the Employee's own purposes or for the purposes of others, during or
after the Employee's employment, any Information owned or controlled by the
Company or any of its subsidiary or affiliated companies. The Employee agrees
that these restrictions shall also apply to all (i) Information in the Company's
possession belonging to third parties, and (ii) Information conceived,
originated,
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discovered or developed, in whole or in part, by the Employee while an employee
of the Company. As used herein, "Information" includes trade secrets and other
confidential or proprietary business, technical, personnel or financial
information, whether or not the Employee's work product, in written, graphic,
oral or other tangible or intangible forms, including but not limited to
specifications, samples, records, data, computer programs, drawings, diagrams,
models, customer names, business or marketing plans, studies, analyses,
projections and reports, communications by or to attorneys (including attorney-
client privileged communications), memos and other materials prepared by
attorneys or under their direction (including attorney work product), and
software systems and processes. Any Information which is not readily available
to the public shall be considered to be a trade secret and confidential
property, even if it is not specifically marked as such, unless the Company
advises the Employee otherwise in writing. The Employee agrees that upon the
conclusion of his service to the Company, he will return to the Company all
property (including any copies thereof) belonging to the Company, including all
documents or other media in the Employee's possession or control which in any
way incorporate or reflect any Information.
11. Arbitration.
-----------
(a) Agreement. The Company and The Employee agree that any dispute or
---------
controversy arising out of, relating to, or in connection with this Agreement,
or the interpretation, validity, construction, performance, breach, or
termination thereof shall be settled by binding arbitration, unless otherwise
required by law, to be held in Santa Clara County, California, in accordance
with the National Rules for the Resolution of Employment Disputes then in effect
of the American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction.
(b) Governing Law. The arbitrators shall apply California law to the
-------------
merits of dispute or claim, without reference to rules of conflicts of law. The
Employee hereby expressly consents to the personal jurisdiction of the state and
federal courts located in California for any action or proceeding arising form
or relating to this Agreement or relating to any arbitration in which the
parties are participants.
(c) Costs and Fees of Arbitration. The Employee shall pay the initial
-----------------------------
arbitration filing (not to exceed $200.00), and the Company shall pay the
remaining costs and expenses of such arbitration (unless the Employee requests
that each party pay one-half of the costs and expenses of such arbitration or
unless otherwise required by law). The Company and the Employee shall each pay
separately its counsel fees and expenses unless otherwise required by law.
(d) Equitable Relief. The parties may apply to any court of competent
----------------
jurisdiction for a temporary restraining order, preliminary injunction, or other
interim or conservatory relief, as necessary, without breach of this arbitration
agreement and without abridgment of the powers of the arbitrator.
(e) Employee's Representation. THE EMPLOYEE HAS READ AND UNDERSTANDS
-------------------------
THIS SECTION, WHICH DISCUSSES ARBITRATION. THE EMPLOYEE UNDERSTANDS THAT BY
SIGNING THIS AGREEMENT, HE AGREES TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF,
RELATING TO, OR IN CONNECTION WITH THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE OR BREACH OF THIS AGREEMENT, TO BINDING ARBITRATION, UNLESS
OTHERWISE REQUIRED BY LAW,
-5-
<PAGE>
AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF HIS RIGHT TO A JURY
TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO THIS AGREEMENT.
12. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. The Employee shall not be required to
-------------------
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor shall any such payment be
reduced by any earnings that the Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified, waived
------
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Whole Agreement. No agreements, representations or understandings
---------------
(whether oral or written and whether express or implied) that are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof.
(d) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California.
(e) Severability. The invalidity or unenforceability of any provision
------------
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(f) Employment At Will; Limitation of Remedies. The Company and the
------------------------------------------
Employee acknowledge that the Employee's employment is at will, as defined in
the applicable law. If the Employee's employment terminates for any reason, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement.
(g) No Assignment of Benefits. The rights of any person to payments
-------------------------
or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this Section 12(g) shall be
void.
(h) Taxes. All payments made pursuant to this Agreement will be
-----
subject to all applicable reporting obligations and any tax or other
contributions required to be withheld under Federal, state or local law, as
interpreted by the Company.
(i) Assignment by Company. The Company may assign its rights under
---------------------
this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company or to the Company. In the
case of any such assignment, the term "Company" when used in a section of this
Agreement shall mean the corporation that actually employs the Employee.
-6-
<PAGE>
(j) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
COMPANY: By: /s/ S.T. Jack Brigham III
-------------------------------------------
June 15, 1999
Title: Senior Vice President Corporate Affairs,
-------------------------------------------
General Counsel
EMPLOYEE: /s/ Lewis E. Platt
-------------------------------------------
Lewis E. Platt
-7-
<PAGE>
EXHIBIT 10(ff)
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
effective as of May 20, 1999 (the "Effective Date") between Robert P. Wayman
(the "Employee") and Hewlett-Packard Company, a Delaware corporation (the
"Company").
R E C I T A L S
A. The Employee is currently employed by the Company as Executive
Vice President, Finance and Administration and Chief Financial Officer. In
addition, the Employee serves on the Company's Board of Directors.
B. The Company and the Employee desire to enter into this Agreement
to provide additional financial security and benefits to the Employee and to
encourage the Employee to continue his employment with the Company.
C. Capitalized terms used in the Agreement, to the extent not
otherwise defined, are defined in Section 5 below.
A G R E E M E N T
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of the Employee by the Company, the
parties agree as follows:
1. Term of Employment.
(a) Basic Rule. The Company agrees to continue the Employee's
----------
employment, and the Employee agrees to remain in employment with the Company,
from the Effective Date until the second anniversary of the Effective Date,
subject to earlier termination pursuant to the provisions to this Agreement.
(b) Early Termination. Subject to Section 4, the Company may
-----------------
terminate the Employee's employment at any time by giving the Employee thirty
(30) days advance notice in writing. If the Company terminates the Employee's
employment for any reason other than Cause, or if the Employee's employment
terminates as a result of Constructive Termination or by reason of his
Disability, the provisions of Section 4 shall apply. The Employee may
terminate his employment at any time by giving the Company thirty (30) days
advance notice in writing. If the Employee terminates his employment under the
preceding sentence, other than as a result of Constructive Termination or by
reason of his Disability, the Company shall have no obligation to pay or provide
any compensation or benefits under this Agreement on account of the Employee's
termination of employment, or for periods following such termination. In such
event the Employee's rights under the benefit plans of the Company shall be
determined under the provisions of those plans. Any
<PAGE>
waiver of notice shall be valid only if it is made in writing and expressly
refers to the applicable notice requirement of this Section 1.
(c) Death. The Employee's employment shall terminate in the event
-----
of his death. The Company shall have no obligation to pay or provide any
compensation or benefits under this Agreement on account of the Employee's
death, or for periods following the Employee's death. In such event the
Employee's rights under the benefit plans of the Company shall be determined
under the provisions of those plans.
(d) Cause. The Company may terminate the Employee's employment for
-----
Cause by giving the Employee thirty (30) days advance notice in writing. No
compensation or benefits will be paid or provided to the Employee under this
Agreement on account of a termination for Cause, or for periods following the
date when such a termination is effective. In such event the Employee's
rights under the benefit plans of the Company shall be determined under the
provisions of those plans.
(e) Retirement. In the event the Employee's employment terminates
----------
by reason of Retirement (as defined in Section 5), the Company shall have no
obligation to pay or provide any compensation or benefits under this Agreement
on account of the Employee's Retirement, or for periods following the
Employee's Retirement. In such event the Employee's rights under the benefit
plans of the Company shall be determined under the provisions of those plans.
(f) Termination of Agreement. The terms of this Agreement
------------------------
shall terminate upon the earlier of (i) the date that all obligations of the
parties hereunder have been satisfied, or (ii) two (2) years after the
Effective Date. A termination of the terms of this Agreement pursuant to the
preceding sentence shall be effective for all purposes, except that such
termination shall not affect the payment or provision of compensation or
benefits on account of a termination of employment occurring prior to the
termination of the term of this Agreement. Notwithstanding the foregoing, the
provisions of Sections 7, 8, 9, 10, 11 and 12 shall survive termination of this
Agreement.
2. Duties and Scope of Employment.
------------------------------
(a) Position. The Company shall employ the Employee in the
--------
position of Executive Vice President, Finance and Administration and Chief
Financial Officer. The duties and responsibilities of the Employee shall
include the duties and responsibilities for the Employee's corporate office and
position as set forth in the Company's bylaws from time to time in effect and
such other duties and responsibilities as the Company's Chief Executive Officer
("CEO") may from time to time reasonably assign to the Employee, in all cases to
be consistent with the Employee's corporate offices and positions.
(b) Obligations. During the term of the Employee's
-----------
employment with the Company, the Employee shall devote substantially all of
his business efforts and time to the Company. The foregoing, however, shall not
preclude the Employee from engaging in such activities and services as do not
materially interfere or conflict with the Employee's duties and
responsibilities to the Company. The Employee shall comply with and be bound by
the Company's operating policies, procedures and practices from time to time in
effect during employment.
-2-
<PAGE>
3. Compensation.
------------
(a) Cash Compensation. As compensation for his services the
-----------------
Employee shall receive a base salary and shall be eligible to receive
additional variable compensation. As of the Effective Date, the Employee's base
salary is $930,000, and his variable compensation amount is $270,000. During the
term of this Agreement, the Employee's base salary and variable amount for a
fiscal period of the Company ("Target Pay") shall be determined in accordance
with the Company's 1999 Variable Pay Plan as in effect as of the Effective Date,
as amended, or any successor plan (the "Variable Pay Plan"). During the term of
this Agreement, the Compensation Committee of the Board (the "Compensation
Committee") shall review the Employee's base salary and variable compensation
then in effect at least annually and shall increase such amounts as the
Compensation Committee may approve. The Employee's base salary and variable
compensation shall be payable in accordance with the Company's normal payroll
practices and, in the case of the variable compensation, in accordance with the
terms of the Variable Pay Plan.
(b) Equity Compensation. During the term of this Agreement, the
-------------------
Employee shall receive stock options, stock and other equity-based
compensation awards under the Company's equity compensation plans and programs
at a level no less than the median level commensurate with the Employee's
responsibilities, subject in each case to the generally applicable terms and
conditions of the applicable plan or program in question.
(c) Employee Benefits. During the term of this Agreement, the
-----------------
Employee shall be eligible to participate in the employee benefit plans and
executive compensation programs maintained by the Company applicable to other
senior executives of the Company, including (without limitation) the Company's
Executive Deferred Compensation Plan, retirement plans, savings or
profit-sharing plans, incentive or other bonus plans, life, disability, health,
accident and other insurance programs, vacation, sick leave, personal time off
and similar plans or programs, subject in each case to the generally applicable
terms and conditions of the applicable plan or program in question and to the
sole determination of the Board or any committee administering such plan or
program.
(d) Retirement Benefits. The Employee is currently covered under
-------------------
the Company's Excess Benefit Retirement Plan and its Officers Early Retirement
Plan (such programs referred to collectively herein as the "Non-Qualified
Retirement Plans"), in addition to the Company's Retirement Plan and its
Deferred Profit-Sharing Plan. Except as provided below with respect to the
Officers Early Retirement Plan, during the term of this Agreement the Company
shall continue to maintain such Non-Qualified Retirement Plans (or such
comparable alternative non-qualified retirement arrangements as the Company may,
in its discretion, determine to be sufficient to satisfy its obligations to the
Employee under this Section 3(d)), so as to provide benefits to the Employee
that are no less favorable than those available to the Employee under such Plans
as of the Effective Date, it being the Company's intention to deliver benefits
to the Employee at a level that is not less than that currently provided under
the Non-Qualified Retirement Plans. Notwithstanding the preceding sentence, on
March 18, 1999, the Compensation Committee of the Board (the "Compensation
Committee") terminated the Officers Early Retirement Plan effective November 1,
1999. In connection with such termination, the Company will calculate a lump
sum equivalent benefit for the Employee, and will credit such amount to the
Employee's account under the Company's Executive Deferred Compensation Plan,
subject to the terms and conditions of that Plan.
-3-
<PAGE>
Except as otherwise provided herein, the amount so credited to the Executive
Deferred Compensation Plan shall be subject to a vesting condition based upon
the Employee's continued employment with the Company.
(e) Transition Stock Award. On or before May 20, 1999, the Company
----------------------
shall grant to the Employee a special restricted stock award (the "Transition
Stock Award") under the Company's 1995 Incentive Compensation Plan (the "1995
Plan") for a number of shares of Company common stock determined by dividing
(i) three times the Employee's Target Pay as of the date of grant by (ii) the
per share fair market value of the Company's common stock as of the date of
grant. The shares subject to the Transition Stock Award (the "Award Shares")
shall be unvested and shall remain unvested unless and until the occurrence of a
"Vesting Event" (as defined in Section 5). Upon a Vesting Event the Award
Shares shall vest in full. In the event the Employee's employment with the
Company terminates for any reason prior to a Vesting Event, the Award Shares
shall be forfeited in their entirety without payment to the Employee.
4. Vesting Event.
-------------
(a) Vesting Event. Upon the occurrence of a Vesting Event on or
-------------
before the second anniversary of the Effective Date, the Employee shall be
entitled to receive the following benefits, provided that in the case of a
Vesting Event that involves the termination of the Employee's employment with
the Company, to receive such benefits the Employee must execute and timely
deliver to the Company a release of claims in favor of the Company in the form
of the release attached hereto as Exhibit A (or such other form of release as
the Company determines to be appropriate):
(i) Options. The unvested portion of any stock option(s) held
-------
by the Employee under the Company's stock plans shall vest and become
exercisable in full.
(ii) Restricted Stock. The unvested portion of any
----------------
restricted stock granted to the Employee under the Company's stock plans other
than (i) the Transition Stock Award, and (ii) restricted stock that is subject
to vesting based upon attainment of performance targets ("Performance
Restricted Stock"), is referred to herein as the "Unvested Restricted Stock."
Upon the occurrence of a Vesting Event, the Unvested Restricted Stock shall vest
on a pro-rated basis by multiplying such unvested shares by a fraction, the
numerator of which is the number of calendar months (including for this purpose
any partial months) between the date of grant and the date of the Vesting Event,
and the denominator of which is the number of calendar months (including for
this purpose any partial months) between the date of grant and the originally
scheduled vesting date applicable to such shares. In the event the Employee
remains employed following a Vesting Event, he shall continue to vest in any
shares of Unvested Restricted Stock that remain unvested after applying the pro-
rated vesting described in the preceding sentence, based upon the Employee's
continued employment and subject to the original terms of such Unvested
Restricted Stock. In the case of the Employee's unvested Performance Restricted
Stock, the Employee shall vest in accordance with the original terms applicable
to such Performance Restricted Stock, provided that in the event the Employee's
employment with the Company terminates for any reason after a Vesting Event,
other than by the Company for Cause, the Employee shall vest in a portion of the
unvested shares of Performance Restricted Stock and shall receive a number of
unrestricted shares, such portion and such number to be determined by the
Company in accordance with past practices
-4-
<PAGE>
consistently applied with respect to unvested shares of Performance Restricted
Stock in the case of an employee whose employment terminates by reason of
retirement or permanent and total disability.
(iii) Special Restricted Stock Award. The Special Restricted
------------------------------
Stock Award shall vest in full.
(iv) Retiree Benefits. The Employee shall be considered
----------------
to have met the definition of "Retirement" for purposes of the Company's
Continued Group Medical and SeniorMed Program, for purposes of the Company's
Officers Early Retirement Plan, and for purposes of the Company's stock option
plans. In addition, any employment or other similar requirement applicable to
the Officers Early Retirement Plan termination amount (as credited to the
Employee's account under the Company's Executive Deferred Compensation Plan,
together with any earnings credited thereto) shall be waived.
(v) Health Plan Coverage and Financial Counseling. In
---------------------------------------------
connection with the Employee's termination of employment (other than by the
Company for Cause) at or after the Vesting Date, the Employee may elect, to the
extent eligible, to continue his group health insurance benefits pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA). The
Company shall also provide to the Employee for one year after such termination
professional financial counseling services comparable in scope and value to the
financial counseling services made available to the Employee immediately prior
to such termination.
(b) Other Termination. If the Employee's employment terminates for
-----------------
any reason after the second anniversary of the Effective Date, or if, prior to
a Vesting Event, (i) the Employee voluntarily resigns from the Company (other
than as a Constructive Termination), (ii) the Company terminates the Employee's
employment for Cause, or (iii) the Employee's employment terminates by reason of
his Retirement or Death, then the Employee shall not be entitled to receive
severance or other benefits under this Agreement and shall be entitled to
benefits (if any) only as may then be established under the Company's then
existing benefit plans and policies at the time of such resignation or
termination.
5. Definition of Terms. The following terms referred to in this
-------------------
Agreement shall have the following meanings:
(a) Board. "Board" means the Board of Directors of the Company.
-----
Where applicable, the term "Board" shall include a committee of the Board.
(b) Cause. "Cause" means (i) the Employee's willful failure to
-----
substantially perform his material duties (other than as a failure resulting
from the Employee's complete or partial incapacity due to physical or mental
illness or impairment) for a period of thirty (30) days after a written demand
for substantial performance is delivered to the Employee by the Board that
specifically identifies the manner in which the Board believes that the Employee
has not substantially performed his duties, (ii) a material and willful
violation of a federal or state law or regulation applicable to the business of
the Company, and (iii) a willful act by the Employee that constitutes gross
misconduct and that is injurious to the Company. No act, or failure to act, by
the Employee shall be considered "willful" unless committed without good faith
and without a reasonable belief that the act or omission was in the Company's
best interests.
-5-
<PAGE>
(c) Constructive Termination. The Employee's employment may be
------------------------
terminated by reason of Constructive Termination. For purposes of this
Agreement, "Constructive Termination" means the Employee terminates his
employment with the Company as a result of one or more of the following events
(unless, in the case of (i), (ii) and (iii) below, such event(s) applies
generally to all officers of the Company): (i) without the Employee's express
written consent, a reduction by the Company in the Employee's annualized Target
Pay relative to his annualized Target Pay as in effect immediately prior to such
reduction; (ii) a reduction in the Employee's annualized base salary relative to
his annualized base salary as in effect immediately prior to such reduction
(other than a reduction under the Variable Pay Plan in accordance with its terms
as consistently applied); (iii) without the Employee's express written consent,
a material reduction by the Company in the kind or level of employee benefits to
which the Employee is entitled immediately prior to such reduction with the
result that the Employee's overall benefits package is significantly reduced;
and (iv) without the Employee's express written consent, the Company fails to
retain the Employee as its Executive Vice President, Finance and Administration
and Chief Financial Officer.
(d) Disability. "Disability" means a disability under the
----------
Company's Income Protection Plan that entitles the Employee to benefits under
such Plan for a period of at least twenty-six (26) weeks.
(e) Distribution. "Distribution" means the Company's distribution
------------
of its shares in the Distribution Company to the Company's stockholders.
(f) Distribution Company. "Distribution Company" means the
--------------------
subsidiary of the Company comprising its testing and measurement business and
established by the Company for the purpose of giving effect to the
Distribution.
(g) Retirement. "Retirement" means the Employee's resignation from
----------
the Company after attaining age fifty-five (55) years of age with fifteen (15)
or more "full-time equivalent years of service" (within the meaning of the
Company's Continued Group Medical and SeniorMed Program as in effect on the
Effective Date).
(h) Termination Date. "Termination Date" means (i) the date on
----------------
which the Company delivers notice of termination to the Employee or such later
date, not to exceed ninety (90) days, specified in the notice of termination,
(ii) in the event the term of employment ends by reason of the Employee's death,
the date of death, or (iii) if the Agreement is terminated by the Employee, the
date on which the Employee delivers notice of termination to the Company.
(i) Vesting Event. "Vesting Event" means (i) a termination of the
-------------
Employee's employment on or before the second anniversary of the Effective Date
by the Company other than for Cause or by the Employee as a result of
Constructive Termination, or (ii) the Distribution, provided the Employee is an
employee on the Distribution date and provided further that the Distribution
occurs on or before the Second Anniversary of the Effective Date.
6. Golden Parachute Payments. In the event it shall be determined that
-------------------------
any payment by the Company to or for the benefit of the Employee, whether paid
or payable under this Agreement or otherwise but determined without regard to
any additional payments required under this Section 6 (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any comparable federal, state or local
excise tax (such
-6-
<PAGE>
excise tax, together with any interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Employee shall be
entitled to receive an additional payment from the Company (a "Gross-Up
Payment") in such an amount that after the payment of all taxes (including,
without limitation, any interest and penalties on such taxes and the Excise Tax)
on the payment and on the Gross-Up Payment, the Employee shall retain an amount
equal to the Payment minus all applicable taxes on the Payment. The intent of
the parties is that the Company shall be solely responsible for, and shall pay,
any Excise Tax on the Payment and Gross-Up Payment and any income and employment
taxes (including without limitation, penalties and interest) imposed on any
Gross-Up Payment (as well as any loss of tax deduction caused by the Gross-Up
Payment. Unless the Company and the Employee otherwise agree in writing, all
determinations required to be made under this Section and the assumptions to be
utilized in arriving at such determinations, shall be made in writing in good
faith by the accounting firm serving as the Company's independent public
accountants immediately prior to the event giving rise to such Payment (the
"Accountants"). For purposes of making the calculations required by this Section
6, the accountants may make reasonable assumptions and approximations concerning
the application of Sections 280G and 4999 of the Code. The Company and the
Employee shall furnish to the Accountants such information and documents as the
Accountants may reasonably request to make a determination under this Section.
The Company shall bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this Section.
7. Non-Compete; Non-Solicit.
------------------------
(a) The parties hereto recognize that the Employee's services are
special and unique and that the level of compensation and the provisions herein
are partly in consideration of and conditioned upon the Employee's not competing
with the Company, and that the Employee's covenant not to compete or solicit as
set forth in this Section 7 during and after employment is essential to protect
the business and good will of the Company.
(b) The Employee agrees that during the term of employment with the
Company and for a period of eighteen (18) months following the Termination Date
(the "Covenant Period"), the Employee shall not render services for any
organization or engage directly or indirectly in any business that, in the
opinion of the Company, competes with or is in conflict with the interests of
the Company.
(c) During the Covenant Period, the Employee shall not, directly
or indirectly, induce or attempt to influence any employee of the Company to
leave its employ.
(d) During the Covenant Period, the Employee shall not, without
prior written authorization from the Company, disclose to anyone outside the
Company, or use in other than the Company's business, any confidential
information and material relating to the business of the Company.
(e) The Employee agrees that the Company would suffer an
irreparable injury if the Employee were to breach the covenants contained in
Sections 7(b), (c) or (d) and that the Company would by reason of such breach or
threatened breach be entitled to injunctive relief in a court of appropriate
jurisdiction and the Employee hereby stipulates to the entering of such
injunctive relief prohibiting the Employee from engaging in such breach.
-7-
<PAGE>
(f) If any of the restrictions contained in this Section 7 shall
be deemed to be unenforceable by reason of the extent, duration or geographical
scope or other provisions thereof, then the parties hereto contemplate that the
court shall reduce such extent, duration, geographical scope or other provision
hereof and enforce this Section 7 in its reduced form for all purposes in the
manner contemplated hereby.
8. Successors.
----------
(a) Company's Successors. Any successor to the Company (whether
--------------------
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and assets shall assume the obligations under this Agreement and agree expressly
to perform the obligations under this Agreement in the same manner and to the
same extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and assets that
executes and delivers the assumption agreement described in this Section 8(a) or
that becomes bound by the terms of this Agreement by operation of law.
(b) Employee's Successors. The terms of this Agreement and all
---------------------
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, devisees and legatees.
9. Notice.
------
(a) General. Notices and all other communications contemplated by
-------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address that he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its General Counsel.
(b) Notice of Termination. Any termination by the Company or by
---------------------
the Employee shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 9(a) of this Agreement. Such notice
shall indicate the specific termination provision in this Agreement relied upon,
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated, and shall
specify the Termination Date (which shall be not more than ninety (90) days
after the giving of such notice). The failure by the Employee to include in the
notice any fact or circumstance that contributes to a showing of Constructive
Termination shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his rights
hereunder.
10. Information. The Employee agrees not to disclose to others, or to
-----------
take or use for the Employee's own purposes or for the purposes of others,
during or after the Employee's employment, any Information owned or controlled
by the Company or any of its subsidiary or affiliated companies. The Employee
agrees that these restrictions shall also apply to all (i) Information in the
Company's possession belonging to third parties, and (ii) Information conceived,
originated, discovered or developed, in whole or in part, by the Employee while
an employee of the Company.
-8-
<PAGE>
As used herein, "Information" includes trade secrets and other confidential or
proprietary business, technical, personnel or financial information, whether or
not the Employee's work product, in written, graphic, oral or other tangible or
intangible forms, including but not limited to specifications, samples, records,
data, computer programs, drawings, diagrams, models, customer names, business or
marketing plans, studies, analyses, projections and reports, communications by
or to attorneys (including attorney-client privileged communications), memos and
other materials prepared by attorneys or under their direction (including
attorney work product), and software systems and processes. Any Information
which is not readily available to the public shall be considered to be a trade
secret and confidential property, even if it is not specifically marked as such,
unless the Company advises the Employee otherwise in writing. The Employee
agrees that on termination of employment, the Employee will return to the
Company all property (including any copies thereof) belonging to the Company,
including all documents or other media in the Employee's possession or control
which in any way incorporate or reflect any Information.
11. Arbitration.
-----------
(a) Agreement. The Company and The Employee agree that any dispute
---------
or controversy arising out of, relating to, or in connection with this
Agreement, or the interpretation, validity, construction, performance, breach,
or termination thereof shall be settled by binding arbitration, unless otherwise
required by law, to be held in Santa Clara County, California, in accordance
with the National Rules for the Resolution of Employment Disputes then in effect
of the American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction.
(b) Governing Law. The arbitrators shall apply California law to
-------------
the merits of dispute or claim, without reference to rules of conflicts of law.
The Employee hereby expressly consents to the personal jurisdiction of the state
and federal courts located in California for any action or proceeding arising
form or relating to this Agreement or relating to any arbitration in which the
parties are participants.
(c) Costs and Fees of Arbitration. The Employee shall pay the
-----------------------------
initial arbitration filing (not to exceed $200.00), and the Company shall pay
the remaining costs and expenses of such arbitration (unless the Employee
requests that each party pay one-half of the costs and expenses of such
arbitration or unless otherwise required by law). The Company and the Employee
shall each pay separately its counsel fees and expenses unless otherwise
required by law.
(d) Equitable Relief. The parties may apply to any court of
----------------
competent jurisdiction for a temporary restraining order, preliminary
injunction, or other interim or conservatory relief, as necessary, without
breach of this arbitration agreement and without abridgment of the powers of the
arbitrator.
(e) Employee's Representation. THE EMPLOYEE HAS READ AND
-------------------------
UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. THE EMPLOYEE UNDERSTANDS
THAT BY SIGNING THIS AGREEMENT, HE AGREES TO SUBMIT ANY FUTURE CLAIMS ARISING
OUT OF, RELATING TO, OR IN CONNECTION WITH THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE OR BREACH OF THIS
-9-
<PAGE>
AGREEMENT, TO BINDING ARBITRATION, UNLESS OTHERWISE REQUIRED BY LAW, AND THAT
THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF HIS RIGHT TO A JURY TRIAL AND
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO THIS AGREEMENT.
12. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. The Employee shall not be required to
-------------------
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor shall any such payment be
reduced by any earnings that the Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified,
------
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
---------------
understandings (whether oral or written and whether express or implied) that are
not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
(d) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California.
(e) Severability. The invalidity or unenforceability of any
------------
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(f) Employment At Will; Limitation of Remedies. The Company and
------------------------------------------
the Employee acknowledge that the Employee's employment is at will, as defined
in the applicable law. If the Employee's employment terminates for any reason,
the Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement.
(g) No Assignment of Benefits. The rights of any person to payments
-------------------------
or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this Section 12(g) shall be
void.
(h) Taxes. All payments made pursuant to this Agreement will be
-----
subject to all applicable reporting obligations and any tax or other
contributions required to be withheld under Federal, state or local law, as
interpreted by the Company.
(i) Assignment by Company. The Company may assign its rights under
---------------------
this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company or to the Company. In the
case of any such assignment, the term
-10-
<PAGE>
"Company" when used in a section of this Agreement shall mean the corporation
that actually employs the Employee.
(j) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
COMPANY: By: /s/ S.T. Jack Brigham III
--------------------------------------------
June 15, 1999
Title: Senior Vice President Corporate Affairs,
-----------------------------------------
General Counsel
EMPLOYEE: /s/ Robert P. Wayman
--------------------------------------------
Robert P. Wayman
-11-
<PAGE>
EXHIBIT A
---------
RELEASE OF CLAIMS AGREEMENT
This Release of Claims Agreement ("Agreement") is made by and between
Hewlett-Packard Company (the "Company") and Robert P. Wayman ("Employee").
WHEREAS, Robert P. Wayman was employed by the Company;
WHEREAS, the Company and Employee have entered into an Employment Agreement
effective as of May 20, 1999 (the "Employment Agreement");
NOW THEREFORE, in consideration of the mutual promises made herein, the
Company and Employee (collectively referred to as "the Parties") hereby agree as
follows:
1. Termination. Employee's employment from the Company terminated on
-----------
________________.
2. Consideration. Subject to and in consideration of Employee's release
-------------
of claims as provided herein, the Company has agreed to pay Employee certain
benefits as set forth in the Employment Agreement.
3. Payment of Salary. Employee acknowledges and represents that the
-----------------
Company has paid all salary, wages, bonuses, accrued vacation, commissions and
any and all other benefits due to Employee.
4. Release of Claims. Employee agrees that the foregoing consideration
-----------------
represents settlement in full of all outstanding obligations owed to Employee by
the Company. Employee, on behalf of himself, and his respective heirs, family
members, executors and assigns, hereby fully and forever releases the Company
and its past, present and future officers, agents, directors, employees,
investors, shareholders, administrators, affiliates, divisions, subsidiaries,
parents, predecessor and successor corporations, and assigns, from, and agrees
not to sue or otherwise institute or cause to be instituted any legal or
administrative proceedings concerning any claim, duty, obligation or cause of
action relating to any matters of any kind, whether presently known or unknown,
suspected or unsuspected, that he may possess arising from any omissions, acts
or facts that have occurred up until and including the Effective Date of this
Agreement including, without limitation.
(a) any and all claims relating to or arising from Employee's
employment relationship with the Company and the termination of that
relationship;
(b) any and all claims relating to, or arising from, Employee's
right to purchase, or actual purchase of shares of stock of the Company,
including, without limitation, any claims for fraud, misrepresentation, breach
of fiduciary duty, breach of duty under applicable state corporate law, and
securities fraud under any state or federal law;
(c) any and all claims for wrongful discharge of employment;
termination in violation of public policy; discrimination; breach of contract,
both express and implied; breach of a covenant of good faith and fair dealing,
both express and implied; promissory estoppel; negligent or intentional
infliction of emotional distress; negligent or intentional misrepresentation;
negligent or
<PAGE>
intentional interference with contract or prospective economic advantage; unfair
business practices; defamation; libel; slander; negligence; personal injury;
assault; battery; invasion of privacy; false imprisonment; and conversion:
(d) any and all claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor
Standards Act, the Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, the California Fair Employment and
Housing Act, and Labor Code section 201, et seq. and section 970, et seq. and
all amendments to each such Act as well as the regulations issued thereunder;
(e) any and all claims for violation of the federal, or any state,
constitution;
(f) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination; and
(g) any and all claims for attorneys' fees and costs.
Employee agrees that the release set forth in this section shall be and remain
in effect in all respects as a complete general release as to the matters
released. This release does not extend to any obligations incurred under this
Agreement.
5. Acknowledgment of Waiver of Claims under ADEA. Employee acknowledges
---------------------------------------------
that he is waiving and releasing any rights he may have under the Age
Discrimination in Employment Act of 1967 ("ADEA") and that this waiver and
release is knowing and voluntary. Employee and the Company agree that this
waiver and release does not apply to any rights or claims that may arise under
the ADEA after the Effective Date of this Agreement. Employee acknowledges that
the consideration given for this waiver and release Agreement is in addition to
anything of value to which Employee was already entitled. Employee further
acknowledges that he has been advised by this writing that (a) he should consult
with an attorney prior to executing this Agreement; (b) he has at least twenty-
-----
one (21) days within which to consider this Agreement; (c) he has seven (7) days
following the execution of this Agreement by the parties to revoke the
Agreement; and (d) this Agreement shall not be effective until the revocation
period has expired. Any revocation should be in writing and delivered to the
General Counsel at Hewlett-Packard Company, 3000 Hanover street, Palo Alto,
California 94304, by close of business on the seventh day from the date that
Employee signs this Agreement.
6. Civil Code Section 1542. Employee represents that he is not aware of
-----------------------
any claims against the Company other than the claims that are released by this
Agreement. Employee acknowledges that he has been advised by legal counsel and
is familiar with the provisions of California Civil Code Section 1542, which
provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
<PAGE>
Employee, being aware of said code section, agrees to expressly waive any
rights he may have thereunder, as well as under any other statute or common law
principles of similar effect.
7. No Pending or Future Lawsuits. Employee represents that he has no
-----------------------------
lawsuits, claims, or actions pending in his name, or on behalf of any other
person or entity, against the Company or any other person or entity referred to
herein. Employee also represents that he does not intend to bring any claims on
his own behalf or on behalf of any other person or entity against the Company or
any other person or entity referred to herein.
8. Confidentiality. Employee agrees to use his best efforts to maintain
---------------
in confidence the existence of this Agreement, the contents and terms of this
Agreement, and the consideration for this Agreement (hereinafter collectively
referred to as "Release Information"). Employee agrees to take every reasonable
precaution to prevent disclosure of any Release Information to third parties,
and agrees that there will be no publicity, directly or indirectly, concerning
any Release Information. Employee agrees to take every precaution to disclose
Release Information only to those attorneys, accountants, governmental entities,
and family members who have a reasonable need to know of such Release
Information.
9. No Cooperation. Employee agrees he will not act in any manner that
--------------
might damage the business of the Company. Employee agrees that he will not
counsel or assist any attorneys or their clients in the presentation or
prosecution of any disputes, differences, grievances, claims, charges, or
complaints by any third party against the Company and/or any officer, director,
employee, agent, representative, shareholder or attorney of the Company, unless
under a subpoena or other court order to do so.
10. Costs. The Parties shall each bear their own costs, expert fees,
-----
attorneys' fees and other fees incurred in connection with this Agreement.
11. Authority. Employee represents and warrants that he has the capacity
---------
to act on his own behalf and on behalf of all who might claim through him to
bind them to the terms and conditions of this Agreement.
12. No Representations. Employee represents that he has had the
------------------
opportunity to consult with an attorney, and has carefully read and understands
the scope and effect of the provisions of this Agreement. Neither party has
relied upon any representations or statements made by the other party hereto
which are not specifically set forth in this Agreement.
13. Severability. In the event that any provision hereof becomes or is
------------
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
14. Entire Agreement. This Agreement and the Employment Agreement and the
----------------
agreements and plans referenced therein represent the entire agreement and
understanding between the Company and Employee concerning Employee's separation
from the Company, and supersede and replace any and all prior agreements and
understandings concerning Employee's relationship with the Company and his
compensation by the Company. This Agreement may only be amended in writing
signed by Employee and executive officer of the Company.
<PAGE>
15. Governing Law. This Agreement shall be governed by the internal
-------------
substantive laws, but not the choice of law rules, of the State of California.
16. Effective Date. This Agreement is effective eight (8) days after it
--------------
has been signed by both Parties.
17. Counterparts. This Agreement may be executed in counterparts, and each
------------
counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
18. Voluntary Execution of Agreement. This Agreement is executed
--------------------------------
voluntarily and without any duress or undue influence on the part or behalf of
the Parties hereto, with the full intent of releasing all claims. The Parties
acknowledge that:
(a) They have read this Agreement;
(b) They have been represented in the preparation, negotiation, and
execution of this Agreement by legal counsel of their own choice or that they
have voluntarily declined to seek such counsel;
(c) They understand the terms and consequences of this Agreement and
of the releases it contains;
(d) They are fully aware of the legal and binding effect of this
Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the
respective dates set forth below.
HEWLETT-PACKARD COMPANY
Dated: ______________, _____ By ___________________________
______________, an individual
Dated: ______________, ____ ______________________________
Robert P. Wayman
<PAGE>
EXHIBIT 10(gg)
HEWLETT-PACKARD COMPANY
EMPLOYMENT AGREEMENT
This Agreement is made as of the 17th day of July, 1999 by and between
Hewlett-Packard Company (the "Company"), and Carleton S. Fiorina (the
"Executive").
1. Duties and Scope of Employment.
------------------------------
(a) Positions; Duties. During the Employment Term (as defined in Section
2), the Company shall employ Executive as the President and Chief Executive
Officer of the Company. Executive shall report solely and directly to the Board
of Directors of the Company (the "Board"). All other employees of the Company
shall report to Executive or her designee and not directly to the Board. During
the Employment Term, Executive shall have such responsibilities, duties and
authorities as commensurate with chief executive officers of public entities of
similar size and, in particular, shall be, in addition to being responsible for
the operations of the Company, the chief external representative of the Company.
The role and responsibilities of the Chairman of the Company shall be limited to
chairing the Board and mentoring and counseling the Chief Executive Officer when
and as requested by her and such other matters as the Chairman and Executive may
agree, and within thirty (30) days after the Employment Commencement Date, the
By-laws of the Company shall be amended accordingly. The Board shall, in good
faith, consider Executive's advice and recommendations, if any, in connection
with any appointments or nominations to the Board. For so long as Executive
remains President and Chief Executive Officer of the Company, the Board will
<PAGE>
nominate Executive to the Board and, if elected, Executive shall serve in such
capacity without additional consideration.
(b) Obligations. During the Employment Term, Executive shall devote
substantially all of her business efforts and time to the Company. Executive
agrees, during the Employment Term, not to actively engage in any other
employment, occupation or consulting activity for any direct or indirect
remuneration without the prior approval of the Board; provided, however, that
Executive may (i) serve in any capacity with any professional, community,
industry, civic, educational or charitable organization, (ii) serve as a member
of corporate boards of directors on which Executive currently serves and, with
the consent of the Board (which consent shall not be unreasonably withheld or
delayed), other corporate boards of directors and (iii) manage her and her
family's personal investments and legal affairs so long as such activities do
not materially interfere with the discharge of Executive's duties.
2. Employment Term. The Company hereby agrees to employ Executive and
---------------
Executive hereby accepts employment, in accordance with the terms and conditions
set forth herein, commencing on July 17, 1999 (the "Employment Commencement
Date"). The period of Executive's employment hereunder is referred to herein as
the "Employment Term." Executive and the Company understand and acknowledge
that Executive's employment with the Company constitutes "at-will" employment.
Subject to the Company's obligation to provide severance benefits as specified
herein, Executive and the Company acknowledge that this employment relationship
may be terminated at any time, upon written notice to the other party, with or
without Cause or Good Reason and for any or no cause or reason, at the option of
either the Company or Executive.
-2-
<PAGE>
3. Compensation/Benefits. During the Employment Term, the Company shall pay
---------------------
and provide Executive the following:
(a) Cash Compensation. As compensation for her services to the Company,
Executive shall receive a base salary ("Base Salary") and shall be eligible to
receive additional variable compensation. As of the Employment Commencement
Date, Executive's annualized Base Salary shall be $1,000,000, and her annual
variable compensation amount shall be targeted at no less than $1,250,000 (the
"Target Bonus" which, together with the Base Salary, shall be referred to herein
as "Target Pay"), with an opportunity to earn up to at least $3,750,000 in
annual variable compensation. Except as provided herein, during the Employment
Term, Executive's Base Salary and variable compensation for the fiscal year of
the Company shall be determined in accordance with the Company's 1999 Variable
Pay Plan as in effect as of the Employment Commencement Date, as amended, or any
successor plan (the "Variable Pay Plan"). During the Employment Term, the
Compensation Committee of the Board (the "Compensation Committee") shall review
Executive's Base Salary and variable compensation then in effect at least
annually and shall increase such amounts as the Compensation Committee may
approve. Such Base Salary and variable compensation shall be payable in
accordance with the Company's normal payroll practices and, in the case of
variable compensation, in accordance with the terms of the Variable Pay Plan,
except as otherwise provided herein. No increase in Base Salary shall be used
to offset or otherwise reduce any obligations of the Company to Executive
hereunder or otherwise.
(b) Joining Bonus. Within fifteen (15) business days after the Employment
Commencement Date, the Company shall pay Executive a one-time lump sum cash
payment in the
-3-
<PAGE>
amount of $3,000,000, reduced by any annual cash bonus Executive receives from
her prior employer for the fiscal year ending September 30, 1999. If such annual
cash bonus is paid after Executive receives the aforesaid payment, Executive
shall refund to the Company an amount equal to the amount of such annual cash
bonus received by her.
(c) Fiscal Years 1999 and 2000 Bonuses.
(i) Pro-Rated Fiscal Year 1999 Bonus. Executive shall receive a cash
--------------------------------
bonus on account of, and subject to, her employment with the Company through the
end of the Company's 1999 fiscal year equal to $1,250,000 multiplied by a
fraction, determined by dividing the number of days from the Employment
Commencement Date through the Company's 1999 fiscal year-end, by 365, payable as
a single lump sum cash payment in accordance with the normal payment practices
under the Variable Pay Plan (the "Guaranteed 1999 Bonus").
(ii) Fiscal Year 2000 Bonus. For the Company's 2000 fiscal year,
----------------------
subject, except as otherwise provided herein, to her continued employment with
the Company through the end of the 2000 fiscal year, Executive shall be
guaranteed a minimum bonus of $1,250,000, payable as a single lump sum cash
payment in accordance with the normal payment practices under the Variable Pay
Plan (the "Guaranteed 2000 Bonus")
(d) Equity Compensation.
(i) Stock Options. The Compensation Committee of the Board, which
-------------
administers the Company's 1995 Incentive Stock Plan (the "1995 Plan"), has
awarded Executive, as
-4-
<PAGE>
of the Employment Commencement Date, a non-qualified stock option (the "Stock
Option") under the Company's 1995 Plan to purchase a total of 600,000 shares of
Company common stock, $1 par value (the "Common Stock"), with a per share
exercise price equal to 100% of the fair market value of the Company's Common
Stock as of the Employment Commencement Date as determined under the 1995 Plan.
The Stock Option is for a term of 10 years (subject to earlier termination as
provided in the 1995 Plan. In the case of termination by the Company without
Cause, voluntary termination by Executive for Good Reason, death or a Disability
Termination, the Stock Option and any other Company stock option then held by
Executive shall remain exercisable (to the extent vested on the date of
termination) until the earlier of one year from the employment termination date
or the expiration of the option. Subject to accelerated vesting as set forth in
this Agreement, the Stock Option shall vest and become exercisable as to 25% of
the shares originally subject to the Stock Option on each anniversary of the
Employment Commencement Date, so as to be 100% vested on the four year
anniversary thereof, conditioned upon Executive's continued employment with the
Company as of each vesting date. Executive may, but need not, exercise the Stock
Option or any other stock option granted to Executive with a loan from the
Company in accordance with Section IX of the 1995 Plan. The Stock Option shall
in all respects be subject to the terms, definitions and provisions of the 1995
Plan and the standard form of stock option agreement, a copy of which has been
given to Executive, as modified by the terms of this Agreement.
(ii) Restricted Stock. The Compensation Committee of the Board has
----------------
awarded Executive as of the Employment Commencement Date, 290,000 shares of the
Company's Common Stock under the 1995 Plan (the "Restricted Stock"). Subject to
accelerated vesting as set forth in this
-5-
<PAGE>
Agreement, the Restricted Stock shall vest (i.e., the forfeiture of the
----
Restricted Stock upon Executive's termination of employment shall lapse) as to
one-third (1/3) of the Restricted Stock shares on each anniversary of the
Employment Commencement Date, so as to be 100% vested on the three year
anniversary thereof, conditioned upon Executive's continued employment with the
Company as of each vesting date. Executive shall be entitled to all cash
dividends paid on the Restricted Stock. If there is (i) any stock dividend,
stock split or other change in the Restricted Stock, or (ii) any merger or sale
of all or substantially all of the assets or other acquisition of the Company,
any and all new, substituted or additional securities attributable to the
Restricted Stock shall be included thereafter as "Restricted Stock" for purposes
of this Agreement. The Restricted Stock shall in all respects be subject to the
terms, definitions and provisions of the 1995 Plan and the standard form of
restricted stock agreement, a copy of which has been given to Executive, as
modified by the terms of this Agreement.
(iii) Restricted Share Units.
----------------------
(A) As of the Employment Commencement Date, the Company shall
credit Executive's account on the books of the Company with 290,000 "restricted
share units" (the "Restricted Units"). The Restricted Units may not be sold,
assigned, exchanged, pledged or otherwise transferred and are subject to the
Forfeiture Restrictions (as hereinafter defined). In the event of a termination
of employment prior to the lapse of the Forfeiture Restrictions, Executive
shall, for no consideration, forfeit to the Company all Restricted Units to the
extent then subject to the Forfeiture Restrictions. The forfeiture of Restricted
Units upon such a termination of employment is herein referred to as "Forfeiture
Restrictions." Except as otherwise provided herein,
-6-
<PAGE>
the Forfeiture Restrictions shall lapse as to one-third (1/3) of the Restricted
Units on each anniversary of the Employment Commencement Date, so as to be 100%
vested on the three year anniversary thereof, conditioned upon Executive's
continued employment with the Company as of each vesting date.
(B) If on any date the Company shall pay any dividend on the
Common Stock (other than a dividend payable in Common Stock), the number of
Restricted Units credited to Executive shall as of such date be increased by an
amount equal to: (x) the product of the number of Restricted Units credited to
Executive as of the record date for such dividend multiplied by the per share
amount of any dividend (or, in the case of any dividend payable in property
other than cash, the per share value of such dividend, as determined in good
faith by the Board), divided by (y) the fair market value of a share of Common
Stock on the payment date of such dividend as determined under the 1995 Plan.
In the case of any dividend declared on Common Stock which is
payable in Common Stock, the number of Restricted Units credited to Executive
shall be increased by a number equal to the product of (x) the aggregate number
of Restricted Units that have been credited to Executive through the related
dividend record date multiplied by (y) the number of shares Common Stock
(including any fraction thereof) payable as a dividend on a share of Common
Stock. In the event of any change in the number or kind of outstanding shares of
Common Stock by reason of any recapitalization, reorganization, merger,
consolidation, stock split or any similar change affecting the Common Stock
(other than a dividend payable in Common Stock) the Company shall make an
appropriate adjustment in the number and terms of the Restricted Units credited
to Executive so that,
-7-
<PAGE>
after such adjustment, the Restricted Units shall represent a right to receive
the same consideration (or if such consideration is not available, other
consideration of the same value) that Executive would have received in
connection with such recapitalization, reorganization, merger, consolidation,
stock split or any similar change if she had owned on the applicable record date
a number of shares of Common Stock equal to the number of Restricted Units
credited to Executive's account prior to such adjustment.
(C) On the first to occur of the fifth (5th) anniversary of the
Employment Commencement Date, the date of any termination of employment, or the
first date on which occurs a Change of Control, the Company shall pay to
Executive a number of shares of Common Stock equal to the aggregate number of
vested Restricted Units credited to Executive as of such date.
(iv) When Executive incurs tax liability in connection with the
exercise of the Stock Option or options, Restricted Stock or Restricted Units,
Executive may elect to satisfy her resulting withholding tax obligation by
having the Company retain shares of Common Stock having a fair market value
equal to the Company's minimum withholding tax obligation.
(v) Ongoing Awards. Executive shall fully participate in annual
--------------
restricted stock and stock option grants and any other long-term incentive
program at levels commensurate with her position.
(vi) Registration. At all times, the Company shall maintain
------------
registrations on Form S-8 or another applicable form so that the Restricted
Stock, Common Stock issued in connection
-8-
<PAGE>
with Restricted Units or upon exercise of the Stock Option or other options or
other equity awards are immediately saleable by Executive on the public market
(subject to the non-registration limitations of applicable laws).
(e) Employee Benefits. Executive shall, to the extent eligible, be
entitled to participate at a level commensurate with her position in all
employee benefit welfare and retirement plans and programs, as well as equity
plans, provided by the Company to its senior executives in accordance with the
terms thereof as in effect from time to time. Such plans and programs currently
include, without limitation, the 1995 Plan, the Variable Pay Plan, the Employee
Stock Purchase Plan, the Tax Saving Capital Accumulation Plan, the Retirement
Plan, the Deferred Profit-Sharing Plan, the Excess Benefit Retirement Plan, the
Executive Deferred Compensation Plan, financial counseling program, automobile
program, group term life insurance plan, comprehensive health, major medical,
dental insurance plans and short-term and long-term disability plans.
(f) Perquisites. The Company shall provide to Executive, at the Company's
cost, all perquisites to which other senior executives of the Company are
entitled to receive and such other perquisites which are suitable to the
character of Executive's position with the Company and adequate for the
performance of her duties hereunder but not less than the level being provided
on the date hereof to her predecessor as Chief Executive Officer except as
otherwise required because of changes in law. To the extent consistent with the
Company's past practice, the Company shall not treat such amounts as income to
Executive.
-9-
<PAGE>
(g) Business and Entertainment Expenses. Upon submission of appropriate
documentation in accordance with its policies in effect from time to time, the
Company shall pay or reimburse Executive for all business expenses which
Executive incurs in performing her duties under this Agreement, including, but
not limited to, travel, entertainment, professional dues and subscriptions, and
all dues, fees, and expenses associated with membership in various professional,
business, and civic associations and societies in which Executive participates
in accordance with the Company's policies in effect from time to time.
(h) Flexible Time Off. Executive shall be entitled to paid time off in
accordance with the standard written policies of the Company with regard to
senior executives, but in no event less than twenty-five (25) days, per calendar
year.
(i) Relocation. Executive shall be entitled to relocation benefits
pursuant to the Company's relocation benefit program, as supplemented by the
provisions of the side letter entered into by the Company and Executive.
4. Termination of Employment.
-------------------------
(a) Death or Disability. The Company may terminate Executive's employment
for disability in the event Executive has been unable to perform her material
duties hereunder for six (6) consecutive months because of physical or mental
incapacity by giving Executive notice of such termination while such continuing
incapacity continues (a "Disability Termination"). Executive's employment shall
automatically terminate on Executive's death. In the event Executive's
employment with the Company terminates during the Employment Term by reason of
Executive's
-10-
<PAGE>
death or a Disability Termination, then upon the date of such termination (i)
any forfeiture provision of any Restricted Stock or Restricted Units shall lapse
and Executive shall be fully vested in such Restricted Stock and Restricted
Units, (ii) the Stock Option and all other stock option or equity grants to
Executive shall vest in full so as to become fully exercisable, (iii) the
Company shall promptly pay and provide Executive (or in the event of Executive's
death, Executive's estate) (A) any unpaid Base Salary through the date of
termination and any accrued vacation, (B) any unpaid bonus accrued with respect
to the fiscal year ending on or preceding the date of termination, (C)
reimbursement for any unreimbursed expenses incurred through the date of
termination and (D) all other payments, benefits or fringe benefits to which
Executive may be entitled subject to and in accordance with, the terms of any
applicable compensation arrangement or benefit, equity or fringe benefit plan or
program or grant and amounts which may become due under Sections 6, 9 and 10
hereof (collectively, items under (iii) are referred to as "Accrued Benefits"),
(iv) the Company shall pay the Guaranteed 1999 Bonus and the Guaranteed 2000
Bonus to the extent not previously paid or paid under (v) below and (v) the
Company shall pay to Executive at the time other senior executives are paid
under any Variable Pay Plan or cash bonus or long term incentive plan, a pro-
rata bonus equal to the amount Executive would have received if employment
continued (without any discretionary cutback) multiplied a fraction where the
numerator is the number of days in each respective bonus period prior to
Executive's termination and the denominator is the number of days in the bonus
period (the "Prorated Bonus").
(b) Termination for Cause. The Company may terminate Executive's
employment for Cause. In the event that Executive's employment with the Company
is terminated during the
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<PAGE>
Employment Term by the Company for Cause, Executive shall not be entitled to any
additional payments or benefits hereunder, other than Accrued Benefits
(including, but not limited to, any then vested Stock Option, Restricted Stock,
Restricted Units or other stock options or equity grants). For the purposes of
this Agreement,"Cause" shall mean (i) the willful failure by Executive to
attempt to substantially perform her duties with the Company (other than any
such failure resulting from her incapacity due to physical or mental
impairment), unless any such failure is corrected within thirty (30) days
following written notice by the Board that specifically identifies the manner in
which the Board believes Executive has substantially not attempted to materially
perform her duties or (ii) the willful gross misconduct by Executive with regard
to the Company that is materially injurious to the Company. No act, or failure
to act, by Executive shall be "willful" unless committed without good faith and
without a reasonable belief that the act or omission was in the best interest of
the Company. No event shall be deemed the basis for Cause unless Executive is
terminated therefor within sixty (60) days after such event is known to the
Chairman of the Company, or, if Executive is Chairman, known to the Chairman of
any committee of the Board.
Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Cause without (i) advance written notice provided to
Executive not less than fourteen (14) days prior to the date of termination
setting forth the Company's intention to consider terminating Executive and
including a statement of the proposed date of termination and the specific
detailed basis for such consideration of termination for Cause, (ii) an
opportunity of Executive, together with her counsel, to be heard before the
Board at least ten (10) days after the giving of such notice and prior to the
proposed date of termination, (iii) a duly adopted resolution of the Board
stating that in accordance
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with the provisions of the next to the last sentence of this paragraph (b), that
the actions of Executive constituted Cause and the basis thereof, and (iv) a
written determination provided by the Board setting forth the acts and omissions
that form the basis of such termination of employment. Any determination by the
Board hereunder shall be made by the affirmative vote of at least a two-thirds
(2/3) majority of all of the members of the Board (other than Executive). Any
purported termination of employment of Executive by the Company which does not
meet each and every substantive and procedural requirement of this paragraph (b)
shall be treated for all purposes under this Agreement as a termination of
employment without Cause.
(c) Voluntary Termination for Good Reason; Involuntary Termination Other
Than for Cause. Executive may terminate her employment for Good Reason at any
time within one hundred eighty (180) days after the occurrence of the Good
Reason event by written notice to the Company. If Executive's employment with
the Company is voluntarily terminated by Executive for "Good Reason" or is
involuntarily terminated by the Company other than for "Cause", then, subject to
Executive executing and not revoking the Release Agreement attached hereto as
Exhibit A (other than with respect to subsections 4(c)(i) and (vii) below), the
Company shall pay or provide Executive with the following:
(i) any Accrued Benefits;
(ii) the Prorated Bonus;
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<PAGE>
(iii) the Guaranteed 1999 Bonus and the Guaranteed 2000 Bonus to the
extent not previously paid or paid under (i) or (ii) above;
(iv) a severance amount equal to two (2) times Executive's then
Target Pay, payable in substantially equal installments over 24 months in
accordance with the Company's standard payroll practice; provided, however, that
(i) if Executive competes with the Company or materially violates Sections 7(c)
or (d) hereof, any severance payments due thereafter shall cease and be
forfeited as of the commencement of such competition, (ii) in the event of a
Change of Control after such termination, the unpaid portion of such severance
amount, if any, shall be paid to Executive in full in a single lump sum cash
payment within fifteen (15) business days following such Change of Control, and
(iii) if such termination occurs in contemplation of, at the time of, or within
two (2) years after a Change of Control, Executive shall instead be entitled to
a lump sum cash payment within fifteen (15) business days after delivery of the
aforesaid release equal to three (3) times the sum of (A) Executive's then Base
Salary and (B) the higher of (x) Executive's then current Target Pay and (y) the
highest variable pay and annual incentive bonus received by Executive for the
two (2) fiscal years last ending prior to such termination. For purposes of this
Section 4(c)(iv), "competition" shall mean engaging in any business that
materially competes with the Company.
(v) to the extent eligible on the date of termination, continued
participation, at no additional after tax cost to Executive than Executive would
have as an employee, in all welfare plans until two (2) years after the date of
termination; provided, however, that if such termination occurs within two (2)
years after a Change of Control, Executive shall be entitled to continued
participation in all welfare plans for three (3) years rather than two (2)
years. In the event Executive obtains other
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<PAGE>
employment that offers substantially similar or improved benefits, as to any
particular welfare plan, such continuation of coverage by the Company for such
benefits under such plan shall immediately cease. To the extent such coverage
cannot be provided under the Company's welfare benefit plans without
jeopardizing the tax status of such plans, for underwriting reasons or because
of the tax impact on Executive, the Company shall pay Executive an amount such
that Executive can purchase such benefits separately at no greater after tax
cost to Executive than Executive would have had if the benefits were provided to
Executive as an employee;
(vi) in the event such termination occurs in contemplation of, at the
time of, or within two (2) years after a Change of Control, three (3) additional
years of service and compensation credit (at Executive's then compensation
level) for benefit purposes under any defined benefit type retirement plan,
including but not limited to any tax-qualified retirement plan and any excess
benefit retirement plan if then in effect, and, if Executive is not eligible to
receive benefits under any such plan on the date of termination, two (2)
additional years of age for determining eligibility to receive such benefits,
provided that benefits under any such plan will not commence until Executive
actually attains the required distribution age under the plan or Executive's
spouse qualifies for death benefits under such plan and further provided that,
with regard to any plan qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), the additional amounts may be provided on
a nonqualified plan basis.
(vii) any forfeiture provision of any Restricted Stock or Restricted
Unit shall lapse and Executive shall be fully vested in such Restricted Stock
and Restricted Unit;
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(viii) full vesting of 50% of Executive's unvested Stock Option and
each traunche of each other grant of stock options or other equity awards,
provided that if such termination takes place in contemplation of, at the time
of, or within two (2) years after a Change of Control, Executive shall be
entitled to full vesting of the Stock Option and all other stock options and
equity awards, except that if such Change of Control occurs within one (1) year
after the Employment Commencement Date, (A) the foregoing proviso shall not
apply and (B) the additional vesting beyond that occurring upon the Change of
Control shall not occur if the termination is at the time of or within three (3)
months after the Change of Control; and
(ix) outplacement services at a level commensurate with Executive's
position, including use of an executive office and secretary, for a period of
one (1) year commencing on Executive's date of termination but in no event
extending beyond the date on which Executive commences other full time
employment.
For the purposes of this Agreement "Good Reason" means, without the express
written consent of Executive, the occurrence of any of the following events: (i)
any reduction or diminution (except temporarily during any period of disability)
in Executive's titles or positions, any material diminution in Executive's
authority, duties or responsibilities with the Company (it being acknowledged
that, in the event any entity becomes the owner (directly or indirectly) of more
than 35% of the Common Stock, it shall be Good Reason if Executive is not the
Chief Executive Officer of such entity); (ii) a breach by the Company of any
material provision of this Agreement, including, but not limited to, a breach of
the Company's obligation under Section 1(a), any reduction, (other than a
reduction (not to exceed ten percent (10%)) that applies, in equal percentages,
to all U.S.
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<PAGE>
officers (within the meaning of Section 16 of the Securities Exchange Act of
1934, as amended) of the Company), in Executive's Base Salary or any material
failure to timely pay any part of Executive's compensation (including, without
limitation, Base Salary, annualized Target Pay and bonus) or to materially
provide in the aggregate the level of benefits contemplated herein; (iii) the
failure of the Company to obtain and deliver to Executive a satisfactory written
agreement from any successor to the Company to assume and agree to perform this
Agreement in accordance with Section 8 hereof; or (iv) the failure to appoint or
elect Executive to the Board within thirty (30) days of the Employment
Commencement Date or at any time thereafter or the removal of Executive
therefrom.
(d) Without Good Reason. Executive may terminate her employment at any
time without Good Reason by written notice to the Company. In the event that
Executive's employment with the Company is terminated during the Employment Term
by Executive without Good Reason, Executive shall not be entitled to any
additional payments or benefits hereunder, other than Accrued Benefits
(including, but not limited to, any then vested Stock Option, Restricted Stock,
Restricted Units or other stock options or equity grants).
(e) No Mitigation/No Offset. Executive shall not be required to seek other
employment or otherwise mitigate the value of any severance benefits
contemplated by this Agreement, nor shall any such benefits be reduced by any
earnings or benefits that Executive may receive from any other source. The
amounts payable hereunder shall not be subject to setoff, counterclaim,
recoupment, defense or other right which the Company may have against Executive
or others.
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<PAGE>
5. Change of Control Vesting Acceleration. In the event of a "Change of
--------------------------------------
Control" (as defined below), on the date of such Change of Control (a) any
forfeiture provision of any Restricted Stock or Restricted Unit shall lapse and
Executive shall be fully vested in such Restricted Stock and Restricted Unit and
(b) 50% of any remaining unvested shares subject to the Stock Option and of each
tranche of each other stock option or equity award shall be immediately vested.
Following such partial acceleration of the Stock Option or each tranche of each
other stock option or equity award, the remaining unvested shares of such Stock
Option or tranche shall continue to vest as otherwise provided in the grant.
For the purposes of this Agreement, "Change of Control" is defined as:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) becomes the "beneficial owner"
(as defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing 35% or more of the total voting power represented by
the Company's then outstanding voting securities; or
(b) A change in the composition of the Board occurring within a two-
year period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either (i)
are directors of the Company as of the date hereof or (ii) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or
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<PAGE>
(c) The consummation of a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 50% of the total voting
power represented by the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; or
(d) The consummation of the sale or disposition by the Company of all
or substantially all of the Company's assets; or
(e) The approval by the stockholders of the Company of a plan of
complete liquidation of the Company.
Notwithstanding the foregoing, a Change of Control shall not be deemed
to occur by reason of the divestiture of the Company's test and measurement and
related businesses in connection with the contemplated spin-off of such business
or any events directly attributable thereto.
6. Golden Parachute Excise Tax Gross-Up.
------------------------------------
(a) In the event that Executive shall become entitled to payments and/or
benefits provided by this Agreement or any other amounts in the "nature of
compensation" (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a change of ownership or effective control covered by Section
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<PAGE>
280G(b)(2) of the Code or any person affiliated with the Company or such person)
as a result of such change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (and any similar tax that may
hereafter be imposed by any taxing authority) the Company shall pay to Executive
at the time specified in paragraph (d) below an additional amount (the "Gross-up
Payment") such that the net amount retained by Executive, after deduction of any
Excise Tax on the Company Payments and any U.S. federal, state, and for local
income or payroll tax upon the Gross-up Payment provided for by this paragraph
(a), but before deduction for any U.S. federal, state, and local income or
payroll tax on the Company Payments, shall be equal to the Company Payments.
(b) For purposes of determining whether any of the Company Payments and
Gross-up Payments (collectively the "Total Payments") will be subject to the
Excise Tax and the amount of such Excise Tax, (i) the Total Payments shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "parachute payments" in excess of the "base amount" (as defined
under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise
Tax, unless and except to the extent that, in the opinion of the Company's
independent certified public accountants appointed prior to any change in
ownership (as defined under Section 280G(b)(2) of the Code) or tax counsel
selected by such accountants (the "Accountants") such Total Payments (in whole
or in part) either do not constitute "parachute payments," represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount" or are otherwise not
subject to the Excise Tax, and (ii) the value of any non-cash
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<PAGE>
benefits or any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G of the Code.
(c) For purposes of determining the amount of the Gross-up Payment,
Executive shall be deemed to pay U.S. federal income taxes at the highest
marginal rate of U.S. federal income taxation in the calendar year in which the
Gross-up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of Executive's residence for
the calendar year in which the Company Payment is to be made, net of the maximum
reduction in U.S. federal income taxes which could be obtained from deduction of
such state and local taxes if paid in such year. In the event that the Excise
Tax is subsequently determined by the Accountants to be less than the amount
taken into account hereunder at the time the Gross-up Payment is made, Executive
shall repay to the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-up Payment
attributable to such reduction (plus the portion of the Gross-up Payment
attributable to the Excise Tax and U.S. federal, state and local income tax
imposed on the portion of the Gross-up Payment being repaid by Executive if such
repayment results in a reduction in Excise Tax or a U.S. federal, state and
local income tax deduction), plus interest on the amount of such repayment at
the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the
foregoing, in the event any portion of the Gross-up Payment to be refunded to
the Company has been paid to any U.S. federal, state and local tax authority,
repayment thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to Executive, and interest
payable to the Company shall not exceed the interest received or credited to
Executive by such tax authority for the period it held such portion.
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Executive and the Company shall mutually agree upon the course of action to be
pursued (and the method of allocating the expense thereof) if Executive's claim
for refund or credit is denied.
In the event that the Excise Tax is later determined by the Accountant
or the Internal Revenue Service to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-up Payment), the Company shall make an additional Gross-up Payment in
respect of such excess (plus any interest or penalties payable with respect to
such excess) at the time that the amount of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided for in paragraph (c)
above shall be paid not later than the thirtieth (30th) day following an event
occurring which subjects Executive to the Excise Tax; provided, however, that if
the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to Executive on such day
an estimate, as determined in good faith by the Accountant, of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code),
subject to further payments pursuant to paragraph (c) hereof, as soon as the
amount thereof can reasonably be determined, but in no event later than the
ninetieth (90th) day after the occurrence of the event subjecting Executive to
the Excise Tax. In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to Executive, payable on the fifth (5th) day
after demand by the Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
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<PAGE>
(e) In the event of any controversy with the Internal Revenue Service (or
other taxing authority) with regard to the Excise Tax, Executive shall permit
the Company to control issues related to the Excise Tax (at its expense),
provided that such issues do not potentially materially adversely affect
Executive, but Executive shall control any other issues. In the event the
issues are interrelated, Executive and the Company shall in good faith cooperate
so as not to jeopardize resolution of either issue, but if the parties cannot
agree Executive shall make the final determination with regard to the issues.
In the event of any conference with any taxing authority as to the Excise Tax or
associated income taxes, Executive shall permit the representative of the
Company to accompany Executive, and Executive and Executive's representative
shall cooperate with the Company and its representative.
(f) The Company shall be responsible for all charges of the Accountant.
(g) The Company and Executive shall promptly deliver to each other copies
of any written communications, and summaries of any verbal communications, with
any taxing authority regarding the Excise Tax covered by this Section 6.
7. Non-Compete; Non-Solicit.
------------------------
(a) The parties hereto recognize that Executive's services are special and
unique and that the level of compensation and the provisions herein for
compensation under Section 3 are partly in consideration of and conditioned upon
Executive's not competing with the Company, and that
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Executive's covenant not to compete or solicit as set forth in this Section 7
during and after employment is essential to protect the business and good will
of the Company.
(b) Executive agrees that during the term of employment with the Company
and for a period of twenty-four (24) months thereafter (the "Covenant Period"),
Executive shall not render services for any of the three (3) organizations
designated by the Board in a writing delivered to Executive within thirty (30)
days after the Employment Commencement Date (the "Prohibited List"). The
Prohibited List may be changed by the Board from time to time (but there may
never be more than three (3) entities listed) by written notice to Executive,
such notice to be effective only if Executive's commencement of rendering
services for such entity is ninety (90) or more days after the giving of such
notice. The scope of the non-competition clause under any equity plan, benefit
plan or other plan, agreement or arrangement of the Company shall not be deemed
to prohibit Executive's actions or, except as provided in Section 4(c) of this
Agreement or pursuant to a provision in a Company plan or grant agreement that
precludes future vesting or exercisability at the time competition is entered
into, serve as a basis for any reduction or forfeiture of benefits or payments
thereunder unless such actions violate this Section 7(b) of this Agreement.
(c) During the Covenant Period, Executive shall not, directly or
indirectly, disrupt, damage or interfere with the operation or business of the
Company by soliciting or recruiting its employees for Executive or others, but
the foregoing shall not prevent Executive from giving references.
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(d) During the Covenant Period, Executive shall not, without prior written
authorization from the Company, violate the agreement entered into pursuant to
Section 13 hereof.
(e) Executive agrees that the Company would suffer an irreparable injury
if Executive was to breach the covenants contained in Sections 7(b), (c) or (d)
and that the Company would by reason of such breach or threatened breach be
entitled to injunctive relief in a court of appropriate jurisdiction and
Executive hereby stipulates to the entering of such injunctive relief
prohibiting Executive from engaging in such breach.
(f) If any of the restrictions contained in this Section 7 shall be deemed
to be unenforceable by reason of the extent, duration or geographical scope or
other provisions thereof, then the parties hereto contemplate that the court
shall reduce such extent, duration, geographical scope or other provision hereof
and enforce this Section 7 in its reduced form for all purposes in the manner
contemplated hereby.
8. Assignment. This Agreement shall be binding upon and inure to the benefit
----------
of (a) the heirs, beneficiaries, executors and legal representatives of
Executive upon Executive's death and (b) any successor of the Company, provided
that any successor shall within ten (10) days of such assumption deliver to
Executive a written assumption in a form reasonably acceptable to Executive.
Any such successor of the Company shall be deemed substituted for the Company
under the terms of this Agreement for all purposes. As used herein, "successor"
shall mean any person, firm, corporation or other business entity which at any
time, whether by purchase, merger or otherwise, directly or indirectly acquires
all or substantially all of the assets or business of the Company.
Notwithstanding
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such assignment, the Company shall remain, with such successor, jointly and
severally liable for all of its obligations hereunder. This Agreement may not
otherwise be assigned by the Company.
None of the rights of Executive to receive any form of compensation payable
pursuant to this Agreement shall be assignable or transferable except through a
testamentary disposition or by the laws of descent and distribution upon the
death of Executive or as provided in Section 18 hereof. Any attempted
assignment, transfer, conveyance or other disposition (other than as aforesaid)
of any interest in the rights of Executive to receive any form of compensation
hereunder shall be null and void; provided, however, that notwithstanding the
foregoing, Executive shall be allowed to transfer vested shares subject to the
Stock Option or other stock options or equity awards and vested Restricted Stock
consistent with the rules for transfers to "family members" as defined in
Securities Act Form S-8.
9. Liability Insurance.
-------------------
(a) The Company shall cover Executive under directors and officers
liability insurance both during and, while potential liability exists, after the
Employment Term in the same amount and to the same extent, if any, as the
Company covers its other officers and directors.
(b) The Company shall during and after the Employment Term indemnify and
hold harmless Executive to the fullest extent permitted by applicable law with
regard to actions or inactions taken by Executive in the performance of her
duties as an officer, director and employee of the Company and its affiliates or
as a fiduciary of any benefit plan of the Company and its affiliates.
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10. Payment of Legal Fees. The Company shall pay Executive's reasonable legal
---------------------
and financial consulting fees and costs associated with entering into this
Agreement.
11. Notices. All notices, requests, demands and other communications called
-------
for hereunder shall be in writing and shall be deemed given if (a) delivered
personally or by facsimile, (b) one (1) day after being sent by Federal Express
or a similar commercial overnight service, or (c) three (3) days after being
mailed by registered or certified mail, return receipt requested, prepaid and
addressed to the parties or their successors in interest at the following
addresses, or at such other addresses as the parties may designate by written
notice in the manner aforesaid:
If to the Company: Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Attn: General Counsel
If to Executive: at the last residential address known by the
Company.
12. Severability. In the event that any provision hereof becomes or is
------------
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
13. Proprietary Information. Concurrently with the execution of this
-----------------------
Agreement, Executive shall enter into a confidentiality and proprietary
information agreement with the Company in the form mutually agreed on by the
parties (the "Confidentiality Agreement"), provided, however, that the foregoing
shall not preclude Executive from complying with due legal process or from
removing Company property from the Company's premises in furtherance of her
duties and obligations as provided herein.
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14. Entire Agreement. This Agreement represents the entire agreement and
----------------
understanding between the Company and Executive concerning Executive's
employment relationship with the Company, and supersedes and replaces any and
all prior agreements and understandings concerning Executive's employment
relationship with the Company entered into prior to the date hereof but not any
written agreements entered into simultaneous with this Agreement or thereafter.
15. Arbitration.
-----------
(a) Agreement. The Company and Executive agree that any dispute or
controversy arising out of, relating to, or in connection with this Agreement,
or the interpretation, validity, construction, performance, breach, or
termination thereof shall be settled by binding arbitration to be held in Santa
Clara, California or such other location agreed by the parties hereto, in
accordance with the National Rules for the Resolution of Employment Disputes
then in effect of the American Arbitration Association. The arbitrator may
grant injunctions or other relief in such dispute or controversy. The decision
of the arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction.
(b) Governing Law. The arbitrators shall apply California law to the
merits of dispute or claim, without reference to rules of conflicts of law.
Executive and the Company hereby expressly consent to the personal jurisdiction
of the state and federal courts located in California for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.
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(c) Costs and Fees of Arbitration. Executive shall pay the initial
arbitration filing (not to exceed $200), and the Company shall pay the remaining
costs and expenses of such arbitration (unless Executive requests that each
party pay one-half of the costs and expenses of such arbitration or unless
otherwise required by law). Unless otherwise required by law or pursuant to an
award by the arbitrator, the Company and Executive shall each pay separately its
counsel fees and expenses. Notwithstanding the foregoing, the arbitrator may,
but need not, award the prevailing party in any dispute its or her legal fees
and expenses.
16. No Oral Modification, Cancellation or Discharge. This Agreement may only
-----------------------------------------------
be amended, canceled or discharged in writing signed by Executive and the
Company's General Counsel, the Chairman of the Company (provided Executive is
not Chairman) or a member of the Compensation Committee.
17. Survivorship. The respective rights and obligations of Company and
------------
Executive hereunder shall survive any termination of Executive upon her
employment to the extent necessary to the intended preservation of such rights
and obligations.
18. Beneficiaries. Executive shall be entitled, to the extent permitted under
-------------
any applicable law, to select and change the beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder upon her death by giving
the Company written notice thereof. If Executive dies, severance then due or
other amounts due hereunder shall be paid to her designated beneficiary or
beneficiaries or, if none are designated or none survive Executive, her estate.
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19. Withholding. The Company shall be entitled to withhold, or cause to be
-----------
withheld, any amount of federal, state, city or other withholding taxes required
by law with respect to payments made to Executive in connection with her
employment hereunder.
20. Governing Law. This Agreement shall be governed by the laws of the State
-------------
of California, without reference to rules of conflicts of law.
IN WITNESS WHEREOF, the undersigned have executed this Agreement:
HEWLETT-PACKARD COMPANY
/s/Lewis E. Platt
-------------------------
Lewis E. Platt
EXECUTIVE
/s/Carleton S. Fiorina
-------------------------
Carleton S. Fiorina
Address:
_________________________
_________________________
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EXHIBIT A
---------
RELEASE OF CLAIMS AGREEMENT
This Release of Claims Agreement ("Agreement") is made by and between
Hewlett-Packard Company (the "Company") and ________________________
("Executive").
WHEREAS, ________________________ was employed by the Company;
WHEREAS, the Company and Executive have entered into an Employment
Agreement effective as of __________, 1999 (the "Employment Agreement").
NOW THEREFORE, in consideration of the mutual promises made herein, the
Company and Executive (collectively referred to as "the Parties") hereby agree
as follows:
1. Termination. Executive's employment from the Company terminated on
-----------
________________.
2. Consideration. Subject to and in consideration of Executive's release
-------------
of claims as provided herein, the Company has agreed to pay Executive certain
benefits as set forth in the Employment Agreement.
3. Payment of Salary. Executive acknowledges and represents that the
-----------------
Company has paid all salary, wages, bonuses, accrued vacation, commissions and
any and all other benefits due to Executive, except ___________________________.
4. Release of Claims. Executive agrees that the foregoing consideration
------------------
represents settlement in full of all outstanding obligations owed to Executive
by the Company. Executive, on behalf of herself, and her respective heirs,
family members, executors and assigns, hereby fully and forever releases the
Company and its past, present and future officers, agents, directors,
Executives, investors, shareholders, administrators, affiliates, divisions,
subsidiaries, parents, predecessor and successor corporations, and assigns,
from, and agrees not to sue or otherwise institute or cause to be instituted and
legal or administrative proceedings concerning any claim, duty, obligation or
cause of action relating to any matters of any kind, whether presently known or
unknown suspected or unsuspected, that she may possess arising from any
omissions, acts or facts that have occurred up until and including the Effective
Date of this Agreement including, without limitation,
(a) any and all claims relating to or arising from Executive's
employment relationship with the Company and the termination of that
relationship;
(b) any and all claims relating to, or arising from, Executive's
right to purchase, or actual purchase of shares of stock of the Company,
including, without limitation, any claims for fraud, misrepresentation, breach
of fiduciary duty, breach of duty under applicable state corporate law, and
securities fraud under any state of federal law:
<PAGE>
(c) any and all claims for wrongful discharge of employment;
termination in violation of public policy; discrimation; breach of contract,
both express and implied; breach of a covenant of good faith and fair dealing,
both express and implied; promissory estoppel; negligent or intentional
infliction of emotional distress; negligent or intentional misrepresentation;
negligent or intentional interference with contract or prospective economic
advantage; unfair business practices; defamation; libel; slander; negligence;
personal injury; assault; battery; invasion of privacy; false imprisonment; and
conversion;
(d) any and all claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor
Standards Act, the Executive Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, the California Fair Employment and
Housing Act, and Labor Code section 201, et seq. and section 970, et seq. and
all amendments to each such Act as well as the regulations issued thereunder;
(e) any and all claims for violation of the federal, or any state,
constitution;
(f) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination; and
(g) any and all claims for attorneys' fees and costs.
Executive agrees that the release set forth in this section shall be remain in
effect in all respects as a complete general release as to the matters released.
This release does not extend to any obligations under the Employment Agreement
that survive termination of Executive's employment with the Company or any
obligations incurred under this Agreement.
Notwithstanding the foregoing, this Release shall not cover Executive's rights
to payments and benefits under Section 4(c) of the Employment Agreement,
Executive's rights under Section 4(e), 6.9 or 15 of the Employment Agreement,
Executive's rights to indemnification under the By-laws or Certificate of
Incorporation of the Company or any other rights to indemnification or
Executive's rights with regard to any equity granted or under any benefit plan.
5. Acknowledgement of Waiver of Claims under ADEA. Executive acknowledges
----------------------------------------------
that she is waiving and releasing any rights she may have under the Age
Discrimination in Employment Act of 1967 ("ADEA") and that this waiver and
release is knowing and voluntary. Executive and the Company agree that this
waiver and release does not apply to any rights or claims that may arise under
the ADEA after the Effective Date of this Agreement. Executive acknowledges that
the consideration given for this waiver and release Agreement is in addition to
anything of value to which Executive was already entitled. Executive further
acknowledges that she has been advised by this writing that (a) she should
consult with an attorney prior to executing this Agreement; (b) she has at least
-----
twenty-one (21) days within which to consider this Agreement; (c) she has seven
(7) days following the executing of this Agreement by the parties to revoke the
Agreement; and (d) this Agreement shall not be effective until the revocation
period has expired. Any revocation should be in writing and delivered to the
General Counsel at Hewlett-Packard Company, 3000 Hanover Street,
<PAGE>
Palo Alto, California 94304, by close of business on the seventh day from the
date that Executive signs this Agreement.
6. Civil Code Section 1542. Executive represents that she is not aware
-----------------------
of any claims against the Company other than the claims that are released by
this Agreement. Executive acknowledges that she has been advised by legal
counsel and is familiar with the provisions of California Civil Code Section
1542, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HER FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HER
MUST HAVE MATERIALLY AFFECTED HER SETTLEMENT WITH THE DEBTOR.
Executive, being aware of said code section, agrees to expressly waive any
rights she may have thereunder, as well as under any other statute or common law
principles of similar effect.
7. No Pending or Future Lawsuits. Executive represents that she has no
-----------------------------
lawsuits, claims, or actions pending in her name, or on behalf of any other
person or entity, against the Company or any other person or entity referred to
herein. Executive also represents that she does not intend to bring any claims
on her own behalf or on behalf of any other person or entity against the Company
or any other person or entity referred to herein with regard to matters
released hereunder.
8. Costs. The Parties shall each bear their own costs, expert fees,
-----
attorneys' fees and other fees incurred in connection with this Agreement.
9. Authority. Executive represents and warrants that she has the
---------
capacity to act on her own behalf and on behalf of all who might claim through
her to bind them to the terms and conditions of this Agreement.
10. No Representations. Executive represents that she has had the
------------------
opportunity to consult with an attorney, and has carefully read and understands
the scope and effect of the provisions of this Agreement. Neither party has
relied upon any representations or statements made by the other party hereto
which are not specifically set forth in this Agreement.
11. Severability. In the event that any provision hereof becomes or is
------------
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
12. Entire Agreement. This Agreement and the Employment Agreement and
----------------
the agreements and plans referenced therein represent the entire agreement and
understanding between the Company and Executive concerning Executive's
separation from the Company, and supersede and replace and all prior agreements
and understandings concerning Executive's relationship with the Company and her
compensation by the Company. This Agreement may only be amended in writing
signed by Executive and an executive officer of the Company.
<PAGE>
13. Governing Law. This Agreement shall be governed by the internal
-------------
substantive laws, but not the choice of law rules, of the State of California.
14. Effective Date. This Agreement is effective eight (8) days after it
--------------
has been signed by both Parties.
15. Counterparts. This Agreement may be executed in counterparts, and
------------
each counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
16. Voluntary Execution of Agreement. This Agreement is executed
--------------------------------
voluntarily and without any duress or undue influence on the part or behalf of
the Parties hereto, with the full intent of releasing all claims. The Parties
acknowledge that:
(a) They have read this Agreement;
(b) They have been represented in the preparation, negotiation, and
execution of this Agreement by legal counsel of their own choice or that they
have voluntarily declined to seek such counsel;
(c) They understand the terms and consequences of this Agreement and
of the releases it contains;
(d) They are fully aware of the legal and binding effect of the
Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the
respective dates set forth below.
HEWLETT-PACKARD COMPANY
Dated: _________, _____ By ______________________________
____________________, an individual
Dated: _________, _____ _________________________________
<PAGE>
EXHIBIT 10(hh)
HEWLETT-PACKARD COMPANY
EXECUTIVE TRANSITION PROGRAM
ARTICLE I
PURPOSE, ESTABLISHMENT AND APPLICABILITY OF PLAN
A. Purposes. On March 2, 1999, Hewlett-Packard Company (the "Company")
--------
announced its plans for a strategic realignment of the Company creating two
independent companies (the "Realignment"). The Company's Board of Directors
(the "Board") recognizes that the Realignment is a distraction to key Employees
and may cause such Employees to consider alternative employment opportunities.
The Board has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication of
these Employees, notwithstanding the uncertainty created by the Realignment, and
that it is in the best interests of the Company and its stockholders to provide
these Employees with financial security and encouragement to remain with the
Company and to maximize the value of the Company following completion of the
Realignment.
B. Establishment of Plan. As of the Effective Date, the Company hereby
---------------------
establishes the Plan, as set forth in this document.
C. Applicability of Plan. Subject to the terms of this Plan, the
---------------------
benefits provided by this Plan shall be available to those Employees who, on or
after the Effective Date, receive a Notice of Participation.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
Whenever used in the Plan, the following terms shall have the meanings set
forth below.
A. Board. "Board" means the Board of Directors of the Company.
-----
B. Cause. "Cause" means (i) the Participant's willful failure to
-----
substantially perform his or her material duties (other than as a failure
resulting from the Participant's complete or partial incapacity due to physical
or mental illness or impairment) for a period of thirty (30) days after a
written demand for substantial performance is delivered to the Participant by
the Plan Administrator that specifically identifies the manner in which the Plan
Administrator believes that the Participant has not substantially performed his
or her duties, (ii) a material and willful violation of a federal or state law
or regulation applicable to the business of the Company, and (iii) a willful act
by the Participant that constitutes gross misconduct and that is injurious to
the Company. No act, or failure
<PAGE>
to act, by the Participant shall be considered "willful" unless committed
without good faith and without a reasonable belief that the act or omission was
in the Company's best interests.
C. Code. "Code" means the Internal Revenue Code of 1986, as amended.
----
D. Company. "Company" means Hewlett-Packard Company, any subsidiary
-------
corporations, any successor entities as provided in Article XI hereof, and any
parent or subsidiaries of such successor entities.
E. Constructive Termination. The Participant's employment may be
------------------------
terminated by reason of Constructive Termination. For purposes of this Plan,
"Constructive Termination" means the Participant terminates his or her
employment with the Company as a result of one or more of the following events
(unless such event(s) applies generally to all officers of the Company): (i)
without the Participant's express written consent, a reduction by the Company in
the Participant's annualized Target Pay relative to his or her annualized Target
Pay as in effect immediately prior to such reduction; (ii) a reduction in the
Participant's annualized base salary relative to his or her annualized base
salary as in effect immediately prior to such reduction (other than a reduction
under the Variable Pay Plan in accordance with its terms as consistently
applied); and (iii) without the Participant's express written consent, a
material reduction by the Company in the kind or level of employee benefits to
which the Participant is entitled immediately prior to such reduction with the
result that the Participant's overall benefits package is significantly reduced.
F. Disability. "Disability" means a disability under the Company's
----------
Income Protection Plan that entitles the Participant to benefits under such Plan
for a period of at least twenty-six (26) weeks.
G. Effective Date. "Effective Date" means the date this Plan is approved
--------------
by the Board.
H. Employee. "Employee" means an employee of the Company.
--------
I. ERISA. "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended.
J. Non-Qualified Retirement Plans. "Non-Qualified Retirement Plans"
------------------------------
means the following Company plans as in effect as of the Effective Date:
(i) the Excess Benefit Retirement Plan;
(ii) the Officers Early Retirement Plan; and
(iii) the International Retirement Guarantee.
K. Notice of Participation. "Notice of Participation" means an
-----------------------
individualized written notice of participation in the Plan from an authorized
officer of the Company.
L. Participant. "Participant" means an individual who meets the
-----------
eligibility requirements of Article III.
M. Plan. "Plan" means this Hewlett-Packard Company Executive Transition
----
Program.
-2-
<PAGE>
N. Plan Administrator. "Plan Administrator" means the Board or its
------------------
committee or designate, as shall be administering the Plan.
O. Release Agreement. "Release Agreement" means the form of general
-----------------
waiver, release and agreement a Participant must execute as a condition to
receiving severance and other benefits pursuant to Article V.
P. Retirement. "Retirement" means the Participant's resignation from the
----------
Company after attaining age fifty-five (55) years of age with fifteen (15) or
more "full-time equivalent years of service" (within the meaning of the
Company's Continued Group Medical and SeniorMed Program as in effect on the
Effective Date) or as defined by local country laws.
Q. Severance Payment Factor. "Severance Payment Factor" means, for each
------------------------
Participant, the Severance Payment Factor set forth in such Participant's Notice
of Participation.
R. Severance Payment Period. "Severance Payment Period" means the period
------------------------
of time, expressed as a number of whole months, over which a Participant's
severance payments are scheduled to be made pursuant to Article V.A(i).
S. Target Pay. "Target Pay" means the Participant's base salary and
----------
variable amount for a fiscal period of the Company determined in accordance with
the Variable Pay Plan.
T. Termination Date. "Termination Date" means (i) the date on which the
----------------
Company delivers notice of termination to the Participant or such later date,
not to exceed ninety (90) days, specified in the notice of termination, (ii) in
the event the term of employment ends by reason of the Participant's death, the
date of death, or (iii) if the Participant terminates his or her employment with
the Company, the date on which the Participant delivers notice of termination to
the Company.
U. Transition Period. "Transition Period" means the period beginning on
-----------------
the Effective Date and continuing until the second anniversary date of the
Effective Date, or (ii) such later date as the Board may specify pursuant to its
authority under Article XII.
V. Variable Pay Plan. "Variable Pay Plan" means the Hewlett-Packard
-----------------
Company 1999 Variable Pay Plan as in effect as of the Effective Date, as
amended, or any successor plan.
ARTICLE III
ELIGIBILITY
A. Waiver. As a condition of receiving benefits under the Plan, an
------
Employee must sign the Release Agreement, attached hereto as Exhibit A.
B. Participation in Plan. Each Employee who is designated by the Board
---------------------
and who signs and timely returns to the Company a Notice of Participation shall
be a Participant in the Plan. A Participant shall cease to be a Participant in
the Plan upon ceasing to be an Employee unless such Participant is entitled to
benefits hereunder. A Participant entitled to benefits hereunder shall remain a
Participant in the Plan until the full amount of the benefits have been
delivered to the Participant.
-3-
<PAGE>
ARTICLE IV
TRANSITION PERIOD COMPENSATION AND BENEFITS
During the Transition Period, the Company shall maintain compensation and
benefit programs for the benefit of Plan Participants as follows:
A. Cash Compensation. Participants shall receive a base salary and shall
-----------------
be eligible to receive additional variable compensation. During the Transition
Period, a Participant's Target Pay shall be determined in accordance with the
Variable Pay Plan. During the Transition Period, the Plan Administrator shall
review the Participant's base salary and variable compensation then in effect at
least annually and shall increase such amounts as the Company may approve. The
Participant's base salary and variable compensation shall be payable in
accordance with the Company's normal payroll practices and, in the case of the
variable compensation, in accordance with the terms of the Variable Pay Plan.
B. Equity Compensation. During the Transition Period, Participants shall
-------------------
be eligible to receive stock options, stock and other equity-based compensation
awards under the Company's equity compensation plans and programs, subject in
each case to the generally applicable terms and conditions of the applicable
plan or program in question and to the sole determination of the Board or any
committee administering such plan or program.
C. Employee Benefits. During the Transition Period, Participants shall
-----------------
be eligible to participate in the employee benefit plans and executive compensa
tion programs maintained by the Company applicable to other senior executives of
the Company, including (without limitation) the Company's Executive Deferred
Compensation Plan, retirement plans, savings or profit-sharing plans, incentive
or other bonus plans, life, disability, health, accident and other insurance
programs, vacation, sick leave, personal time off and similar plans or programs,
subject in each case to the generally applicable terms and conditions of the
applicable plan or program in question and to the sole determination of the
Board or any committee administering such plan or program.
D. Retirement Benefits. Certain of the Participants are covered under
-------------------
one or more of the Non-Qualified Retirement Programs, in addition to the
Company's Retirement Plan and its Deferred Profit-Sharing Plan. With respect to
such Participants, except as provided below with respect to the Officers Early
Retirement Plan, during the Transition Period the Company shall continue to
maintain such Non-Qualified Retirement Plans (or such comparable alternative
non-qualified retirement arrangements as the Company may, in its discretion,
determine to be sufficient to satisfy its obligations to the Participants under
this Article IV.D, so as to provide benefits to the Participants that are no
less favorable than those available to the Participants under such Plans as of
the Effective Date, it being the Company's intention to deliver benefits to the
Participants at a level that is not less than that currently provided under the
Non-Qualified Retirement Plans. Notwithstanding the preceding sentence, on
March 18, 1999 the Compensation Committee of the Board (the "Compensation
Committee") terminated the Officers Early Retirement Plan effective November 1,
1999. In connection with such termination, the Company will calculate a lump
sum equivalent benefit for eligible Officers Early Retirement Plan participants,
and will credit such amounts to the participants' accounts under the Company's
Executive Deferred Compensation Plan, subject to the terms and conditions of
that Plan. Except as otherwise provided herein, the amount so credited to
-4-
<PAGE>
the Executive Deferred Compensation Plan shall be subject to a vesting condition
based on the Participant's continued employment with the Company.
E. Other Benefits. The Participant shall be entitled to such other
--------------
benefits, if any, as may be specified by the Plan Administrator on the
Participant's Notice of Participation.
ARTICLE V
TERMINATION OF EMPLOYMENT
If a Participant's employment with the Company terminates for any reason
during the Transition Period, he or she may be entitled to severance and other
benefits as follows:
A. Involuntary or Constructive Termination; Disability. If the Company
---------------------------------------------------
terminates a Participant's employment other than for Cause, or if the
Participant terminates his or her employment as a result of Constructive
Termination, or if the Participant's employment terminates by reason of
Disability, then, subject to the Participant's obligations under the Release
Agreement, the Participant shall be entitled to receive the following severance
and other benefits:
(i) Cash Payments. The Participant shall be entitled to severance
-------------
equal to the product obtained by multiplying the Participant's annualized Target
Pay for the Company's fiscal period then in effect times the Participant's
Severance Payment Factor; provided, however, that in the event that the
Participant's termination is by reason of the Participant's Disability, any cash
payment to which the Participant is entitled herein shall be offset by any cash
disability payments to which the Participant is entitled under the Company's
disability plans and programs. Such severance shall be paid to the Participant
in substantially equal installments in accordance with the Company's normal
payroll over the Severance Payment Period, beginning within fifteen (15)
calendar days of the Participant's Termination Date.
(ii) Options. The unvested portion of any stock option(s) held by
-------
the Participant under the Company's stock plans shall vest and become
exercisable in full.
(iii) Restricted Stock. Except as otherwise provided below with
----------------
respect to "performance-based" restricted stock, the unvested portion of any
restricted stock granted to the Participant under the Company's stock plans
shall vest in full on the Termination Date; with respect to restricted stock
awarded to the Participant that is subject to vesting based upon the attainment
of performance targets, the Participant shall vest in a portion of the unvested
shares of such restricted stock and shall receive a number of unrestricted
shares, such portion and such number to be determined by the Company in
accordance with past practices consistently applied with respect to unvested
shares of restricted stock in the case of an employee whose employment
terminates by reason of retirement or permanent and total disability.
(iv) Retiree Benefits. If specified on the Participant's Notice of
----------------
Participation, the Participant shall be credited with additional service for
eligibility purposes under the Company's Continued Group Medical and SeniorMed
Program. In addition, any employment or other similar requirement applicable to
the Officers Early Retirement Plan termination amount (as credited to the
Participant's account under the Company's Executive Deferred Compensation Plan,
together with any earnings credited thereto) shall be waived.
-5-
<PAGE>
(v) Health Plan Coverage and Financial Counseling. The Participant
---------------------------------------------
may elect, to the extent eligible, to continue his or her group health insurance
benefits pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended (COBRA). The Company shall also provide to the Participant for one
year after the Termination Date professional financial counseling services
comparable in scope and value to the financial counseling services made
available to the Participant immediately prior to the Termination Date.
(vi) Other Benefits. The Participant shall be entitled to such other
--------------
benefits, if any, as may be specified by the Plan Administrator on the
Participant's Notice of Participation.
B. Other Termination. If (i) the Participant voluntarily resigns from
-----------------
the Company (other than as a Constructive Termination), (ii) the Company
terminates the Participant's employment for Cause, or (iii) the Participant's
employment terminates by reason of his or her Retirement or death, then the
Participant shall not be entitled to receive severance or other benefits under
this Plan and shall be entitled to benefits (if any) only as may then be
established under the Company's then existing benefit plans and policies at the
time of such resignation or termination.
ARTICLE VI
GOLDEN PARACHUTE EXCISE TAX AND NON-DEDUCTIBILITY LIMITATIONS
In the event that the benefits provided for in this Plan otherwise
constitute "parachute payments" within the meaning of Section 280G of the Code
and would, but for this Article VI, be subject to the excise tax imposed by
Section 4999 of the Code (the "Excise Tax"), then the Participant's benefits
under Article V shall be either:
(i) delivered in full, or
(ii) delivered as to such lesser extent as would result in no portion
of such benefits being subject to the Excise Tax,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the Excise Tax, results in the receipt by
Participant on an after-tax basis, of the greatest amount of benefits,
notwithstanding that all or some portion of such benefits may be taxable under
Section 4999 of the Code. Unless the Company and the Participant otherwise
agree in writing, all determinations required to be made under this Article,
including the manner and amount of any reduction in the Participant's benefits
under Article V, and the assumptions to be utilized in arriving at such
determinations, shall be made in writing in good faith by the accounting firm
serving as the Company's independent public accountants immediately prior to the
event giving rise to such Payment (the "Accountants"). For purposes of making
the calculations required by this Article VI, the Accountants may make
reasonable assumptions and approximations concerning the application of Sections
280G and 4999 of the Code. The Company and the Participant shall furnish to the
Accountants such information and documents as the Accountants may reasonably
request to make a determination under this Article. The Company shall bear all
costs the Accountants may reasonably incur in connection with any calculations
contemplated by this Article.
-6-
<PAGE>
ARTICLE VII
FUNDING POLICY AND METHOD
Benefits and any administrative expenses arising in connection with the
Plan shall be paid as needed solely from the general assets of the Company. No
contributions are required from any 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. Participants' rights against the
Company with respect to severance and other benefits provided under this Plan
shall be those of general unsecured creditors. No Participant has an interest
in his or her severance or other benefits under this Plan until the Participant
actually receives a payment.
ARTICLE VIII
CLAIMS PROCEDURE
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 the specific reasons for the denial and shall be given to the claimant
within ninety (90) days after the Company receives his or her claim.
ARTICLE IX
REVIEW PROCEDURE
A. Review Panel. The Review Panel appointed for the Hewlett-Packard
------------
Company Deferred Profit Sharing and Retirement Plan shall be named fiduciary
that shall have discretionary authority to act with respect to appeals from
denials of claims for benefits under the Plan.
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 sixty (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 Executive Transition Program; 3000 Hanover St., Palo Alto,
California 94304." A request for review shall set forth all of the grounds upon
which it is based, all facts and support thereof and any other matters that 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.
-7-
<PAGE>
ARTICLE X
EMPLOYMENT STATUS; WITHHOLDING
A. Employment Status. This Plan does not constitute a contract of
-----------------
employment or impose on the Participant or the Company any obligation to retain
the Participant as an Employee, to change the status of the Participant's
employment, or to change the Company's policies regarding termination of
employment. The Participant's employment is and shall continue to be at-will,
as defined under applicable law. If the Participant's employment with the
Company or a successor entity terminates for any reason, the Participant shall
not be entitled to any payments, benefits, damages, awards or compensation other
than as provided by this Plan, or as may otherwise be available in accordance
with the Company's established employee plans and practices or other agreements
with the Company at the time of termination.
B. Taxes. All payments made pursuant to this Plan shall be subject to
-----
all applicable reporting obligations and any tax or other contributions required
to be withheld under Federal, state or local law, or the applicable laws of any
non-U.S. taxing authority as interpreted by the Company.
ARTICLE XI
SUCCESSORS TO COMPANY AND PARTICIPANTS
A. Company's Successors. Any successor to the Company (whether direct or
--------------------
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Plan and agree expressly to perform the
obligations under this Plan by executing a written agreement. For all purposes
under this Plan, the term "Company" shall include any successor to the Company's
business and/or assets which executes and delivers the assumption agreement
described in this subsection or which becomes bound by the terms of this Plan by
operation of law.
B. Participant's Successors. All rights of the Participant hereunder
------------------------
shall inure to the benefit of, and be enforceable by, the Participant's personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
ARTICLE XII
DURATION, AMENDMENT AND TERMINATION
A. Duration. This Plan shall terminate on the second anniversary of the
--------
Effective Date, unless this Plan is extended by the Board.
B. Plan Amendment. The Board shall have the discretionary authority to
--------------
amend the Plan in any respect by resolution adopted by a majority of the Board;
provided, however, that the Board may not amend the Plan in any way that is
adverse to a Plan Participant without the Participant's written consent.
-8-
<PAGE>
ARTICLE XIII
NOTICE
A. General. Notices and all other communications contemplated by this
-------
Plan shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Participant, mailed
notices shall be addressed to him or her at the home address which he or she
most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
all notices shall be directed to the attention of its General Counsel.
B. Notice of Termination by the Company. Any termination by the Company
------------------------------------
of the Participant's employment with the Company during the Transition Period
shall be communicated by a notice of termination to the Participant at least
five (5) days prior to the date of such termination (or at least thirty (30)
days prior to the date of a termination by reason of the Participant's
Disability). Such notice shall indicate the specific termination provision or
provisions in this Plan relied upon (if any), shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
under the provision or provisions so indicated, and shall specify the
Termination Date.
C. Notice by the Participant of Constructive Termination by the Company.
--------------------------------------------------------------------
In the event that the Participant determines that a Constructive Termination has
occurred at any time during the Transition Period, the Participant shall give
written notice to the Company that such Constructive Termination has occurred.
Such notice shall be delivered by the Participant to the Company within ninety
(90) days following the date on which such Constructive Termination occurred,
shall indicate the specific provision or provisions in this Plan upon which the
Participant relied to make such determination and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for such
determination. The failure by the Participant to include in the notice any fact
or circumstance which contributes to a showing of Constructive Termination shall
not waive any right of the Participant hereunder or preclude the Participant
from asserting such fact or circumstance in enforcing his or her rights
hereunder.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
A. No Duty to Mitigate. The Participant shall not be required to
-------------------
mitigate the amount of any benefits contemplated by this Plan, nor shall any
such benefits be reduced by any earnings or benefits that the Participant may
receive from any other source, except as provided in Article V.A(i).
B. Severability. The invalidity or unenforceability of any provision or
------------
provisions of this Plan shall not affect the validity or enforceability of any
other provision hereof, which shall remain in full force and effect.
C. No Assignment of Benefits. The rights of any person to payments or
-------------------------
benefits under this Plan shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this subsection shall be void.
-9-
<PAGE>
ARTICLE XV
ERISA REQUIRED INFORMATION
A. Plan Sponsor. The Plan sponsor and administrator is:
------------
Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
B. Designated Agent. Designated agent for service of process:
----------------
General Counsel
Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94303
C. Plan Records. Plan records are kept on a fiscal year basis.
------------
D. Plan Funding. The Plan is funded from the Company's general assets.
------------
-10-
<PAGE>
HEWLETT-PACKARD COMPANY EXECUTIVE TRANSITION PROGRAM
NOTICE OF PARTICIPATION
To:
Date:
The Board has designated you as a Participant in the Hewlett-Packard
Company Executive Transition Program (the "Plan"), a copy of which is attached
hereto. The terms and conditions of your participation in the Plan are as set
forth in the Plan and in this Notice of Participation. As a condition to
receiving benefits under the Plan you agree (i) to sign a general waiver,
release and agreement, substantially in the form attached to the Plan as Exhibit
A, and (ii) to maintain in complete confidence your participation in the Plan as
well as the contents and terms of this Notice of Participation. The variables
relating to your Plan participation are as follows:
Severance Payment Factor: [__________]
Severance Payment Period: [_______ months]
Additional Credited Service (Retiree Medical) [________months]
[Retention Bonus (payable to Participant
on [date] as a single lump sum amount (cash)
or stock), provided the Participant remains
employed by the Company through such date;
the accelerated vesting provision of Article
V.A(iii) shall not apply to the Retention Bonus: $_______________]
[Other Benefits: e.g., relocation]
If you agree to participate in the Plan on these terms and conditions,
please acknowledge your acceptance by signing below. Please return the signed
copy of this Notice of Participation within ten (10) days of the date set forth
above to:
_______________________________
_______________________________
3000 Hanover Street
Palo Alto, California 94304
<PAGE>
Your failure to timely remit this signed Notice of Participation will
result in your removal from the Plan. Please retain a copy of this Notice of
Participation, along with the Plan, for your records.
Date:___________________________ Signature:________________________________
<PAGE>
EXHIBIT 10 (ii)
HEWLETT-PACKARD COMPANY
INCENTIVE STOCK PLAN STOCK OPTION AGREEMENT (NON-QUALIFIED)
THIS AGREEMENT, dated July 17, 1999 ("Grant Date") by and between HEWLETT-
PACKARD COMPANY, a Delaware corporation ("Company"), and 00547500 Carleton S.
Fiorina ("Employee"), is entered into as follows:
WITNESSETH:
WHEREAS, the Company has established the Hewlett-Packard Company 1995
Incentive Stock Plan ("Plan"), a copy of which can be found on the Stock Options
Web Site at: http://hpweb.corp.hp.com/publish/hwp/stock/stok_opt.htm or by
written or telephonic request to the Company Secretary, and which Plan made a
part hereof; and
WHEREAS, the Compensation Committee of the Board of Directors of the Company
("Committee") determined that the Employee be granted an option under the Plan
as reflected in the terms and conditions contained in the Employment Agreement
by and between the Employee and the Company made as of July 17, 1999 (the
"Employment Agreement") and as hereinafter set forth;
NOW THEREFORE, the parties hereby agree that in consideration of services to
be rendered, the Company grants the Employee an option ("Option") to purchase
600,000 shares of its $1.00 par value voting common stock of the Company
("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. The Option price shall be $113.03 per share of Stock.
3. Except as may be provided in this Paragraph 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 her
lifetime. Except as may be provided in this Paragraph 3, this Option may not
be transferred, assigned, pledged or hypothecated by the Employee during her
lifetime, whether by operation of law or otherwise, and is not subject to
execution, attachment or similar process. The Employee may transfer this
Option (to the extent vested) consistent with the rules for transfers to
"family members" as defined in Form S-8 of the Securities Act of 1933, as
amended; provided, however, that any such transfer shall comply with all
procedural rules reasonably established by the Committee.
4. This Option shall become exercisable as to 25% of the Stock subject to such
Option on the first anniversary date of the Grant Date, and as to an
additional 25% on each succeeding anniversary date, so as to be 100% vested
on the fourth anniversary thereof, conditioned upon the Employee's continued
employment with the Company as of each vesting date. Notwithstanding the
foregoing, this Option shall become exercisable as to:
(a) 100% of the then unvested Stock subject to this Option upon the
termination of the Employee's employment due to a "Disability
Termination" (as defined in the Employment Agreement), death or
retirement due to age or permanent and total disability;
(b) 50% of the then unvested Stock subject to this Option upon the Employee's
voluntary termination of employment for "Good Reason" (as defined in the
Employment Agreement) or involuntary termination by the Company other
than for "Cause" (as defined in the Employment Agreement); provided,
however, that if such termination takes place in contemplation of, at the
time of, or within two (2) years after a Change of Control (as defined in
the Employment Agreement), this Option shall become exercisable in full,
except that if such Change of Control occurs within one (1) year after
the Grant Date (i) such full vesting shall not occur, and (ii) the
additional vesting beyond that occurring upon the Change of Control under
sub-paragraph (c) below shall not occur if the termination is at the time
or within three (3) months after the Change of Control; or
(c) 50% of each vesting tranche of the then unvested Stock subject to this
Option in the event of a Change of Control.
Following such partial acceleration of this Option as provided in
Paragraphs 4(b) or (c), the remaining unvested Stock subject to this Option
shall continue to vest as otherwise provided in this Agreement.
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 and this
Agreement. This means that the Option must be exercised, if at all, on or
before July 16, 2009.
6. This Option may be exercised by delivering to the Secretary of the Company at
its head office a written notice stating the number of shares of Stock 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 by:
(a) Cash;
-1-
<PAGE>
(b) Shares of Stock owned for at least six (6) months;
(c) Delivery of the Employee's promissory note ("Note") in the form attached
hereto as Exhibit A bearing interest at the "applicable federal
---------
rate" prescribed under the Internal Revenue Code of 1986, as amended and
its regulations at time of purchase and secured by a pledge of the Stock
purchased by the Note pursuant to the Security Agreement attached hereto
as Exhibit B; or
---------
(f)d Consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
(e) A combination thereof; provided, however, that any payment in Stock or
by delivery of a Note 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 her employment for any reason other
than retirement due to age or permanent and total disability, a Disability
Termination, termination by the Company without Cause, or voluntary
termination by the Employee for Good Reason, except as provided in Paragraph
4(b) with regard to the contemplation of a Change of Control. In the event of
the Employee=s retirement due to age or permanent and total disability, the
Employee may exercise the Option within three (3) years after such
retirement. In the event of the Employee's termination of employment due to a
Disability Termination (other than due to a permanent and total disability),
termination by the Company without Cause, or voluntary termination by the
Employee for Good Reason, the Employee may exercise the Option within one (1)
year after such termination. In the event of the Employee's death, her 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
withholding taxes and required social security contributions at the time the
Employee exercises any portion of this Option. The Employee may elect to
satisfy such withholding tax obligation by having the Company retain Stock
having a fair market value equal to the Company's minimum withholding
obligation.
9. 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, and it is expressly agreed and understood that employment is
terminable at the will of either party subject to the provisions of the
Employment Agreement.
HEWLETT-PACKARD COMPANY
By /s/ Susan P. Orr
----------------
Susan P. Orr
Chairman of the Compensation Committee
By /s/ Ann Baskins
---------------
Ann Baskins
Associate General Counsel
RETAIN THIS AGREEMENT FOR YOUR RECORDS
-2-
<PAGE>
Exhibit A
---------
NOTE
FOR VALUE RECEIVED, _____________________ promises to pay to HEWLETT-
PACKARD COMPANY, a Delaware corporation (the "Company"), or order, the principal
sum of _______________________ ($_____________), together with interest on the
unpaid principal hereof from the date hereof at the rate of _______________
percent (____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on _______________,
_____. Payment of principal and interest shall be made in lawful money of the
United States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Company's 1995 Incentive Stock
Plan, the Incentive Stock Plan Stock Option Agreement (Non-Qualified) between
the Company and the undersigned, dated as of July 17, 1999 and the Employment
Agreement between the Employee and the Company made as of July 17, 1999. This
Note is secured in part by a pledge of the Company's $1.00 par value voting
common stock ("Stock") under the terms of a Security Agreement of even date
herewith and is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee of the Company
for any reason, this Note shall, at the option of the Company, be accelerated,
and the whole unpaid balance on this Note of principal and accrued interest
shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
Dated:_________________________ ______________________________________
Signature
______________________________________
Print Name
<PAGE>
EXHIBIT B
---------
SECURITY AGREEMENT
This Security Agreement is made as of __________, _____ between
HEWLETT-PACKARD COMPANY, a Delaware corporation ("Pledgee"), and
_________________________ ("APledgor").
Recitals
--------
WHEREAS, pursuant to Pledgor's election to purchase shares of $1.00
par value voting common stock of the Company ("Stock") under the Option
Agreement dated July 17, 1999 (the "Option Agreement"), between Pledgor and
Pledgee under Pledgee's 1995 Incentive Stock Plan, and Pledgor's election under
the terms of the Option Agreement to pay for such Stock with her promissory note
(the "Note"), Pledgor has purchased _________ shares of Pledgee's Stock at a
price of $________ per share, for a total purchase price of $__________. The
Note and the obligations thereunder are as set forth in Exhibit A to the Option
Agreement.
NOW, THEREFORE, it is agreed as follows:
1 Creation and Description of Security Interest. In consideration of
---------------------------------------------
the pursuant to the Delaware Commercial Code, hereby pledges all of such
Stock (herein sometimes referred to as the "Collateral") represented by
certificate number ______, duly endorsed in blank or with executed stock
powers, and herewith delivers said certificate to the Secretary of
Pledgee ("Pledgeholder"), who shall hold said certificate subject to the
terms and conditions of this Security Agreement.
The pledged Stock (together with an executed blank stock assignment
for use in transferring all or a portion of the Stock to Pledgee if, as
and when required pursuant to this Security Agreement) shall be held by
the Pledgeholder as security for the repayment of the Note, and any
extensions or renewals thereof, to be executed by Pledgor pursuant to
the terms of the Option, and the Pledgeholder shall not encumber or
dispose of such Stock except in accordance with the provisions of this
Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
---------------------------------------
into this Security Agreement, Pledgor represents and covenants to
Pledgee, its successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum of the
-----------------------
Note secured hereby, together with interest thereon, at the time and
in the manner provided in the Note.
(b) Encumbrances. The Stock is free of all other encumbrances, defenses
------------
and liens, and Pledgor will not further encumber the Stock without
the prior written consent of Pledgee.
(c) Margin Regulations. In the event that Pledgee's Stock is now or
------------------
later becomes margin-listed by the Federal Reserve Board and Pledgee
is classified as a "lender" within the meaning of the regulations
under Part 207 of Title 12 of the Code of Federal Regulations
("Regulation G"), Pledgor agrees to cooperate with Pledgee in making
any amendments to the Note or providing any additional collateral as
may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
-------------
payments of principal and interest are made as they become due under the
terms of the Note, Pledgor shall have the right to vote all of the
shares of Stock pledged hereunder.
4. Stock Adjustments. In the event that during the term of the pledge any
-----------------
stock dividend, reclassification, readjustment or other changes are
declared or made in the capital structure of Pledgee, all new,
substituted and additional shares or other securities issued by reason
of any such change shall be delivered to and held by the Pledgee under
the terms of this Security Agreement in the same manner as the Stock
originally pledged hereunder. In the event of substitution of such
securities, Pledgor, Pledgee and Pledgeholder shall cooperate and
execute such documents as are reasonable so as to provide for the
substitution of such Collateral
-1-
<PAGE>
and, upon such substitution, references to "Stock" in this Security
Agreement shall include the substituted shares of capital stock of
Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this pledge,
------------------
subscription options or other rights or options shall be issued in
connection with the pledged Stock, such subscription options or other
rights or options shall be the property of Pledgor and, if exercised by
Pledgor, all new stock or other securities so acquired by Pledgor as it
relates to the pledged Stock then held by Pledgeholder shall be
immediately delivered to Pledgeholder, to be held under the terms of
this Security Agreement in the same manner as the Stock pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
-------
this Security Agreement in the event:
(a) Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
(b) Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10
days after written notice thereof from Pledgee.
In the case of an event of default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor,
and Pledgee shall thereafter be entitled to pursue its remedies under
the Delaware Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
---------------------
Regulation G, there shall be released from this pledge a portion of the
pledged Stock held by Pledgeholder hereunder upon payments of the
principal of the Note. The number of the pledged shares of Stock which
shall be released shall be that number of full shares which bears the
same proportion to the initial number of shares pledged hereunder as the
payment of principal bears to the initial full principal amount of the
Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
----------------------------------------
withdraw, pledge, substitute or otherwise dispose of all or any part of
the Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Stock shall continue until the payment of
----
all indebtedness secured hereby, at which time the remaining pledged
Stock shall be promptly delivered to Pledgor, subject to the provisions
for prior release of a portion of the Collateral as provided in
paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
----------
proceeding is instituted by or against it, or if a receiver is appointed
for the property of Pledgor, or if Pledgor makes an assignment for the
benefit of creditors, the entire amount unpaid on the Note shall become
immediately due and payable, and Pledgee may proceed as provided in the
case of default.
11. Pledgeholder Liability. In the absence of willful or gross negligence,
----------------------
Pledgeholder shall not be liable to any party for any of his or her
acts, or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
-----------------------------------
the enforceability or invalidity of any provision or provisions of this
Security Agreement shall not render any other provision or provisions
herein contained unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the terms
---------------------
of this Security Agreement shall be binding on their respective
successors and assigns, and that the term "Pledgor" and the term
"Pledgee" as used herein shall be deemed to include, for all purposes,
the respective designees, successors, assigns, heirs, executors and
administrators.
14. Governing Law. This Security Agreement shall be interpreted and
-------------
governed under the internal substantive laws, but not the choice of law
rules, of California.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR" ____________________________________________
Signature
____________________________________________
Print Name
"PLEDGEE"
HEWLETT-PACKARD COMPANY
a Delaware corporation
____________________________________________
Signature
____________________________________________
Print Name
____________________________________________
Title:
"PLEDGEHOLDER" ____________________________________________
Signature
____________________________________________
Print Name
____________________________________________
Title: Secretary of HEWLETT-PACKARD COMPANY
-3-
<PAGE>
EXHIBIT 10(jj)
HEWLETT-PACKARD COMPANY
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, dated as of July 17, 1999 ("Grant Date") by and between
Hewlett-Packard Company, a Delaware Corporation ("Company"), and 00547500
Carleton S. Fiorina ("Employee"), is entered into as follows:
WHEREAS, the Company has established the Hewlett-Packard Company 1995
Incentive Stock Plan ("Plan"), a copy of which can be found on the Stock Options
Web Site at: http://hpweb.corp.hp.com/publish/hwp/stock/stok-opt.htm or by
written or telephonic request to the Company Secretary, and which Plan made a
part hereof; and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company ("Committee") determined that the Employee be granted shares of the
Company's $1.00 par value Common Stock ("Stock") subject to the restrictions
stated below, as reflected in the terms and conditions contained in the
Employment Agreement by and between the Employee and the Company made as of July
17, 1999 (the "Employment Agreement") and as hereinafter set forth;
NOW, THEREFORE, the parties hereby 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 the Employee 290,000 shares of Stock.
2. Vesting Schedule.
The interest of the Employee in the Stock shall vest as to one-third of
such Stock on the first anniversary of the Grant Date, and as to an
additional one-third on each succeeding anniversary date, so as to be 100%
vested on the third anniversary thereof, conditioned upon the Employee's
continued employment with the Company as of each vesting date.
Notwithstanding the foregoing, the interest of the Employee in the Stock
shall vest as to:
(a) 100% of the then unvested Stock upon the Employee's termination of
employment due to death, a "Disability Termination" (as defined in the
Employment Agreement), involuntary termination by the Company other
than for "Cause" (as defined in the Employment Agreement) or voluntary
termination by the Employee for "Good Reason" (as defined in the
Employment Agreement); or
(b) 100% of the then unvested Stock upon a "Change of Control" (as defined
in the Employment Agreement).
3. Restrictions.
(a) The Stock or rights granted hereunder may not be sold, pledged or
otherwise transferred until the Stock becomes vested in accordance
with Section 2. The period of time between the date hereof and the
date Stock becomes vested is referred to herein as the "Restriction
Period."
(b) If the Employee's employment with the Company is terminated by the
Company for Cause or voluntarily by the Employee (other than for Good
Reason), the balance of the Stock subject to the provisions of this
Agreement which have not vested at the time of the Employee's
termination of employment 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 released by said Escrow Agent to the
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 and except as set forth in Section 7.
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. Changes in Stock.
In the event that as a result of (a) any stock dividend, stock split or
other change in the Stock, or (b) any merger or sale of all or
substantially all of the assets of other acquisition of the Company, and by
virtue of any such change the Employee shall in her capacity as owner of
unvested shares of Stock which have been awarded to her (the "Prior Stock")
be entitled to new or additional or different shares or securities,
-1-
<PAGE>
such new or additional or different shares or securities shall thereupon be
considered to be unvested Stock and shall be subject to all of the
conditions and restrictions which were applicable to the Prior Stock
pursuant to this Agreement.
8. Disability Termination or permanent and total disability of Employee.
In the event of a Disability Termination or permanent and total disability
of the Employee, any unpaid but vested Stock shall be paid to the Employee
if legally competent or to a legally designated guardian or representative
if the Employee is legally incompetent.
9. Death of Employee.
In the event of the Employee's death after the vesting date but prior to
the payment of Stock, said Stock shall be paid to the Employee's estate or
designated beneficiary.
10. Taxes.
The Employee shall be liable for any and all taxes, including withholding
taxes, arising out of this grant or the vesting of Stock hereunder. The
Employee may elect to satisfy such withholding tax obligation by having the
Company retain Stock having a fair market value equal to the Company's
minimum withholding obligation .
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 the Employee at
her 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 and the Employment Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof.
HEWLETT-PACKARD COMPANY
By /s/ Susan P.Orr
---------------
Susan P.Orr
Chairman of the Compensation Committee
By /s/ Ann Baskins
---------------
Ann Baskins
Associate General Counsel
RETAIN THIS AGREEMENT FOR YOUR RECORDS
-2-
<PAGE>
EXHIBIT 10(kk)
HEWLETT-PACKARD COMPANY
RESTRICTED STOCK UNIT AGREEMENT
THIS AGREEMENT, dated as of July 17, 1999 ("Grant Date") by and between
Hewlett-Packard Company, a Delaware Corporation ("Company"), and 00547500
Carleton S. Fiorina ("Employee"), is entered into as follows:
WHEREAS, the Company has established the Hewlett-Packard Company 1995
Incentive Stock Plan ("Plan"), a copy of which can be found on the Stock Options
Web Site at: http://hpweb.corp.hp.com/publish/hwp/stock/stok_opt.htm or by
written or telephonic request to the Company Secretary, and which Plan made a
part hereof; and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company ("Committee") determined that the Employee be granted stock units
subject to the restrictions stated below, as reflected in the terms and
conditions contained in the Employment Agreement by and between the Employee and
the Company made as of July 17, 1999 (the "Employment Agreement") and as
hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
1. Grant of Units.
Subject to the terms and conditions of this Agreement and of the Plan, the
Company hereby credits to a separate account maintained on the books of the
Company ("Account") 290,000 units ("Units"). On any date, the value of each
Unit shall equal the fair market value of a share of the Company's $1.00
par value Common Stock ("Stock"). For purposes of this Agreement, "fair
market value" shall be deemed to be the mean of the highest and lowest
quoted selling prices for a share of Stock on that date as reported on The
New York Stock Exchange Composite Tape.
2. Vesting Schedule.
The interest of the Employee in the Units shall vest as to one-third of
such Units on the first anniversary of the Grant Date, and as to an
additional one-third on each succeeding anniversary date, so as to be 100%
vested on the third anniversary thereof, conditioned upon the Employee's
continued employment with the Company as of each vesting date.
Notwithstanding the foregoing, the interest of the Employee in the Units
shall vest as to:
(a) 100% of the then unvested Units upon the Employee's termination
of employment due to death, a "Disability Termination" (as
defined in the Employment Agreement), involuntary termination by
the Company other than for "Cause" (as defined in the Employment
Agreement) or voluntary termination by the Employee for "Good
Reason" (as defined in the Employment Agreement); or
(b) 100% of the then unvested Units upon a "Change of Control" (as
defined in the Employment Agreement).
3. Restrictions.
(a) The Units granted hereunder may not be sold, pledged or otherwise
transferred and may not be subject to lien, garnishment,
attachment or other legal process. The period of time between the
date hereof and the date the Units become vested is referred to
herein as the "Restriction Period."
(b) If the Employee's employment with the Company is terminated by
the Company for Cause or voluntarily by the Employee (other than
for Good Reason), the balance of the Units subject to the
provisions of this Agreement which have not vested at the time of
the Employee's termination of employment shall be forfeited by
the Employee.
4. Dividends.
If on any date the Company shall pay any dividend on the Stock (other than
a dividend payable in Stock), the number of Units credited to the
Employee's Account shall as of such date be increased by an amount equal
to: (a) the product of the number of Units credited to the Employee's
Account as of the record date for such dividend, multiplied by the per
share amount of any dividend (or, in the case of any dividend payable in
property other than cash, the per share value of such dividend, as
determined in good faith by the Board of Directors of the Company), divided
by (b) the fair market value of a share of Stock on the payment date of
such dividend. In the case of any dividend declared on Stock which is
payable in Stock, the number of Units credited to the Employee shall be
increased by a number equal to the product of (x) the aggregate number of
Units that have been credited to the Employee's Account through the related
dividend record date, multiplied by (y) the number of shares of Stock
(including any fraction thereof) payable as a dividend on a share of Stock.
5. Changes in Stock.
In the event of any change in the number and kind of outstanding shares of
Stock by reason of any recapitalization, reorganization, merger,
consolidation, stock split or any similar change affecting the Stock (other
than a dividend payable in Stock) the Company shall make an appropriate
adjustment in the number and terms of the Units credited to the Employee's
Account so that, after such adjustment, the Units shall represent a right
to receive the same consideration (or if such consideration is not
available, other consideration of the same value) that the Employee would
have received in connection with such recapitalization, reorganization,
merger, consolidation, stock split or any similar
-1-
<PAGE>
change if she had owned on the applicable record date a number of shares of
Stock equal to the number of Units credited to the Employee's Account prior
to such adjustment.
6. Form and Timing of Payment.
On the first to occur of the following, the Company shall pay to the
Employee a number of shares of Stock equal to the aggregate number of
vested Units credited to the Employee as of such date:
(a) The fifth anniversary of the Grant Date;
(b) The first date on which occurs a Change of Control; or
(c) The date of the Employee's termination of employment for any reason.
7. Disability Termination of Employee.
In the event of a Disability Termination of the Employee, any unpaid but
vested Units shall be paid to the Employee if legally competent or to a
legally designated guardian or representative if the Employee is legally
incompetent.
8. Death of Employee.
In the event of the Employee's death after the vesting date but prior to
the payment of the Units, said Units shall be paid to the Employee's estate
or designated beneficiary.
9. Taxes.
The Employee shall be liable for any and all taxes, including withholding
taxes, arising out of this grant or the vesting of Units hereunder. The
Employee may elect to satisfy such withholding tax obligation by having the
Company retain Stock having a fair market value equal to the Company's
minimum withholding obligation.
10. Miscellaneous.
(a) All amounts credited to the Employee's Account under this
Agreement shall continue for all purposes to be a part of the
general assets of the Company. The Employee's interest in the
Account shall make her only a general, unsecured creditor of the
Company.
(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
the Employee at her 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 and the Employment Agreement constitute the entire
agreement of the parties with respect to the subject matter
hereof.
HEWLETT-PACKARD COMPANY
By /s/ Susan P. Orr
----------------
Susan P. Orr
Chairman of the Compensation Committee
By /s/ Ann Baskins
---------------
Ann Baskins
Associate General Counsel
RETAIN THIS AGREEMENT FOR YOUR RECORDS
-2-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AND CONSOLIDATED CONDENSED STATEMENT OF
EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 6,052
<SECURITIES> 54
<RECEIVABLES> 6,766
<ALLOWANCES> 0
<INVENTORY> 5,040
<CURRENT-ASSETS> 20,685
<PP&E> 8,973
<DEPRECIATION> 4,476
<TOTAL-ASSETS> 34,070
<CURRENT-LIABILITIES> 12,349
<BONDS> 1,824
0
0
<COMMON> 294
<OTHER-SE> 18,715
<TOTAL-LIABILITY-AND-EQUITY> 34,070
<SALES> 26,374
<TOTAL-REVENUES> 31,008
<CGS> 0
<TOTAL-COSTS> 21,618
<OTHER-EXPENSES> 6,611
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 137
<INCOME-PRETAX> 3,189
<INCOME-TAX> 845
<INCOME-CONTINUING> 2,344
<DISCONTINUED> 387
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,731
<EPS-BASIC> 2.70
<EPS-DILUTED> 2.61
</TABLE>
