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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c)
or Section240.14a-12
</TABLE>
<TABLE>
<S> <C>
HEWLETT-PACKARD COMPANY
- ------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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</TABLE>
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<TABLE>
<S> <C> <C>
CARLETON S. FIORINA HEWLETT-PACKARD COMPANY
President and [LOGO] 3000 Hanover Street
Chief Executive Officer invent Palo Alto, California 94304
</TABLE>
To our Shareowners:
I am pleased to invite you to attend the annual meeting of shareowners of
Hewlett-Packard Company to be held on Tuesday, February 29, 2000 at 2:00 p.m. at
the Flint Center for the Performing Arts located at 21250 Stevens Creek
Boulevard, Cupertino, California.
Details regarding admission to the meeting and the business to be conducted are
more fully described in the accompanying Notice of Annual Meeting and Proxy
Statement.
If you are unable to attend the meeting in person, you may listen to audio
highlights, which will be posted a few days after the meeting on our investor
relations Web site located at http://www.hp.com/go/financials.
Your vote is important. Whether or not you plan to attend the annual meeting, I
hope you will vote as soon as possible. You may vote over the Internet, as well
as by telephone or by mailing a proxy card. Voting over the Internet, by phone
or by written proxy will ensure your representation at the annual meeting if you
do not attend in person. Please review the instructions on the proxy card
regarding each of these voting options.
Thank you for your ongoing support of and continued interest in Hewlett-Packard
Company.
Sincerely,
/s/ CARLETON S. FIORINA
<PAGE>
2000 ANNUAL MEETING OF SHAREOWNERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
NOTICE OF ANNUAL MEETING.................................... 1
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE
ANNUAL MEETING............................................ 2
WHY AM I RECEIVING THESE MATERIALS?....................... 2
WHAT INFORMATION IS CONTAINED IN THESE MATERIALS?......... 2
WHAT PROPOSALS WILL BE VOTED ON AT THE MEETING?........... 2
WHAT IS HP'S VOTING RECOMMENDATION?....................... 2
WHAT SHARES OWNED BY ME CAN BE VOTED?..................... 2
WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A
SHAREOWNER OF RECORD AND AS A BENEFICIAL OWNER?......... 2
HOW CAN I VOTE MY SHARES IN PERSON AT THE MEETING?........ 2
HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE MEETING?... 3
CAN I CHANGE MY VOTE?..................................... 3
HOW ARE VOTES COUNTED?.................................... 3
WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH OF THE
PROPOSALS?.............................................. 3
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY OR
VOTING INSTRUCTION CARD?................................ 3
HOW CAN I OBTAIN AN ADMISSION TICKET FOR THE MEETING?..... 3
WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?....... 4
WHAT HAPPENS IF ADDITIONAL PROPOSALS ARE PRESENTED AT THE
MEETING?................................................ 4
WHAT CLASSES OF SHARES ARE ENTITLED TO BE VOTED?.......... 4
WHAT IS THE QUORUM REQUIREMENT FOR THE MEETING?........... 4
IS CUMULATIVE VOTING PERMITTED FOR THE ELECTION OF
DIRECTORS?.............................................. 4
WHO WILL COUNT THE VOTES?................................. 4
IS MY VOTE CONFIDENTIAL?.................................. 4
WHO WILL BEAR THE COST OF SOLICITING VOTES FOR THE
MEETING?................................................ 4
MAY I PROPOSE ACTIONS FOR CONSIDERATION AT NEXT YEAR'S
ANNUAL MEETING OF SHAREOWNERS OR NOMINATE INDIVIDUALS TO
SERVE AS DIRECTORS?..................................... 5
BOARD STRUCTURE AND COMPENSATION............................ 6
DIRECTOR COMPENSATION ARRANGEMENTS AND STOCK OWNERSHIP
GUIDELINES................................................ 8
PROPOSALS TO BE VOTED ON.................................... 9
PROPOSAL NO. 1 Election of Directors................... 9
PROPOSAL NO. 2 Ratification of Independent
Accountants............................................ 11
PROPOSAL NO. 3 Approval of the Hewlett-Packard Company
2000 Stock Plan........................................ 12
PROPOSAL NO. 4 Approval of the Hewlett-Packard Company
2000 Employee Stock Purchase Plan...................... 16
PROPOSAL NO. 5 Approval of the Hewlett-Packard Company
Pay-for-Results Plan................................... 19
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.............................................. 22
Beneficial Ownership Table.............................. 22
Section 16(a) Beneficial Ownership Reporting
Compliance............................................. 26
EXECUTIVE COMPENSATION...................................... 27
Summary Compensation Table.............................. 27
Option Grants in Last Fiscal Year....................... 32
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values.......................... 33
Employment Contracts, Termination of Employment and
Change in Control Arrangements......................... 34
Pension Plans........................................... 36
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Officers Early Retirement Plan.......................... 38
Report of the Compensation Committee of the Board of
Directors on Executive Compensation.................... 40
Stock Performance Graph................................. 44
OTHER MATTERS............................................... 45
APPENDIX A HEWLETT-PACKARD COMPANY 2000 STOCK PLAN......... A-1
APPENDIX B HEWLETT-PACKARD COMPANY 2000 EMPLOYEE STOCK
PURCHASE PLAN............................................. B-1
APPENDIX C HEWLETT-PACKARD COMPANY PAY-FOR-RESULTS PLAN.... C-1
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HEWLETT-PACKARD COMPANY
3000 HANOVER STREET
PALO ALTO, CALIFORNIA 94304
(650) 857-1501
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
<TABLE>
<S> <C> <C>
TIME 2:00 p.m. on Tuesday, February 29, 2000
PLACE Flint Center for the Performing Arts
21250 Stevens Creek Boulevard
Cupertino, California
ITEMS OF BUSINESS (1) To elect directors
(2) To ratify the appointment of independent
accountants
(3) To approve the Hewlett-Packard Company 2000 Stock
Plan
(4) To approve the Hewlett-Packard Company 2000
Employee Stock Purchase Plan
(5) To approve the Hewlett-Packard Company Pay-for-
Results Plan
(6) To consider such other business as may properly
come before the meeting
RECORD DATE You are entitled to vote if you were a shareowner at
the close of business on Friday, December 31, 1999.
MEETING ADMISSION TWO CUT-OUT ADMISSION TICKETS ARE INCLUDED ON THE BACK
COVER OF THIS PROXY STATEMENT. Please contact the HP
Corporate Secretary at our headquarters if you need
additional tickets. The meeting will begin promptly at
2 o'clock.
VOTING BY PROXY Please submit a proxy as soon as possible so that your
shares can be voted at the meeting in accordance with
your instructions. You may submit your proxy (1) over
the Internet, (2) by telephone, or (3) by mail. For
specific instructions, please refer to the QUESTIONS
AND ANSWERS beginning on page 2 of this proxy statement
and the instructions on the proxy card.
</TABLE>
By Order of the Board of Directors
/s/ ANN O. BASKINS
ANN O. BASKINS
Vice President, General Counsel and
Secretary
THIS NOTICE OF MEETING AND PROXY STATEMENT AND ACCOMPANYING PROXY CARD ARE BEING
DISTRIBUTED ON OR ABOUT JANUARY 18, 2000.
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- --------------------------------------------------------------------------------
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
Q: WHY AM I RECEIVING THESE MATERIALS?
A: The Board of Directors (the "Board") of Hewlett-Packard Company, a Delaware
corporation (sometimes referred to as the "Company" or "HP"), is providing
these proxy materials for you in connection with HP's annual meeting of
shareowners, which will take place on February 29, 2000. As a shareowner,
you are invited to attend the meeting and are entitled to and requested to
vote on the proposals described in this proxy statement.
Q: WHAT INFORMATION IS CONTAINED IN THESE MATERIALS?
A: The information included in this proxy statement relates to the proposals to
be voted on at the meeting, the voting process, the compensation of
directors and our most highly paid officers, and certain other required
information. Our 1999 Annual Report is also enclosed, and our full 1999
Consolidated Financial Statements accompany this proxy statement.
Q: WHAT PROPOSALS WILL BE VOTED ON AT THE MEETING?
A: There are five proposals scheduled to be voted on at the meeting:
- The election of directors,
- The ratification of independent accountants,
- The approval of the Hewlett-Packard Company 2000 Stock Plan,
- The approval of the Hewlett-Packard Company 2000 Employee Stock Purchase
Plan, and
- The approval of the Hewlett-Packard Company Pay-for-Results Plan.
Q: WHAT IS HP'S VOTING RECOMMENDATION?
A: Our Board of Directors recommends that you vote your shares "FOR" each of
the nominees to the Board and "FOR" each of the other proposals.
Q: WHAT SHARES OWNED BY ME CAN BE VOTED?
A: All shares owned by you as of the close of business on December 31, 1999,
the RECORD DATE, may be voted by you. These shares include (1) shares held
directly in your name as the SHAREOWNER OF RECORD, including shares
purchased through HP's Dividend Reinvestment Plan and HP's Employee Stock
Purchase Plan, and (2) shares held for you as the BENEFICIAL OWNER through a
stockbroker or bank or shares purchased through HP's 40l(k) plan, the TAX
SAVING CAPITAL ACCUMULATION PLAN ("TAXCAP").
Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREOWNER OF RECORD AND
AS A BENEFICIAL OWNER?
A: Most HP shareowners hold their shares through a stockbroker, bank or other
nominee rather than directly in their own name. As summarized below, there
are some distinctions between shares held of record and those owned
beneficially.
SHAREOWNER OF RECORD
If your shares are registered directly in your name with HP's transfer
agent, Harris Trust and Savings Bank, you are considered, with respect to
those shares, the SHAREOWNER OF RECORD, and these proxy materials are being
sent directly to you by HP. As the SHAREOWNER OF RECORD, you have the right
to grant your voting proxy directly to HP or to vote in person at the
meeting. HP has enclosed a proxy card for you to use.
BENEFICIAL OWNER
If your shares are held in a stock brokerage account or by a bank or other
nominee, you are considered the BENEFICIAL OWNER of shares held IN STREET
NAME, and these proxy materials are being forwarded to you by your broker or
nominee which is considered, with respect to those shares, the SHAREOWNER OF
RECORD. As the beneficial owner, you have the right to direct your broker
how to vote and are also invited to attend the meeting. However, since you
are not the SHAREOWNER OF RECORD, you may not vote these shares in person at
the meeting. Your broker or nominee has enclosed a voting instruction card
for you to use in directing the broker or nominee how to vote your shares.
Q: HOW CAN I VOTE MY SHARES IN PERSON AT THE MEETING?
A: Shares held directly in your name as the SHAREOWNER OF RECORD may be voted
in person at the annual meeting. If you choose to do so, please bring the
enclosed proxy card or proof of identification.
EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING, WE RECOMMEND THAT
YOU ALSO SUBMIT YOUR PROXY AS DESCRIBED BELOW SO THAT YOUR VOTE WILL BE
COUNTED IF YOU LATER DECIDE NOT TO ATTEND THE MEETING. SHARES HELD IN STREET
NAME MAY BE VOTED
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IN PERSON BY YOU ONLY IF YOU OBTAIN A SIGNED PROXY FROM THE RECORD HOLDER
GIVING YOU THE RIGHT TO VOTE THE SHARES.
Q: HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE MEETING?
A: Whether you hold shares directly as the shareowner of record or beneficially
in street name, you may direct your vote without attending the meeting. You
may vote by granting a proxy or, for shares held in street name, by
submitting voting instructions to your broker or nominee. In most instances,
you will be able to do this over the Internet, by telephone or by mail.
Please refer to the summary instructions below and those included on your
proxy card or, for shares held in street name, the voting instruction card
included by your broker or nominee.
BY INTERNET--If you have Internet access, you may submit your proxy from any
location in the world by following the "Vote by Internet" instructions on
the proxy card.
BY TELEPHONE--If you live in the United States or Canada, you may submit
your proxy by following the "Vote by Phone" instructions on the proxy card.
BY MAIL--You may do this by signing your proxy card or, for shares held in
street name, the voting instruction card included by your broker or nominee
and mailing it in the enclosed, postage prepaid and addressed envelope. If
you provide specific voting instructions, your shares will be voted as you
instruct. If you sign but do not provide instructions, your shares will be
voted as described below in "HOW ARE VOTES COUNTED?".
Q: CAN I CHANGE MY VOTE?
A: You may change your proxy instructions at any time prior to the vote at the
annual meeting. For shares held directly in your name, you may accomplish
this by granting a new proxy bearing a later date (which automatically
revokes the earlier proxy) or by attending the annual meeting and voting in
person. Attendance at the meeting will not cause your previously granted
proxy to be revoked unless you specifically so request. For shares held
beneficially by you, you may accomplish this by submitting new voting
instructions to your broker or nominee.
Q: HOW ARE VOTES COUNTED?
A: In the election of directors, you may vote "FOR" all of the nominees or your
vote may be "WITHHELD" with respect to one or more of the nominees. For the
other proposals, you may vote "FOR," "AGAINST" or "ABSTAIN." If you
"ABSTAIN," it has the same effect as a vote "AGAINST." If you sign your
proxy card or broker voting instruction card with no further instructions,
your shares will be voted in accordance with the recommendations of the
Board ("FOR" all of the Company's nominees to the Board "FOR" all other
items described in this proxy statement and in the discretion of the proxy
holders on any other matters that properly come before the meeting), except
that any shares you hold in TAXCAP will be voted in proportion to the way
the other TAXCAP participants vote their shares.
Q: WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH OF THE PROPOSALS?
A: In the election of directors, the nine persons receiving the highest number
of "FOR" votes will be elected. All other proposals require the affirmative
"FOR" vote of a majority of those shares present and entitled to vote. If
you are a BENEFICIAL OWNER and do not provide the SHAREOWNER OF RECORD with
voting instructions, your shares may constitute BROKER NON-VOTES, as
described in "WHAT IS THE QUORUM REQUIREMENT FOR THE MEETING?" below. In
tabulating the voting result for any particular proposal, shares that
constitute BROKER NON-VOTES are not considered entitled to vote on that
proposal.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY OR VOTING INSTRUCTION
CARD?
A: It means your shares are registered differently or are in more than one
account. Please provide voting instructions for all proxy and voting
instruction cards you receive.
Q: HOW CAN I OBTAIN AN ADMISSION TICKET FOR THE MEETING?
A: Two cut-out admission tickets are included on the back of this proxy
statement. A limited number of tickets are available for additional joint
owners. To request additional tickets, please contact the HP Corporate
Secretary at our headquarters. If you forget to bring an admission ticket,
you will be admitted to the meeting only if you are listed as a shareowner
of record as of the close of business on December 31, 1999 and bring proof
of
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<PAGE>
identification. If you hold your shares through a stockbroker or other
nominee and fail to bring an admission ticket, you will need to provide
proof of ownership by bringing either a copy of the voting instruction card
provided by your broker or a copy of a brokerage statement showing your
share ownership as of December 31, 1999.
Q: WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?
A: We will announce preliminary voting results at the meeting and publish final
results in our quarterly report on Form 10-Q for the second quarter of
fiscal year 2000.
Q: WHAT HAPPENS IF ADDITIONAL PROPOSALS ARE PRESENTED AT THE MEETING?
A: Other than the five proposals described in this proxy statement, we do not
expect any matters to be presented for a vote at the annual meeting. If you
grant a proxy, the persons named as proxy holders, Carleton S. Fiorina, HP's
President and Chief Executive Officer, and Ann O. Baskins, HP's Vice
President, General Counsel and Secretary, will have the discretion to vote
your shares on any additional matters properly presented for a vote at the
meeting. If for any unforeseen reason any of our nominees is not available
as a candidate for director, the persons named as proxy holders will vote
your proxy for such other candidate or candidates as may be nominated by the
Board of Directors.
Q: WHAT CLASSES OF SHARES ARE ENTITLED TO BE VOTED?
A: Each share of our common stock outstanding as of the close of business on
December 31, 1999, the RECORD DATE, is entitled to one vote on all items
being voted upon at the annual meeting other than election of directors. On
the RECORD DATE, we had approximately 1,004,949,833 shares of common stock
issued and outstanding.
Q: WHAT IS THE QUORUM REQUIREMENT FOR THE MEETING?
A: The quorum requirement for holding the meeting and transacting business is a
majority of the outstanding shares present in person or represented by proxy
and entitled to be voted. Both abstentions and broker non-votes are counted
as present for the purpose of determining the presence of a quorum.
Abstentions are also counted as shares present and entitled to be voted.
Broker non-votes, however, are not counted as shares present and entitled to
be voted with respect to the matter on which the broker has expressly not
voted. Thus, broker non-votes will not affect the outcome of any of the
matters being voted upon at the meeting. Generally, broker non-votes occur
when shares held by a broker for a beneficial owner are not voted with
respect to a particular proposal because (1) the broker has not received
voting instructions from the beneficial owner, and (2) the broker lacks
discretionary voting power to vote such shares.
Q: IS CUMULATIVE VOTING PERMITTED FOR THE ELECTION OF DIRECTORS?
A: In the election of directors, you may elect to cumulate your vote.
Cumulative voting will allow you to allocate, as you see fit, the total
number of votes equal to the number of director positions to be filled
multiplied by the number of shares held by you. Thus, if you own 1 share of
stock, you could allocate 9 "FOR" votes (9 X 1) to as few or as many persons
you choose. Cumulative voting only applies to the election of directors. If
you choose to cumulate your votes, you will need to make an explicit
statement of your intent to do so, either by so indicating in writing on the
proxy card or by stating so when voting at the annual meeting.
Q: WHO WILL COUNT THE VOTES?
A: A representative of Harris Trust and Savings Bank, HP's transfer agent, will
tabulate the votes and act as the inspector of election.
Q: IS MY VOTE CONFIDENTIAL?
A: Proxy instructions, ballots and voting tabulations that identify individual
shareowners are handled in a manner that protects your voting privacy. Your
vote will not be disclosed either within HP or to third parties except
(1) as necessary to meet applicable legal requirements, (2) to allow for the
tabulation of votes and certification of the vote, or (3) to facilitate a
successful proxy solicitation by our Board. Occasionally, shareowners
provide written comments on their proxy card, which are then forwarded to HP
management.
Q: WHO WILL BEAR THE COST OF SOLICITING VOTES FOR THE MEETING?
A: HP will pay the entire cost of preparing, assembling, printing, mailing and
distributing these proxy materials. If you choose to access the proxy
materials and/or vote over the Internet, however, you are responsible for
Internet access charges you may incur. In addition to the mailing of these
proxy materials,
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the solicitation of proxies or votes may be made in person, by telephone or
by electronic communication by our directors, officers and employees, who
will not receive any additional compensation for such solicitation
activities. We also have hired Corporate Investor Communications, Inc.
("CIC") to assist us in the distribution of proxy materials and the
solicitation of votes. We will pay CIC a fee of $15,000 plus expenses for
these services. We will also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to shareowners.
Q: MAY I PROPOSE ACTIONS FOR CONSIDERATION AT NEXT YEAR'S ANNUAL MEETING OF
SHAREOWNERS OR NOMINATE INDIVIDUALS TO SERVE AS DIRECTORS?
A: You may submit proposals for consideration at future shareowner meetings,
including director nominations.
SHAREOWNER PROPOSALS: In order for a shareowner proposal to be considered
for inclusion in HP's proxy statement for next year's annual meeting, the
written proposal must be received by HP no later than September 20, 2000.
Such proposals also will need to comply with Securities and Exchange
Commission regulations regarding the inclusion of shareowner proposals in
company-sponsored proxy materials. Similarly, in order for a shareowner
proposal to be raised from the floor during next year's annual meeting,
written notice must be received by HP no later than September 20, 2000 and
shall contain such information as required under our Bylaws.
NOMINATION OF DIRECTOR CANDIDATES: You may propose director candidates for
consideration by our Board's Organization Review and Nominating Committee.
Any such recommendations should be directed to the HP Corporate Secretary at
our headquarters. In addition, our Bylaws permit shareowners to nominate
directors at a shareowner meeting. In order to make a director nomination at
a shareowner meeting, it is necessary that you notify HP not fewer than 120
days in advance of the day specified as the mailing date in our proxy
statement for the prior year's annual meeting of shareowners. Thus, since
January 18, 2000 is specified as the mailing date in this year's proxy
statement, in order for any such nomination notice to be timely for next
year's annual meeting, it must be received by HP not later than
September 20, 2000 (i.e., 120 days prior to January 18). In addition, the
notice must meet all other requirements contained in our Bylaws.
COPY OF BYLAW PROVISIONS: You may contact the HP Corporate Secretary at our
headquarters for a copy of the relevant Bylaw provisions regarding the
requirements for making shareowner proposals and nominating director
candidates.
5
<PAGE>
BOARD STRUCTURE AND COMPENSATION
Our Board has 11 directors and the following five committees: (1) Audit, (2)
Compensation, (3) Executive, (4) Finance and Investment, and (5) Organization
Review and Nominating. The membership and the function of each committee are
described below. During fiscal year 1999, the Board held 14 meetings and each
director attended at least 75% of all Board and applicable committee meetings.
<TABLE>
ORGANIZATION REVIEW
NAME OF DIRECTOR AUDIT COMPENSATION EXECUTIVE FINANCE AND INVESTMENT AND NOMINATING
<S> <C> <C> <C> <C> <C>
NON-EMPLOYEE DIRECTORS:(1)
Philip M. Condit X X
Patricia C. Dunn(2) X*
John B. Fery X X*
Jean-Paul G. Gimon X
Sam Ginn X X
Richard A. Hackborn(2)(3) X X
Walter B. Hewlett X X
Dr. George A. Keyworth II X* X
Susan Packard Orr X*
EMPLOYEE DIRECTORS:(4)
Carleton S. Fiorina(5) X* X
Robert P. Wayman X X
Number of Meetings in Fiscal
Year 1999 4 6 0(6) 5 1(7)
</TABLE>
X = Committee member; * = Chair
(1) Dr. Thomas E. Everhart and Dr. David M. Lawrence became directors of Agilent
Technologies, Inc. in July 1999 and resigned from the HP Board effective
September 17, 1999. Dr. Everhart previously served on the Compensation and
Finance and Investment Committees, and Dr. Lawrence previously served on the
Audit and Compensation Committees. David Woodley Packard resigned from the
HP Board effective March 18, 1999. Mr. Packard previously served on the
Finance and Investment and Organization Review and Nominating Committees.
(2) Effective January 1, 2000, Patricia C. Dunn became Chair of the Finance and
Investment Committee, replacing Richard A. Hackborn.
(3) Effective January 1, 2000, Richard A. Hackborn became Chairman of the Board,
replacing Lewis E. Platt.
(4) Lewis E. Platt resigned from the Board effective December 31, 1999.
Mr. Platt previously served as Chairman of the Board and Chair of the
Executive Committee and served on the Organization Review and Nominating
Committee. Mr. Platt also served as President and Chief Executive Officer
through July 31, 1999.
(5) Carleton S. Fiorina was elected a director of HP on July 23, 1999.
(6) Numerous actions were taken by the Executive Committee by written consent.
The Executive Committee met informally and had other discussions relating to
these actions and other governance matters during the fiscal year.
(7) An Ad Hoc Committee of the Board, which included members of the Organization
Review and Nominating Committee, was established in connection with the
search for a new chief executive officer and the realignment of HP. Because
the Ad Hoc Committee met numerous times during the fiscal year in that
capacity, the Organization Review and Nominating Committee met formally only
once during the fiscal year.
THE AUDIT COMMITTEE
The Audit Committee reviews our auditing, accounting, financial reporting and
internal control functions and selects our independent accountants. In addition,
the committee monitors the non-audit services of our independent accountants. In
discharging its duties, the committee:
- reviews and approves the scope of the annual audit and the independent
accountants' fees;
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- meets independently with our internal auditing staff, our independent
accountants and our senior management; and
- reviews the general scope of our accounting, financial reporting, annual
audit and internal audit program and matters relating to internal control
systems, as well as the results of the annual audit.
COMPENSATION COMMITTEE
The Compensation Committee determines, and approves and reports to the Board on,
all elements of compensation for our elected officers including bonuses, as
described below in pages 40 through 44 of this proxy statement.
EXECUTIVE COMMITTEE
The Executive Committee meets or takes written action when the Board is not
otherwise meeting and has the same level of authority as the Board, except that
it cannot amend HP's Bylaws, recommend any action that requires the approval of
the shareowners or take any other action not permitted to be delegated to a
committee under Delaware law.
FINANCE AND INVESTMENT COMMITTEE
The Finance and Investment Committee supervises the investment of all assets
held by HP's employee benefit plans and funds and reviews the investment results
of HP's international subsidiaries' pension plans. It also establishes and
reviews policies regarding the investment of general corporate assets, HP's
capital structure and the issuance of debt, as well as the use of derivative
investments to manage currency and interest rate exposure. In addition, the
committee provides oversight and guidance to the Board regarding significant
financial matters, including the payment of dividends.
ORGANIZATION REVIEW AND NOMINATING COMMITTEE
The Organization Review and Nominating Committee proposes a slate of directors
for election by our shareowners at each annual meeting and candidates to fill
any vacancies on the Board. It is also responsible for approving management
succession plans and addressing Board organizational and governance issues. In
addition, an Ad Hoc Committee, which included members of the Organization Review
and Nominating Committee, was responsible for the search for our new President
and Chief Executive Officer and determining her employment terms and the
transition package for our outgoing President and CEO.
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DIRECTOR COMPENSATION ARRANGEMENTS
AND STOCK OWNERSHIP GUIDELINES
The following table provides information on HP's compensation and
reimbursement practices during fiscal year 1999 for non-employee directors, as
well as the range of compensation paid to non-employee directors who served the
entire 1999 fiscal year. Directors who are employed by HP, Ms. Fiorina and
Mr. Wayman, do not receive any compensation for their Board activities.
<TABLE>
<S> <C>
DIRECTOR COMPENSATION TABLE
FOR FISCAL YEAR 1999(1)
Annual Director Retainer.................................... $100,000
Minimum Percentage of Annual Retainer to be Paid in HP Stock
or Options(2).............................................. 75%
Board Meeting Attendance Fees (per meeting through
2/28/99)................................................... $1,500
Range of Board Meeting Attendance Fees Paid to Directors
(11/1/98 to 2/28/99)....................................... $4,500--$6,000
Committee Meeting Attendance Fees (per meeting through
2/28/99)................................................... $1,200
Range of Committee Meeting Attendance Fees Paid to Directors
(11/1/98 to 2/28/99)....................................... $2,400--$6,000
Additional Retainer for Committee Chair..................... $5,000
Reimbursement for Expenses Attendant to Board Membership.... Yes
Range of Total Compensation Paid to Directors (for the
year)...................................................... $105,700--$110,700
</TABLE>
(1) All directors served the entire 1999 fiscal year, except for Carleton S.
Fiorina, who joined our Board on July 23, 1999, Dr. Thomas E. Everhart and
Dr. David Lawrence, both of whom resigned effective September 17, 1999, and
David Woodley Packard, who resigned effective March 18, 1999.
(2) Less than 75% may be paid in stock under special circumstances as determined
by the Board.
Effective March 1, 1999, the Compensation Committee approved the following
changes to the compensation program for non-employee directors: (1) the annual
director retainer was increased from $45,000 to $100,000, (2) Board and
committee attendance fees were eliminated, and (3) the minimum percentage of the
annual retainer to be paid in HP stock or options was increased, absent special
circumstances, from 50% to 75%. In addition, the Compensation Committee
increased the stock ownership guidelines for directors. Under these revised
guidelines, all directors are required to accumulate over time shares of HP
stock equal in value to at least twice the value of the annual director
retainer.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
There are nine nominees for election to our Board this year. Directors
John B. Fery and Jean-Paul G. Gimon are not standing for re-election. All of the
nominees have served as directors since the last annual meeting, except for
Carleton S. Fiorina, who was elected a director by our Board on July 23, 1999
and will stand for election as a director by our shareowners for the first time
at this year's annual meeting. Information regarding the business experience of
each nominee is provided below. All directors are elected annually to serve
until the next annual meeting and until their respective successors are elected.
There are no family relationships among our executive officers and directors
except as described below.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION TO THE BOARD OF
EACH OF THE FOLLOWING NOMINEES.
VOTE REQUIRED
The nine persons receiving the highest number of votes represented by
outstanding shares of common stock present or represented by proxy and entitled
to vote will be elected.
<TABLE>
<S> <C>
PHILIP M. CONDIT Mr. Condit has been Chairman of The Boeing Company since
Director since 1998 February 1997, its Chief Executive Officer since April 1996
Age 57 and a member of its board since 1992. He served as President
of The Boeing Company from August 1992 until becoming
Chairman.
PATRICIA C. DUNN Ms. Dunn has been Chairman of Barclays Global Investors
Director since 1998 since July 1998 and its Co-Chief Executive Officer since
Age 46 October 1995. Prior to becoming Chairman, Ms. Dunn had
served as Barclay's Co-Chairman since January 1997. In 1995,
she was named Managing Director and Chief Executive Officer
of the Defined Benefit Group of Barclays. Ms. Dunn is
Chairman of Barclays Global Investors, N.A. and Barclays
Global Fund Services.
CARLETON S. FIORINA Ms. Fiorina became President and Chief Executive Officer of
Director since 1999 HP in July 1999, succeeding Lewis E. Platt. From October
Age 45 1997 until she joined HP, Ms. Fiorina was Group President of
the Global Service Provider Business of Lucent
Technologies, Inc., a communications systems and technology
company. From October 1996 to October 1997, she was
President of Lucent Technologies' Consumer Products
Business, and from January 1996 to October 1996 she was
Executive Vice President, Corporate Operations. From January
1995 to January 1996, she was President, North America and
from July 1994 to January 1995, she was President, Atlantic
and Canada Region in the Network Systems Group of AT&T.
Ms. Fiorina is a member of the Board of Directors of the
Kellogg Company and Merck & Co. and also serves on the U.S.
China Board of Trade.
SAM GINN Mr. Ginn has served as Chairman of Vodafone AirTouch Plc
Director since 1996 since July 1999, following the merger of Vodafone and
Age 62 AirTouch. He was Chairman of the Board and Chief Executive
Officer of AirTouch from December 1993 to June 1999. He was
Chairman of the Board, President and Chief Executive Officer
of the Pacific Telesis Group from 1988 to April 1994.
Mr. Ginn is also a director of Chevron Corporation.
</TABLE>
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<TABLE>
<S> <C>
RICHARD A. HACKBORN Mr. Hackborn served as HP's Executive Vice President,
Director since 1992 Computer Products Organization from 1990 until his
Age 62 retirement in November 1993 after a 33-year career with our
company. He is a director of Microsoft Corporation, the
William and Flora Hewlett Foundation and the Boise Art
Museum.
WALTER B. HEWLETT Mr. Hewlett has been an independent software developer
Director since 1987 involved with computer applications in the humanities for
Age 55 more than five years. In 1997, Mr. Hewlett was elected to
the Board of Overseers of Harvard University. In 1994,
Mr. Hewlett participated in the formation of Vermont
Telephone Company of Springfield, Vermont and currently
serves as its Chairman. Mr. Hewlett founded the Center for
Computer Assisted Research in the Humanities in 1984, for
which he serves as a director. Mr. Hewlett has been a
trustee of The William and Flora Hewlett Foundation since
its founding in 1966 and currently serves as its Chairman.
Mr. Hewlett has served as a director of Agilent
Technologies, Inc. since 1999. He is the son of HP co-
founder William R. Hewlett and the brother-in-law of
retiring director Jean-Paul G. Gimon.
GEORGE A. KEYWORTH II Dr. Keyworth has been Chairman and Senior Fellow with The
Director since 1986 Progress & Freedom Foundation, a public policy research
Age 60 institute, since 1995. He had been a Distinguished Fellow of
the Hudson Institute from 1988 to 1995. He is a director of
Encanto Networks, Inc., NovaWEB Technologies, Inc.,
Yourtel, Inc. and General Atomics. Dr. Keyworth holds
various honorary degrees and is an honorary professor at
Fudan University in Shanghai, People's Republic of China.
SUSAN PACKARD ORR Ms. Orr has been President and owner of the Technology
Director since 1993 Resource Assistance Center, which provides computer
Age 53 consulting and software development services to non-profit
organizations, since 1986. Ms. Orr is Chairman and a
director of The David and Lucile Packard Foundation and Vice
President and a director of The Packard Humanities
Institute.
ROBERT P. WAYMAN Mr. Wayman has served as an Executive Vice President of our
Director since 1993 company, responsible for finance and administration, since
Age 54 December 1992 and Chief Financial Officer since 1984.
Mr. Wayman is a director of CNF Transportation, Inc. and
Sybase Inc. He also serves as a member of the Kellogg
Advisory Board to Northwestern University School of Business
and is Chairman of the Private Sector Council.
</TABLE>
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PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board of Directors has appointed
PricewaterhouseCoopers LLP as HP's independent accountants to audit HP's
consolidated financial statements for the fiscal year ending October 31, 2000.
During fiscal year 1999, PricewaterhouseCoopers served as HP's independent
accountants and also provided certain tax and consulting services.
Representatives of PricewaterhouseCoopers LLP are expected to attend the
meeting, where they will be available to respond to questions and, if they
desire, to make a statement.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS HP'S INDEPENDENT ACCOUNTANTS FOR
THE 2000 FISCAL YEAR. If the appointment is not ratified, our Board will
consider whether it should select other independent accountants.
VOTE REQUIRED
Ratification of the appointment of PricewaterhouseCoopers LLP as HP's
independent accountants for fiscal year 2000 requires the affirmative vote of a
majority of the shares of common stock present or represented by proxy and
entitled to vote at the meeting.
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PROPOSAL NO. 3
APPROVAL OF THE HEWLETT-PACKARD COMPANY
2000 STOCK PLAN
On November 18, 1999, the Compensation Committee of the Board of Directors
adopted the Hewlett-Packard Company 2000 Stock Plan (the "Stock Plan") and
reserved 125,000,000 shares of common stock for issuance thereunder, subject to
shareowner approval. As of the present date, no awards have been granted
pursuant to the Stock Plan.
At the annual meeting, the shareowners are being asked to approve the Stock
Plan and the reservation of shares for issuance thereunder for the purpose of
qualifying such shares for special tax treatment under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
HEWLETT-PACKARD COMPANY 2000 STOCK PLAN AND THE RESERVATION OF SHARES FOR
ISSUANCE THEREUNDER.
VOTE REQUIRED
Approval of the Stock Plan requires the affirmative vote of a majority of
the shares of common stock present or represented by proxy and entitled to vote
at the meeting.
SUMMARY OF THE 2000 STOCK PLAN
GENERAL. The purpose of the Stock Plan is to encourage ownership in HP by
key personnel whose long-term employment is essential to HP's continued
progress. Stock options, stock awards and cash awards may be granted under the
Stock Plan. Options granted under the Stock Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or non-statutory stock options.
ADMINISTRATION. The Stock Plan may generally be administered by the Board
or a Committee appointed by the Board including the Executive Committee (as
applicable, the "Administrator").
ELIGIBILITY. Non-statutory stock options, stock awards and cash awards may
be granted under the Stock Plan to employees, directors and consultants of HP,
its affiliates and subsidiaries. Incentive stock options may be granted only to
employees of HP or its subsidiaries. The Administrator, in its discretion,
selects the employees, directors and consultants to whom options, stock awards
and cash awards may be granted, the time or times at which such awards are
granted, and the number of shares subject to each grant.
LIMITATIONS. Section 162(m) of the Code places limits on the deductibility
for federal income tax purposes of compensation paid to certain executive
officers of HP. In order to preserve HP's ability to deduct the compensation
income associated with options granted to such persons, the Stock Plan provides
that no employee, director or consultant may be granted, in any fiscal year of
HP, options to purchase more than 5,000,000 shares of common stock.
Notwithstanding this limit, however, an individual may be granted options to
purchase up to an additional 5,000,000 shares of common stock in connection with
his or her initial employment with HP. In addition, the aggregate number of
shares underlying stock awards granted under the Stock Plan may not exceed
10,000,000, and the aggregate number of shares underlying discounted
non-statutory stock options that may be granted under this Plan generally may
not exceed 15,000,000.
TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a stock option
agreement between HP and the optionee and is subject to the following additional
terms and conditions:
EXERCISE PRICE. The Administrator determines the exercise price of options
at the time the options are granted. The exercise price of an incentive stock
option may not be less than 100% of the fair market value of the common stock on
the date such option is granted. The exercise price
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of a non-statutory stock option may not be less than 75% of the fair market
value of the common stock on the date such option is granted, although certain
replacement options with lower exercise prices may be granted to service
providers of entities acquired by HP. The fair market value of the common stock
is generally determined as the average of the highest and lowest quoted sales
prices for the common stock on the date the option is granted (or if no sales
were reported that day, the last preceding day a sale occurred). As of
December 31, 1999, the average of the highest and lowest quoted sales prices of
common stock was $114.69 per share. In addition, no option may be repriced,
replaced, regranted through cancellation or modified without shareowner approval
if the effect would be to reduce the exercise price of such option (except in
connection with a change in HP's capitalization).
EXERCISE OF OPTION; FORM OF CONSIDERATION. The Administrator determines when
options become exercisable and in its discretion may accelerate the vesting of
any outstanding option. The means of payment for shares issued upon exercise of
an option are specified in each option agreement. The Stock Plan permits payment
to be made by cash, check, wire transfer, other shares of common stock of HP
(with some restrictions), broker assisted same day sales, any other form of
consideration permitted by applicable law, or any combination thereof.
TERM OF OPTION. The term of an option may be no more than ten years from
the date of grant, or 10 1/2 years in certain jurisdictions outside of the
United States. No option may be exercised after the expiration of its term.
TERMINATION OF EMPLOYMENT. If an optionee's employment or consulting
relationship terminates for any reason (other than as described below), then all
options held by the optionee under the Stock Plan generally will terminate
immediately upon the optionee's termination.
DEATH, DISABILITY OR RETIREMENT DUE TO AGE. If an optionee's employment or
consulting relationship terminates as a result of the optionee's death, then all
unvested options will immediately vest and all options may be exercised for one
year following the optionee's death. If an optionee's employment or consulting
relationship terminates as a result of the optionee's disability or retirement
due to age, then all unvested options will immediately vest and the optionee may
exercise the option within three years of the date of such disability or
retirement for a non-statutory stock option, and within three months of the date
of such disability or retirement for an incentive stock option, provided that no
option may be exercised after the expiration of its term.
VOLUNTARY SEVERANCE INCENTIVE PROGRAM OR DIVESTITURE. If an optionee ceases
to be an employee as a result of participation in voluntary severance incentive
program of HP or a subsidiary, all unvested options will immediately vest and
all outstanding options will be exercisable for three months following the
optionee's termination. If an employee ceases to be a participant because of a
divestiture by HP, as determined by the Administrator, the Administrator will
have the sole discretion to accelerate the vesting of outstanding options and
determine the time period for exercise.
NONTRANSFERABILITY OF OPTIONS. Unless otherwise determined by the
Administrator, options granted under the Stock Plan are not transferable other
than by will or the laws of descent and distribution and may be exercised during
the optionee's lifetime only by the optionee.
OTHER PROVISIONS. The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the Stock Plan, as may be
determined by the Administrator.
STOCK AWARDS. In the case of stock awards, unless the Administrator
determines otherwise, the restricted stock agreement will provide that the
unvested stock is forfeited back to HP upon the awardee's termination of
employment for any reason (except death, disability, retirement, or
participation in a voluntary severance incentive program). Upon disability or
retirement due to age, the forfeiture provisions of the restricted stock
continue to lapse as long as the awardee does not compete or disclose any
confidential information and, if retiring due to age, the awardee performs
reasonably requested consulting services. The forfeiture provisions for the
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restricted stock will generally lapse at a rate determined by the Administrator.
Upon the death of an awardee, or if an awardee's employment is terminated due to
a voluntary severance incentive program of HP or a subsidiary, then the
forfeiture provisions lapse as to a prorated amount based on the awardee's
length of service since the grant of the restricted stock.
CASH AWARDS. The Administrator may grant cash awards which entitle the
recipient to a cash payment upon meeting predetermined goals.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR SALE OF ASSETS. In
the event that HP's stock changes by reason of any stock split, dividend,
combination, reclassification or other similar change in HP's capital structure
effected without the receipt of consideration, appropriate adjustments shall be
made in the number and class of shares of stock subject to the Stock Plan, the
number and class of shares of stock subject to any option or stock award
outstanding under the Stock Plan, and the exercise price of any such outstanding
option or stock award.
In the event of a liquidation or dissolution, any unexercised options or
stock awards will terminate. The Administrator, in its discretion, may provide
that each optionee shall have the right to exercise all of the optionee's
options, including those not otherwise exercisable, and be fully vested in any
stock awards until the date ten days prior to the consummation of the
liquidation or dissolution.
In the event of a change of control of HP, as determined by the Board, the
Board, in its discretion, may provide for the assumption, substitution or
adjustment of each outstanding award, accelerate the vesting of options and
terminate any restrictions on stock awards or cash awards, or cancel awards for
a cash payment to the awardee.
AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend, alter, suspend
or terminate the Stock Plan, or any part thereof, at any time and for any
reason. However, HP shall obtain shareowner approval for any amendment to the
Stock Plan to the extent necessary and desirable to comply with applicable laws.
No such action by the Board or shareowners may alter or impair any option or
award previously granted under the Stock Plan without the written consent of the
awardee. Unless terminated earlier, the Stock Plan shall terminate ten years
from the date of its approval by the shareowners or the Board of HP, whichever
is earlier.
NEW PLAN BENEFITS. Because benefits under the Stock Plan will depend on the
Administrator's actions and the fair market value of common stock at various
future dates, it is not possible to determine the benefits that will be received
by directors, executive officers and other employees if the Stock Plan is
approved by the shareowners.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise is an adjustment item for alternative
minimum tax purposes and may subject the optionee to the alternative minimum
tax. Upon a disposition of the shares more than two years after grant of the
option and one year after exercise of the option, any gain or loss is treated as
long-term capital gain or loss. Net capital gains on shares held more than
12 months are generally taxed at a maximum federal rate of 20%. Capital losses
are generally allowed in full against capital gains and up to $3,000 against
other income. If the above holding periods are not satisfied, the optionee
recognizes ordinary income at the time of disposition equal to the difference
between the exercise price and the lower of (i) the fair market value of the
shares at the date of the option exercise or (ii) the sale price of the shares.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income is treated as long-term or
short-term capital gain or loss, depending on the holding period. A different
rule for measuring ordinary income upon such a premature disposition may apply
if the optionee is also an officer, director or 10% shareowner of HP. Unless
limited by Section 162(m) of the Code, HP is entitled to a deduction in the same
amount as and at the time the optionee recognizes ordinary income.
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NON-STATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a non-statutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of HP is subject to tax withholding by HP. Unless limited by Section 162(m) of
the Code, HP is entitled to a deduction in the same amount as and at the time
the optionee recognizes ordinary income. Upon a disposition of such shares by
the optionee, any difference between the sale price and the optionee's exercise
price, to the extent not recognized as taxable income as provided above, is
treated as long-term or short-term capital gain or loss, depending on the
holding period. Net capital gains on shares held more than 12 months may be
taxed at a maximum federal rate of 20% (lower rates may apply depending upon
when the stock is acquired and the applicable income tax bracket of the
taxpayer). Capital losses are generally allowed in full against capital gains
and up to $3,000 against other income.
STOCK AWARDS. Stock awards will generally be taxed in the same manner as
non-statutory stock options. However, a stock award is subject to a "substantial
risk of forfeiture" within the meaning of Section 83 of the Code to the extent
the award will be forfeited in the event that the service provider ceases to
provide services to HP. As a result of this substantial risk of forfeiture, the
service provider will not recognize ordinary income at the time of award.
Instead, the service provider will recognize ordinary income on the dates when
the stock is no longer subject to a substantial risk of forfeiture, or when the
stock becomes transferable, if earlier. The service provider's ordinary income
is measured as the difference between the amount paid for the stock, if any, and
the fair market value of the stock on the date the stock is no longer subject to
forfeiture.
The service provider may accelerate to the date of award his or her
recognition of ordinary income, if any, and begin his or her capital gains
holding period by timely filing (i.e., within thirty days of the award) an
election pursuant to Section 83(b) of the Code. In such event, the ordinary
income recognized, if any, is measured as the difference between the amount paid
for the stock, if any, and the fair market value of the stock on the date of
award, and the capital gain holding period commences on such date. The ordinary
income recognized by a service provider who is an employee will be subject to
tax withholding by HP. Unless limited by Section 162(m) of the Code, HP is
entitled to a deduction in the same amount as and at the time the service
provider recognizes ordinary income.
CASH AWARDS. Upon receipt of cash, the recipient will have taxable ordinary
income, in the year of receipt, equal to the cash received. In the case of a
recipient who is also an employee, any cash received will be subject to tax
withholding by HP. Unless limited by section 162(m) of the Code, HP will be
entitled to a tax deduction in the amount and at the time the recipient
recognizes compensation income.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES AND HP WITH RESPECT TO THE GRANT AND/OR EXERCISE OF OPTIONS AND
AWARDS UNDER THE STOCK PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT
DISCUSS THE TAX CONSEQUENCES ARISING IN THE CONTEXT OF THE EMPLOYEE'S OR
CONSULTANT'S DEATH OR THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN
COUNTRY IN WHICH THE EMPLOYEE'S OR CONSULTANT'S INCOME OR GAIN MAY BE TAXABLE.
INCORPORATION BY REFERENCE
The foregoing is only a summary of the Stock Plan and is qualified in its
entirety by reference to its full text, a copy of which is attached hereto as
Appendix A.
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PROPOSAL NO. 4
APPROVAL OF THE HEWLETT-PACKARD COMPANY
2000 EMPLOYEE STOCK PURCHASE PLAN
On November 18, 1999, the Compensation Committee of the Board of Directors
adopted the Hewlett-Packard Company Employee Stock Purchase Plan (the "ESPP"),
effective November 1, 2000, and reserved 50,000,000 shares for issuance under
the ESPP, subject to shareowner approval within 12 months of Board approval.
At the annual meeting, HP shareowners are being asked to approve the ESPP
and the Board's reservation of shares under the ESPP for the purpose of
qualifying such shares for special tax treatment under Internal Revenue Code
Section 423. The ESPP is intended to replace HP's existing employee stock
purchase plan, which had approximately 1,384,885 shares of common stock
available for purchase as of December 31, 1999.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
HEWLETT-PACKARD COMPANY EMPLOYEE STOCK PURCHASE PLAN AND THE RESERVATION OF
SHARES FOR ISSUANCE THEREUNDER.
VOTE REQUIRED
Approval of the ESPP requires the affirmative vote of a majority of the
shares of common stock present or represented by proxy and entitled to vote at
the meeting.
SUMMARY OF THE ESPP
GENERAL. The purpose of the ESPP is to provide employees of HP and its
designated subsidiaries with an opportunity to purchase HP common stock and,
therefore, to have an additional incentive to contribute to the prosperity of
HP.
ADMINISTRATION. The ESPP is administered by a committee (the "Committee")
appointed by the Board. The Committee has full power to interpret the ESPP, and
the decisions of the Board and the Committee are final and binding upon all
participants.
ELIGIBILITY. Any employee of HP or any HP subsidiary designated by the
Committee who is regularly employed for at least 20 hours per week and more than
five months in a calendar year on an Entry Date (as defined below) is eligible
to participate in the ESPP during the Purchase Period (as defined below)
beginning on that Entry Date, subject to administrative rules established by the
Committee. However, no employee is eligible to participate in the ESPP to the
extent that, immediately after the grant, that employee would have owned 5% of
either the voting power or the value of HP's common stock, and no employee's
rights to purchase HP's common stock pursuant to the ESPP may accrue at a rate
that exceeds $25,000 per calendar year. Eligible employees become participants
in the ESPP by filing with HP a subscription agreement authorizing payroll
deductions on a date set by the Committee prior to the applicable Entry Date. As
of October 31, 1999, approximately 111,877 HP employees, including 11 executive
officers, were eligible to participate in the ESPP.
PARTICIPATION IN AN OFFERING. The ESPP is implemented by offering periods
lasting for two years (an "Offering Period"). The first two-year Offering Period
will commence on November 1, 2000. Common stock is purchased under the ESPP
every six months (a "Purchase Period"), unless the participant withdraws or
terminates employment earlier. The Entry Date is the first trading day of the
Offering Period or, for new participants, the first trading day of the first
Purchase Period after the employee becomes eligible. To participate in the ESPP,
each eligible employee must authorize payroll deductions pursuant to the ESPP.
Such payroll deductions may not exceed, for an Offering Period, 10% of a
participant's compensation and is also subject to the limitations discussed
above. A participant may increase or decrease his
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or her rate of contribution through payroll deductions at any time, but at no
time may such rate of contribution exceed 10%. Each participant who has elected
to participate is automatically granted an option to purchase shares of common
stock on his or her Entry Date. The option expires at the end of the Offering
Period or upon termination of employment, whichever is earlier, but is exercised
at the end of each Purchase Period to the extent of the payroll deductions
accumulated during such Purchase Period. The number of shares that may be
purchased by an employee in any Purchase Period, subject to the limitations
discussed above, may not exceed 5,000 shares of common stock during a Purchase
Period.
PURCHASE PRICE, SHARES PURCHASED. Shares of common stock may be purchased
under the ESPP at a price not less than 85% of the fair market value of the
common stock on (i) the Entry Date or (ii) the last trading day of the Purchase
Period, whichever is less. On December 31, 1999, the closing price per share of
HP common stock was $113.75. The number of whole shares of HP common stock a
participant purchases in each Purchase Period is determined by dividing the
total amount of payroll deductions withheld from the participant's compensation
during that Purchase Period by the purchase price.
TERMINATION OF EMPLOYMENT. Termination of a participant's employment for
any reason, including death, immediately cancels his or her option and
participation in the ESPP. In such event, the payroll deductions credited to the
participant's account will be returned without interest to him or her or, in the
case of death, to the person or persons entitled to those deductions.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR SALE OF ASSETS. In
the event that HP common stock is changed by reason of any stock split, stock
dividend, combination, recapitalization or other similar changes in HP's capital
structure effected without the receipt of consideration, appropriate
proportional adjustments may be made in the number of shares of stock subject to
the ESPP, the number of shares of stock to be purchased pursuant to an option
and the price per share of common stock covered by an option. Any such
adjustment will be made by the Board, whose determination shall be conclusive
and binding. In the event of a proposed sale of all or substantially all of the
assets of HP or the merger or consolidation of HP with another company, the
Board may determine that each option will be assumed by, or an equivalent option
substituted by the successor company or its affiliates, that the purchase date
will be accelerated, or that all outstanding options will terminate and
accumulated payroll deductions will be refunded.
AMENDMENT AND TERMINATION OF THE PLAN. The Board may terminate or amend the
ESPP at any time, except that it may not increase the number of shares subject
to the ESPP other than as described in the ESPP. The ESPP will continue until
November 1, 2010 unless otherwise terminated by the Board.
WITHDRAWAL. Generally, a participant may withdraw from the ESPP during a
Purchase Period prior to the fifth business day before a purchase date. The
Committee may establish rules limiting the frequency with which participants may
withdraw and re-enroll in the plan and may establish a waiting period for
participants wishing to re-enroll.
NEW PLAN BENEFITS. Because benefits under the ESPP will depend on
employees' elections to participate and the fair market value of HP common stock
at various future dates, it is not possible to determine the benefits that will
be received by executive officers and other employees if the ESPP is approved by
the shareowners. Non-employee directors are not eligible to participate in the
ESPP.
FEDERAL INCOME TAX CONSEQUENCES
If HP shareowners approve this proposal, the ESPP, and the right of
participants to make purchases thereunder, should qualify under the provisions
of Sections 421 and 423 of the Code. Under these provisions, no income will be
taxable to a participant until the shares purchased under the ESPP are sold or
otherwise disposed of. Upon sale or other disposition of the shares, the
participant will generally be subject to tax and the amount of the tax will
depend upon the holding period. If the shares are sold or otherwise disposed of
more than two years from the first day of the applicable Entry Date and more
than one year from the date of transfer of the shares to the participant, then
the participant generally will recognize ordinary income measured as the lesser
of
17
<PAGE>
(i) the excess of the fair market value of the shares at the time of such sale
or disposition over the purchase price, or (ii) an amount equal to 15% of the
fair market value of the shares as of the Entry Date. Any additional gain should
be treated as long-term capital gain. If the shares are sold or otherwise
disposed of before the expiration of this holding period, the participant will
recognize ordinary income generally measured as the excess of the fair market
value of the shares on the date the shares are purchased over the purchase
price. Any additional gain or loss on such sale or disposition will be long-term
or short-term capital gain or loss, depending on the holding period. HP is not
entitled to a deduction for amounts taxed as ordinary income or capital gain to
a participant except to the extent ordinary income is recognized by participants
upon a sale or disposition of shares prior to the expiration of the holding
period(s) described above. In all other cases, no deduction is allowed to HP.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON THE PARTICIPANT AND HP WITH RESPECT TO THE SHARES PURCHASED UNDER THE ESPP.
IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES
ARISING IN THE CONTEXT OF A PARTICIPANT'S DEATH OR THE INCOME TAX LAWS OF ANY
MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT'S INCOME OR GAIN
MAY BE TAXABLE.
INCORPORATION BY REFERENCE
The foregoing is only a summary of the ESPP and is qualified in its entirety
by reference to its full text, a copy of which is attached hereto as
Appendix B.
18
<PAGE>
PROPOSAL NO. 5
APPROVAL OF THE HEWLETT-PACKARD COMPANY
PAY-FOR-RESULTS PLAN
On November 18, 1999, the Compensation Committee of the Board of Directors
adopted the Hewlett-Packard Company Pay-for-Results Plan (the "PFR Plan,"
formerly known as the Hewlett-Packard Company Variable Pay Plan). At the annual
meeting, shareowners are being asked to approve the PFR Plan in order to qualify
payments made to certain HP officers under the PFR Plan as deductible for U.S.
federal income tax purposes. The Board believes that the PFR Plan benefits
shareowners by linking a portion of executive compensation to performance and by
qualifying amounts paid pursuant to the PFR Plan for a U.S. federal income tax
deduction.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
HEWLETT-PACKARD COMPANY PFR PLAN.
VOTE REQUIRED
Approval of the PFR Plan requires the affirmative vote of a majority of the
shares of common stock present or represented by proxy and entitled to vote at
the meeting.
SUMMARY OF THE PAY-FOR-RESULTS PLAN
GENERAL. The PFR Plan is designed to provide certain employees of HP and
its subsidiaries with incentive compensation based on the level of HP's
achievement of financial, business and other performance criteria. Under the PFR
Plan, the Compensation Committee will designate a target short-term bonus
("STB") with respect to a six-month performance period and a target mid-term
bonus ("MTB") with respect to a three year performance period for each plan
participant (a "Participant"), as well as the applicable performance measures
for receiving such bonuses. The PFR Plan amends and supersedes the 1999 Variable
Pay Plan adopted by the Compensation Committee and approved by HP shareowners at
last year's annual meeting.
SECTION 162(m). Section 162(m) of the Code ("Section 162(m)") places a
limit on the deductibility for federal income tax purposes of the compensation
paid to certain executive officers of HP. Certain performance-based compensation
(such as that under the PFR Plan) that has been approved by HP's shareowners is
not subject to this deduction limit.
ADMINISTRATION. Unless otherwise designated by the Board, the Compensation
Committee of the Board (the "Committee") will administer the PFR Plan and has
full power to construe, interpret and administer the PFR Plan. The Committee may
empower a committee or person or persons to administer the PFR Plan with respect
to participants other than "covered employees" (as that term is defined in
Section 162(m)).
PARTICIPATION AND ELIGIBILITY. Persons employed by HP or one of its
affiliates and in active service during a performance period will be eligible to
participate. Actual Participants for each six-month performance period for a STB
or each fiscal year for a MTB will be designated by the Committee.
The Committee will determine PFR Plan participation based on an employee's
job position. With respect to STBs, if a Plan Participant changes from one
eligible position to another or transfers into a position that is not eligible
for participation under the PFR Plan, any award will be prorated based on the
Participant's time in each eligible position and his or her performance in each
eligible position (such a change will have no effect on an MTB). A Participant
will forfeit any bonus for a performance period during which such participant is
involuntarily terminated by HP for cause or voluntarily terminates his or her
employment with HP for any reason, although the Committee may determine that the
forfeiture does
19
<PAGE>
not apply in cases of termination due to death, permanent or total disability or
retirement. Adjustments will also be made if a Participant is on a
Company-approved leave of absence or his or her base pay changes during the
performance period for an STB.
The Committee has designated 83 Participants for the current STB performance
period, the first half of which began on November 1, 1999 and will end
April 30, 2000, and the second half of which will begin May 1, 2000 and end
October 31, 2000. In addition, the Committee has designated 83 Participants for
the current MTB performance period, which began on November 1, 1999 and will end
on October 31, 2002.
PLAN OPERATION. The PFR Plan will be administered in six-month performance
periods, which coincide with each half of HP's fiscal year, with respect to
STBs. With respect to MTBs, which are based on a three year period, a new
performance period generally will begin on the first day of each fiscal year.
An STB is payable in cash. An MTB is payable in cash, stock or a discounted
non-statutory stock option granted in accordance with the Hewlett-Packard
Company 1995 Incentive Stock Plan, the Hewlett-Packard Company 2000 Stock Plan
and/or successor plans.
Prior to a date which generally is not later than the expiration of 25% of
the days in a particular performance period, the Committee will determine who
will participate in the PFR Plan and for each Participant:
- - the target STB and MTB, 100% of which are payable if all applicable
performance measures are achieved and are based on a fixed percentage of a
Participant's base pay,
- - the maximum STB and MTB,
- - the applicable performance measures, which could be based on order levels,
profit and/or revenue levels and growth, shareowner return, individual
performance or other objectives,
- - the percentages of the STB and MTB allocated to each performance measure, and
- - the performance period.
For each applicable performance period, a Participant may earn an award of
up to 3 times the target STB or $4 million dollars, whichever is less, or 2
times the target MTB or $8 million dollars, whichever is less.
Within 30 days after the end of the relevant performance period, the
Committee will determine the amount of the bonus for each participant by
determining the actual performance results for each performance measure and
applying the percentage allocated to each performance measure against the target
bonus.
In determining the amount of compensation paid pursuant to the PFR Plan, the
Committee has the discretion to consider certain extraordinary events, such as
major accounting changes, unanticipated material acquisition activity or any
major reorganization within HP, which may affect the evaluated performance
results, although the bonus to "covered officers" within the meaning of the
Section 162(m) cannot be increased due to such considerations. The Committee
also has the power, in its sole discretion, to reduce or eliminate to zero the
amount of any bonus payable under the PFR Plan.
With the exception of the Hewlett-Packard Company Executive Deferred
Compensation Plan and the Hewlett-Packard Company Excess Benefit Retirement
Plan, HP intends that any benefits payable or accruable to Participants under HP
benefit programs will be based on such Participant's base pay rather than on his
or her actual total cash compensation. Some exceptions may apply outside of the
United States.
AMENDMENT AND TERMINATION OF THE PLAN. The Committee may amend, suspend or
terminate the PFR Plan at any time as it may deem proper and in the best
interests of HP. Minor or administrative changes to the PFR Plan may also be
made by specified persons.
ESTIMATED AWARDS. The following table shows the range of awards payable
under the PFR Plan with respect to both STBs and MTBs to (1) the HP officers
named in the Summary Compensation Table presently employed by HP, (2) all
current executive officer participants and (3) all non-executive officer
participants. The maximum
20
<PAGE>
award represents 3 times the STB target bonus and 2 times the MTB target bonus,
respectively.
RANGE OF AWARDS UNDER
THE PAY-FOR-RESULTS PLAN
<TABLE>
STB DOLLAR VALUE MTB DOLLAR VALUE
NAME AND POSITION MINIMUM/MAXIMUM MINIMUM/MAXIMUM
<S> <C> <C>
Carleton S. Fiorina $1,250,000--$3,750,000 N/A
President and Chief
Executive Officer
Robert P. Wayman $0--$1,323,000 $0--$882,000
Executive Vice President and Chief Financial Officer
Antonio M. Perez $0--$900,000 $0--$600,000
President--Consumer Business
Carolyn M. Ticknor $0--$900,000 $0--$600,000
President--Imaging and Printing Systems
All current executive officers as a group $1,250,000--$9,633,000 $0--$3,882,000
Non-executive officer employee group $0--$19,843,000 $0--$11,074,000
</TABLE>
Other than Ms. Fiorina and Mr. Wayman, none of HP's current directors is
eligible to participate in the PFR Plan.
FEDERAL INCOME TAX CONSIDERATIONS
All STB amounts paid pursuant to the PFR Plan constitute taxable income to
the employee when received. All MTB amounts paid pursuant to the PFR Plan
constitute taxable income to the employee when exercised (with respect to stock
options) or when no longer subject to substantial risk of forfeiture or
restrictions on transferability (with respect to Stock Awards other than stock
options). HP will be entitled to a federal income tax deduction when amounts
paid under the PFR Plan are included in employee income, if the Plan is approved
by shareowners and otherwise meets the requirements of Section 162(m).
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON EMPLOYEES AND HP WITH RESPECT TO STB AMOUNTS AND MTB AMOUNTS PAID PURSUANT
TO THE PFR PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE TAX
CONSEQUENCES ARISING IN THE CONTEXT OF THE EMPLOYEE'S DEATH OR THE INCOME TAX
LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE EMPLOYEE'S
INCOME OR GAIN MAY BE TAXABLE.
INCORPORATION BY REFERENCE
The foregoing is only a summary of the PFR Plan and is qualified in its
entirety by reference to its full text, a copy of which is attached hereto as
Appendix C.
21
<PAGE>
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of December 31, 1999,
concerning:
- each beneficial owner of more than 5% of HP's common stock (The David and
Lucile Packard Foundation, Susan P. Orr, William R. Hewlett, Walter B.
Hewlett, and Edwin E. van Bronkhorst);
- beneficial ownership by all other current HP directors and the named
executive officers set forth in the Summary Compensation Table on
page 27; and
- beneficial ownership by all current HP directors and HP executive officers
as a group.
The table begins with certain ownership information of the families of HP's
founders and their related entities: (1) the foundation of the late Mr. David
Packard, a related charitable institution and other related persons, and
(2) Mr. William R. Hewlett, a family foundation and other related persons.
The number of shares beneficially owned by each entity, person, director or
executive officer is determined under rules of the Securities and Exchange
Commission, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership includes
any shares as to which the individual has the sole or shared voting power or
investment power and also any shares that the individual has the right to
acquire as of February 29, 2000 (60 days after the record date of December 31,
1999) through the exercise of any stock option or other right. Unless otherwise
indicated, each person has sole investment and voting power (or shares such
powers with his or her spouse) with respect to the shares set forth in the
following table.
BENEFICIAL OWNERSHIP TABLE
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) CLASS
------------------------------------ ---------------------------------------------- ----------
<S> <C> <C> <C>
THE DAVID AND LUCILE PACKARD FOUNDATION (THE "PACKARD
FOUNDATION")(3)
P.O. Box 1330
Los Altos, CA 94023.............................. 104,564,828 10.4%
THE PACKARD HUMANITIES INSTITUTE ("PHI")(4)
300 2nd Street, Suite 201
Los Altos, CA 94022.............................. 13,580,000 1.4%
SUSAN P. ORR(5)...................................... 2,542,667 Indirect(6) (1)
LEWIS E. PLATT(7).................................... 244,098 Direct
752,500 Vested Options
-----------------------------
996,598 *
THE WILLIAM R. HEWLETT REVOCABLE TRUST DATED
FEBRUARY 3, 1995 (THE "HEWLETT TRUST")(8)
1501 Page Mill Road
Palo Alto, CA 94304.............................. 60,042,696 6.0%
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) CLASS
------------------------------------ ---------------------------------------------- ----------
<S> <C> <C> <C>
WILLIAM R. HEWLETT, CO-FOUNDER, DIRECTOR EMERITUS
1501 Page Mill Rd. 1,759,232 Direct(9)
Palo Alto, CA 94304................................ 1,086,706 Indirect(9)(10)
-----------------------------
2,845,938 (1)
THE WILLIAM AND FLORA HEWLETT FOUNDATION (THE
"HEWLETT FOUNDATION")(11)
525 Middlefield Road, Suite 200
Menlo Park, CA 94025............................. 2,046,053 *
WALTER B. HEWLETT(12)................................ 100,000 Direct
3,924 Vested Options
17,210 Indirect(9)(13)
-----------------------------
121,134 (1)
JEAN-PAUL G. GIMON(14)(15)........................... 200 Direct
1,962 Vested Options
1,108,600 Indirect(16)
-----------------------------
1,110,762 *
EDWIN E. VAN BRONKHORST(17)
1501 Page Mill Road
Palo Alto, CA 94304.............................. 88 Direct
1,054,284 Indirect(9)(18)
-----------------------------
1,054,372 (1)
ALL OTHER DIRECTORS AND NAMED EXECUTIVE OFFICERS NOT
LISTED ABOVE:
Edward W. Barnholt................................... 122,925 Direct
226,000 Vested Options
5,292 Indirect(19)
-----------------------------
354,217 *
Philip M. Condit..................................... 2,312 Direct *
Patricia C. Dunn..................................... 8,768 Direct *
John B. Fery(15)..................................... 9,144 Direct
7,782 Vested Options
-----------------------------
16,926 *
Carleton S. Fiorina.................................. 580,552 Direct(20) *
Sam Ginn............................................. 3,332 Direct
2,436 Vested Options
-----------------------------
5,768 *
Richard A. Hackborn.................................. 6,976 Direct *
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) CLASS
------------------------------------ ---------------------------------------------- ----------
<S> <C> <C> <C>
George A. Keyworth II................................ 4,040 Direct
1,962 Vested Options
-----------------------------
6,002 *
Antonio M. Perez..................................... 64,236 Direct
51,500 Vested Options
-----------------------------
115,736 *
Carolyn M. Ticknor................................... 69,724 Direct
62,000 Vested Options
1,000 Indirect(21)
-----------------------------
132,724 *
Robert P. Wayman..................................... 163,946 Direct
372,748 Vested Options
10 Indirect(22)
-----------------------------
536,704 *
ALL CURRENT DIRECTORS AND EXECUTIVE OFFICERS AS A
GROUP (19 PERSONS)................................. 188,803,035 (23)(24) 18.8%
</TABLE>
- ------------------------
* Represents holdings of less than one percent.
(1) None of HP's named executive officers, directors or persons listed in the
table beneficially owns more than 1% of HP's outstanding shares, except for
the following persons who beneficially own the following percentages of
HP's outstanding shares: Ms. Susan P. Orr, 10.7%, Mr. William R. Hewlett,
6.5%; Mr. Walter B. Hewlett, 7.8%; and Mr. Edwin E. van Bronkhorst, 7.7%.
These percentages represent, in part, shared voting and investment power
and in some cases may cover the same shares. Accordingly, the ownership
percentages for each of the above individuals should not be combined to
determine the total voting power and investment power of the Hewlett and
Packard families. For these named individuals, the number of shares
indicated under the "Amount and Nature of Beneficial Ownership" column in
the table reflects all shares held directly or indirectly by them except
for any beneficial ownership interest, as described elsewhere in the table,
that they may have in the Packard Foundation, PHI, the Hewlett Trust, the
Hewlett Foundation or as described in footnote 9 of the table.
(2) "Vested Options" are options that may be exercised as of February 29, 2000.
(3) The directors of the Packard Foundation include: Ms. Susan P. Orr (who is
also a director of HP) and Mr. Lewis E. Platt (who is also a named
executive officer). Ms. Susan P. Orr is also Chairman of the Packard
Foundation and as such shares voting and investment power over the Packard
Foundation shares. Accordingly, she is considered a beneficial owner of the
Packard Foundation shares. However, Ms. Orr disclaims any beneficial
interest in the Packard Foundation shares because she has no economic
interest in any of these shares.
(4) The directors of PHI include Ms. Susan P. Orr, Mr. Walter B. Hewlett (who
is also a director of HP) and Mr. Edwin E. van Bronkhorst. Mr. Hewlett and
Mr. van Bronkhorst share (with other persons) voting and investment power
over the PHI shares and accordingly are considered beneficial owners of
these shares. However, Mr. Hewlett and Mr. van Bronkhorst disclaim any
beneficial interest in the PHI shares because they have no economic
interest in any of these shares.
(5) Director of HP, the Packard Foundation and PHI.
24
<PAGE>
(6) Includes 17,896 shares held by Ms. Orr's son, 14,216 shares held by
Ms. Orr as custodian for her daughter, 22,000 shares held by her husband,
1,939,047 shares held in the Susan P. Orr Trust, 32,324 shares held in a
family trust and 517,184 shares held in trusts for her children, of which
trusts she is a trustee. Ms. Orr disclaims any beneficial interest in all
of these shares other than those held in the Susan P. Orr Trust.
(7) Director of the Packard Foundation and named executive officer.
(8) The co-trustees of the Hewlett Trust are Mr. William R. Hewlett,
Mr. Walter B. Hewlett and Mr. Edwin E. van Bronkhorst. As co-trustees of
the Hewlett Trust, Mr. William R. Hewlett, Mr. Walter B. Hewlett and
Mr. van Bronkhorst share voting and investment power over the Hewlett Trust
shares. Accordingly, each of them is considered a beneficial owner of these
shares. However, Mr. Walter B. Hewlett and Mr. van Bronkhorst disclaim any
beneficial interest in the Hewlett Trust shares because they have no
economic interest in any of these shares.
(9) Walter B. Hewlett and Edwin E. van Bronkhorst share voting and investment
power over the 1,759,232 shares that are owned directly by Mr. William R.
Hewlett and share voting power over 1,083,000 shares held in a trust for
William R. Hewlett's grandchildren (as to which Mr. van Bronkhorst is also
a trustee) . Mr. Walter B. Hewlett and Mr. van Bronkhorst disclaim any
beneficial interest in all of those shares because they have no economic
interest in any of these shares.
(10) Includes 3,706 shares held by Mr. William R. Hewlett's spouse and
1,083,000 shares held in a trust for Mr. Hewlett's grandchildren as to
which Mr. Hewlett shares voting power. Mr. Hewlett disclaims any
beneficial interest in all shares owned by the trust.
(11) The directors of the Hewlett Foundation include Mr. William R. Hewlett;
Mr. Walter B. Hewlett (who also serves as its Chairman); Ms. Eleanor H.
Gimon, daughter of Mr. William R. Hewlett, the wife of HP director
Mr. Jean-Paul G. Gimon and sister of HP director Mr. Walter B. Hewlett;
and Mr. Richard A. Hackborn (who is also a director of HP).
Mr. William R. Hewlett and Mr. Walter B. Hewlett share (with other
persons) voting and investment power over the Hewlett Foundation shares
and accordingly are considered the beneficial owners of these shares.
However, Mr. William R. Hewlett and Mr. Walter B. Hewlett disclaim any
beneficial interest in the Hewlett Foundation shares because they have no
economic interest in any of these shares.
(12) Son of Mr. William R. Hewlett and brother-in-law of HP director
Mr. Jean-Paul G. Gimon and director of HP, PHI and the Hewlett Foundation.
(13) Includes 14,580 shares held by Mr. Walter B. Hewlett as custodian for his
children, 1,100 shares held by his son, 1,280 shares held by his wife, and
250 shares held by his daughter. Mr. Hewlett disclaims any beneficial
interest in all of these shares.
(14) Son-in-law of Mr. William R. Hewlett and brother-in-law of HP director
Mr. Walter B. Hewlett and director of HP.
(15) Will not stand for reelection as a director of HP at the 2000 annual
meeting.
(16) Includes 1,108,600 shares held by Mr. Gimon's wife.
(17) Director of PHI and trustee of certain Hewlett family trusts.
(18) Includes 842,384 shares held in a trust for Ms. Mary H. Jaffe and 211,900
shares held in a trust for Ms. Eleanor H. Gimon, of which trusts Mr. van
Bronkhorst is a co-trustee. Mr. van Bronkhorst disclaims any beneficial
interest in all of the shares held by those trusts because he has no
economic interest in any of those shares.
(19) Includes 5,292 shares held by Mr. Barnholt as custodian for his children.
25
<PAGE>
(20) In connection with her employment as President and Chief Executive Officer
and in order to compensate her partially for stock and options that she
forfeited upon the termination of her employment with Lucent Technologies,
Ms. Fiorina received 290,000 shares of restricted stock and 290,000 shares
of restricted stock units, as to which an additional 551.53 shares have
been received in dividends.
(21) Includes 1,000 shares held by Ms. Ticknor as custodian for her son.
(22) Includes 10 shares held by Mr. Wayman as custodian for his son.
(23) Includes an aggregate of 751,657 shares that the current directors and
executive officers have the right to acquire as of February 29, 2000
through the exercise of options.
(24) Includes an aggregate of 183,655,123 shares held by current directors and
executive officers in fiduciary capacities.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors,
executive officers and holders of more than 10% of our common stock to file with
the Securities and Exchange Commission reports regarding their ownership and
changes in ownership of our securities. HP believes that, during fiscal year
1999, its directors, executive officers and 10% shareowners complied with all
Section 16(a) filing requirements with the following exceptions: a late report
filed by Mr. Edward W. Barnholt regarding two sales of shares held in custodial
accounts for his children; a late report filed by Mr. Jean-Paul G. Gimon
regarding a sale of shares held by his wife; and a late report filed by
Mr. George A. Keyworth II regarding a sale of shares held by his wife. In making
this statement, HP has relied upon examination of the copies of Forms 3, 4 and 5
provided to the Company and the written representations of its directors,
executive officers and 10% shareowners.
26
<PAGE>
EXECUTIVE COMPENSATION
The following table discloses compensation received by each person who
served as HP's Chief Executive Officer during fiscal year 1999 and HP's four
other most highly paid executive officers ("named executive officers") during
fiscal year 1999 as well as their compensation for each of the fiscal years
ending October 31, 1998 and October 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual ------------------------------------------
Compensation Awards Payouts
----------------------- --------------------------- ------------
(a) (b) (c) (d) (e) (f) (g) (h)
SECURITIES
RESTRICTED UNDERLYING LTIP ALL OTHER
BONUS STOCK AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($)(4)(7) ($)(5) SARS (#) ($)(6)(7) ($)(8)(9)
- --------------------------- -------- ---------- ---------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Carleton S. Fiorina ...... 1999 $ 287,933 $ 366,438 $65,557,400 600,000 N/A $3,223,867
President, Chief
Executive Officer
and Director(1)
Lewis E. Platt ........... 1999 1,000,000 3,114,721 1,298,501 300,000 $ 0 600,089
Former Chairman, 1998 1,000,000 910,700 2,265,258 200,000 -2,360,925 6,491
President and 1997 1,700,000 111,435 2,712,071 150,000 2,470,000 6,427
Chief Executive
Officer(2)
Robert P. Wayman ......... 1999 930,000 471,590 4,208,840 115,000 0 264,384
Executive Vice President, 1998 997,625 147,804 1,289,516 70,000 -674,550 6,491
Chief Financial 1997 968,750 63,550 1,360,426 45,000 741,000 6,427
Officer and Director
Antonio M. Perez ......... 1999 530,875 431,066 1,301,374 85,000 N/A 6,485
President--Consumer 1998 600,875 33,055 926,250 12,000 N/A 6,491
Business 1997 517,500 33,964 679,936 15,000 N/A 6,427
Carolyn M. Ticknor ....... 1999 603,125 310,773 1,897,088 110,000 N/A 9,303
President--Imaging and 1998 629,250 34,612 1,185,025 15,000 N/A 6,283
Printing Systems 1997 538,750 35,364 654,834 20,000 N/A 6,427
Edward W. Barnholt ....... 1999 920,635 474,684 416,589 70,000 0 313,892
Former Executive Vice 1998 759,488 115,754 967,581 60,000 -539,640 6,491
President(3) 1997 702,500 46,092 1,083,627 30,000 617,500 6,427
</TABLE>
FOOTNOTES TO SUMMARY COMPENSATION TABLE
(1) Ms. Fiorina was elected President and Chief Executive Officer effective
July 17, 1999 and a director effective July 23, 1999.
(2) Mr. Platt resigned as President and Chief Executive Officer effective
July 31, 1999 and as Chairman of the Board effective December 31, 1999.
(3) Mr. Barnholt resigned as Executive Vice President effective October 31, 1999
and was appointed Chief Executive Officer of Agilent Technologies, Inc.
effective May 4, 1999.
(4) The amounts shown in this column reflect payments under HP's Variable Pay
Plan established November 1, 1998 (the "1999 Variable Pay Plan," which term
includes its predecessor, as applicable)
27
<PAGE>
and HP's cash profit-sharing plan. All HP officers subject to Section 16 of
the Securities Exchange Act of 1934 and selected other employees were
eligible to participate in the 1999 Variable Pay Plan. During fiscal year
1999, all of the named executive officers participated in the 1999 Variable
Pay Plan.
The 1999 Variable Pay Plan permitted the Compensation Committee to designate
a portion of the annual cash compensation planned for certain executive
officers as variable pay. Under the 1999 Variable Pay Plan, the percentage
of the targeted variable amount to be paid was dependent upon the degree to
which performance metrics defined on an annual basis were met. In
November 1998, the Compensation Committee established the performance
metrics for fiscal year 1999. These metrics varied for each participant, but
at least a portion of each person's pay was dependent on a company-wide net
profit metric. Economic value added, business specific net profit, revenue
and orders information were also used for a number of the participants. For
the following periods in fiscal year 1999, the Compensation Committee
determined that the following variable compensation for the named executive
officers had been earned:
<TABLE>
<CAPTION>
NOV. 1, 1998 - APRIL 30, MAY 1, 1998 - OCT. 31,
1999 ($) 1999 ($)
------------------------ ----------------------
<S> <C> <C>
Carleton S. Fiorina................... N/A $366,438
Lewis E. Platt........................ $2,338,481 633,760
Robert P. Wayman...................... 263,079 142,596
Antonio M. Perez...................... 150,174 243,354
Carolyn M. Ticknor.................... 108,174 161,449
Edward W. Barnholt.................... 188,386 217,892
</TABLE>
The amounts attributable to the 1999 Variable Pay Plan for fiscal years 1999
and 1998 are disclosed in the table above as Bonus. In fiscal year 1997, all
annual cash compensation other than compensation paid under the
profit-sharing plan was reflected as salary.
During fiscal year 1999, the cash profit-sharing plan was available to all
employees of HP. Under the cash profit-sharing plan, a portion of HP's
earnings for each half of its fiscal year was paid to all employees. The
amount paid was based upon HP's performance as measured by return on assets
and revenue growth. The amounts shown in this column which are not
associated with bonuses payable under the Variable Pay Plan are payments
pursuant to the cash profit-sharing plan.
(5) In connection with her employment as President and Chief Executive Officer,
Ms. Fiorina received 290,000 shares of restricted stock and 290,000 shares
of restricted stock units which vest annually over a three-year period with
an aggregate value of $65,557,400 at the time of grant. These shares were
provided in order to compensate her partially for stock and options that she
forfeited upon the termination of her employment with Lucent Technologies,
Inc. and are reflected in this column.
The amounts disclosed in this column also reflect, for fiscal years 1999,
1998 and 1997, the dollar values of (a) performance-based restricted stock
granted to the named executive officers other than Ms. Fiorina,
(b) time-based restricted stock granted to Mr. Perez and Ms. Ticknor in
fiscal years 1998 and 1997, (c) restricted stock granted pursuant to the
Employment Agreement with Mr. Wayman and the Transition Program for
Mr. Perez and Ms. Ticknor, and (d) HP common stock that HP
28
<PAGE>
contributed under its existing Employee Stock Purchase Plan (the "ESPP") as
a match for every two shares purchased by the named executive officers
during the applicable fiscal years, as follows:
<TABLE>
<CAPTION>
PERFORMANCE-BASED TIME-BASED EMPLOYMENT/TRANSITION EMPLOYEE STOCK
RESTRICTED STOCK RESTRICTED STOCK AGREEMENT AWARDS PURCHASE PLAN
# SHARES # SHARES # SHARES # SHARES
NAME ($ AMOUNT) ($ AMOUNT) ($ AMOUNT) ($ AMOUNT)
- ---- ------------------ ------------------ --------------------- ---------------
<S> <C> <C> <C> <C>
Lewis E. Platt
1999............... 20,000 ($1,183,800) 1,405 ($114,701)
1998............... 35,000 ($2,161,250) 1,664 ($104,008)
1997............... 50,000 ($2,625,800) 1,473 ($87,071)
Robert P. Wayman
1999............... 9,000 ($532,710) 38,300 ($3,614,754) 740 ($61,376)
1998............... 20,000 ($1,235,000) 873 ($54,516)
1997............... 25,000 ($1,312,500) 804 ($47,926)
Antonio M. Perez
1999............... 4,000 ($236,760) 10,930 ($1,031,573) 397 ($33,041)
1998............... 15,000 ($926,250) 456 ($28,120)
1997............... 12,500 ($626,250) 392 ($23,686)
Carolyn M. Ticknor
1999............... 6,000 ($355,140) 15,960 ($1,506,305) 428 ($35,643)
1998............... 18,500 ($1,155,175) 483 ($29,850)
1997............... 12,000 ($630,000) 411 ($24,834)
Edward W. Barnholt
1999............... 6,000 ($355,140) 731 ($61,449)
1998............... 15,000 ($926,250) 664 ($41,331)
1997............... 20,000 ($1,050,000) 561 ($33,627)
</TABLE>
The performance-based restricted stock will vest only to the extent that HP
achieves stated performance goals with respect to earnings per share and
return on assets over a three-year period ending October 31, 2002, 2001 and
2000 for the performance-based restricted stock granted in fiscal years
1999, 1998 and 1997, respectively, and vests at the end of a three-year
period. Because the stated performance goals for the three-year period ended
October 31, 1998 were not met, 75% of the performance-based restricted stock
granted in fiscal year 1996 to each of Mr. Platt, Mr. Wayman and
Mr. Barnholt was forfeited in fiscal year 1998, as further described in
footnote 6 below. The time-based restricted stock granted to each of
Mr. Perez and Ms. Ticknor is not subject to performance-based goals with
respect to earnings per share and return on assets and vests at the end of a
three-year period. The amounts set forth above for restricted stock awards
(other than for the ESPP) are based on the average stock price for HP common
stock on the date of grant.
The ESPP is a broad-based plan which is available to all HP employees. The
matching shares vest two years after HP's contributions, which occur on a
rolling fiscal quarter basis, and are subject to forfeiture during the
two-year period in the event of termination or certain other events. The
named executive officers receive non-preferential dividends on these
restricted shares.
29
<PAGE>
At the end of fiscal year 1999, the aggregate share amount and dollar value
of the restricted stock held by the named executive officers was as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES $ VALUE
---------------- -----------
<S> <C> <C>
Carleton S. Fiorina............................. 580,552 $43,069,992
Lewis E. Platt.................................. 108,069 8,017,423
Robert P. Wayman................................ 93,913 6,967,218
Antonio M. Perez................................ 76,283 5,659,283
Carolyn M. Ticknor.............................. 85,371 6,333,504
Edward W. Barnholt.............................. 42,395 3,145,200
</TABLE>
(6) In November 1999, the Compensation Committee reviewed the results for the
three-year performance period ended October 31, 1999 and determined that the
performance objectives associated with performance-based restricted stock
granted in fiscal year 1997 had been met at target. Therefore, no
adjustments to the stock grants were made and the amount in the LTIP Payouts
column is correspondingly $0.
In November 1998, the Compensation Committee reviewed the results for the
three-year performance period ended October 31, 1998 to determine to what
extent the performance objectives associated with performance-based
restricted stock granted in fiscal year 1996 had been met. The Compensation
Committee determined that under the terms of each grant Mr. Platt,
Mr. Wayman and Mr. Barnholt were required to forfeit the following shares
constituting 75% of the performance-based restricted stock granted to each
of them in 1996: Mr. Platt, 52,500 shares; Mr. Wayman, 15,000 shares; and
Mr. Barnholt, 12,000 shares. The value of the forfeiture is reflected in the
table above as a negative LTIP pay-out in fiscal year 1998 based upon the
value of HP stock as of the date of the grant in fiscal year 1996.
In fiscal year 1997, HP granted to the named executive officers shares of
unrestricted stock in the following respective share amounts having the
following respective dollar values as of the date of the grant,
respectively: Mr. Platt, 40,000 shares ($2,470,000); Mr. Wayman, 12,000
shares ($741,000); and Mr. Barnholt, 10,000 shares ($617,500). These grants
were made pursuant to the agreements under which the Compensation Committee
in fiscal year 1995 granted shares of performance-based restricted stock to
each of the above-named executive officers. Under the terms of those
agreements, the above-named executive officers became eligible for
additional shares of unrestricted stock because HP's performance, over the
three-year period October 31, 1997, exceeded stated goals with respect to
earnings per share and return on assets.
(7) As noted above, HP provides performance-based compensation under the 1999
Variable Pay Plan, its cash profit-sharing plan, pursuant to the agreements
under which the Compensation Committee granted shares of restricted stock in
fiscal years 1999, 1998 and 1997 and, beginning in fiscal year 2000, the
2000 Pay-for-Results Plan. The subsequent compensation payment or
forfeiture, described above as BONUS or LTIP PAYOUT, respectively, is
reflected as compensation in the fiscal year for which the relevant
performance period is completed. Because the payment of such
performance-based compensation is subject to the review and final action of
the Compensation Committee, which generally takes place at a meeting in the
fiscal year following the completion of the relevant performance period, HP
in its proxy statements prior to 1998 has reflected such compensation in the
following fiscal year. HP presently reports the timing of such
performance-based compensation in the fiscal year for which the relevant
performance period is completed.
(8) The amounts disclosed in this column include payment by HP of a sign-on
bonus of $3,000,000, mortgage assistance in the amount of $36,343, a
relocation allowance of $187,500 and $24 for term life
30
<PAGE>
insurance for Ms. Fiorina. For the other named executive officers, this
column includes the following payments by HP:
<TABLE>
<CAPTION>
TERM-LIFE
401(K) INSURANCE ACCRUED SICK LEAVE PAYMENT
NAME (TAXCAP) PAYMENT FOR DISCONTINUED PLAN
- ---- -------- --------- --------------------------
<S> <C> <C> <C>
Lewis E. Platt
1999.......................... $ 6,400 $85 $593,604
1998.......................... 6,400 91
1997.......................... 6,333 94
Robert P. Wayman
1999.......................... 6,400 85 257,899
1998.......................... 6,400 91
1997.......................... 6,333 94
Antonio M. Perez
1999.......................... 6,400 85 0
1998.......................... 6,400 91
1997.......................... 6,333 94
Carolyn M. Ticknor
1999.......................... 6,400 85 2,818
1998.......................... 6,192 91
1997.......................... 6,333 94
Edward W. Barnholt
1999.......................... 6,400 85 307,407
1998.......................... 6,400 91
1997.......................... 6,333 94
</TABLE>
(9) The amounts described in this column do not include payment by HP on
November 1, 1999 of a lump-sum settlement amount for benefits accrued under
the Officers Early Retirement Plan in the amount of $4,960,958 for
Mr. Platt, $1,641,169 for Mr. Wayman, $795,516 for Mr. Perez, $749,320 for
Ms. Ticknor and $1,976,051 for Mr. Barnholt. The Officers Early Retirement
Plan was terminated by the Compensation Committee of the Board of Directors,
as described more fully under "Officers Early Retirement Plan."
31
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal year
1999 to each of the named executive officers. HP did not grant any stock
appreciation rights to the named executive officers during fiscal year 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE
------------------------------------------------------------------ ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE GRANT DATE
NAME GRANTED(#)(1)(2) FISCAL YEAR(3) ($/SHARE)(4) EXPIRATION DATE PRESENT VALUE ($)(5)
---- ---------------- -------------- ------------ --------------- ---------------------
<S> <C> <C> <C> <C> <C>
Carleton S. Fiorina....... 600,000 3.2% $113.03 July 16, 2009 $24,366,000
Lewis E. Platt............ 300,000 1.6% 59.19 Nov. 18, 2008 6,378,000
Robert P. Wayman.......... 115,000 0.6% 59.19 Nov. 18, 2008 2,444,900
Antonio M. Perez.......... 85,000 0.5% 59.19 Nov. 18, 2008 1,807,100
Carolyn M. Ticknor........ 110,000 0.6% 59.19 Nov. 18, 2008 2,338,600
Edward W. Barnholt........ 70,000 0.4% 59.19 Nov. 18, 2008 1,488,200
</TABLE>
- ------------------------
(1) The shares are exercisable 25% after the first year, 50% after the second
year, 75% after the third year, and 100% after the fourth year.
(2) All or a portion of the unvested portion of these options vests in
connection with certain terminations of employment. In addition, 50% of
Ms. Fiorina's then unvested options vests upon a change of control of HP
(see "Employment Contracts, Termination of Employment and Change-in-Control
Arrangements").
(3) HP granted options to purchase 18,836,273 shares to employees in fiscal year
1999.
(4) The exercise price may be paid by delivery of already-owned shares, and tax
withholding obligations related to exercise may be paid by offset of the
underlying shares, subject to certain conditions. The exercise price is the
fair market value on the date of grant.
(5) HP used a modified Black-Scholes model of option valuation to determine
grant date present value. HP does not advocate or necessarily agree that the
Black-Scholes model can properly determine the value of an option.
Calculations for the named executive officers are based on a seven-year
option term, which reflects HP's experience that its options, on average,
are exercised within seven years of grant. Other assumptions used for the
valuations are: interest rate of 5.53%; annual dividend yield of 1.0%; and
volatility of 30%. The resulting values are reduced by 8% to reflect HP's
experience with forfeitures.
32
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal year
1999 by each of the named executive officers and the values of each of such
officer's unexercised options at October 29, 1999. There were no stock
appreciation rights exercised or outstanding.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NO. OF OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END(#)(1)(2) AT FISCAL YEAR-END($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carleton S. Fiorina.... 0 $ 0 0 600,000 $ 0 $ 0
Lewis E. Platt......... 333,928 26,912,428 630,000 560,000 27,081,150 22,041,850
Robert P. Wayman....... 115,000 8,446,650 320,248 200,000 15,863,223 3,096,325
Antonio M. Perez....... 18,800 1,541,384 20,250 104,750 478,613 1,612,128
Carolyn M. Ticknor..... 0 0 22,750 134,250 519,478 2,052,893
Edward W. Barnholt..... 82,288 6,757,816 178,500 137,500 7,993,245 2,111,675
</TABLE>
- ------------------------
(1) All or a portion of the unvested portion of these options vests in
connection with certain terminations of employment. In addition, 50% of
Ms. Fiorina's then unvested options vests upon a change of control of HP
(see "Employment Contracts, Termination of Employment and Change-in-Control
Arrangements").
(2) The value of unexercised options is based upon the difference between the
exercise price and the average of the high and low market prices on
October 29, 1999, which was $73.88. The numbers shown reflect the value of
options accumulated over a ten-year period.
33
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
HP entered into an employment agreement with Ms. Fiorina, President and
Chief Executive Officer of HP, as of July 17, 1999. The agreement provides for
an initial base salary of $1,000,000 per year. It also provides for a targeted
annual incentive award of $1,250,000 per year, with an opportunity to earn up to
an additional $2,500,000 per year in annual variable compensation. This variable
pay is guaranteed at target for the 2000 fiscal year and was prorated at the
target level for the portion of the 1999 fiscal year during which Ms. Fiorina
was employed. Ms. Fiorina is entitled to participate at a level commensurate
with her position in all HP employee benefit programs and equity plans and is
also entitled to all perquisites that other senior executives are entitled to
receive and as are otherwise suitable to her position.
In accordance with her employment agreement, Ms. Fiorina was also granted HP
restricted stock, HP restricted stock units and HP non-qualified stock options
in order to compensate her for stock and options that she forfeited upon the
termination of her employment with Lucent Technologies and that were scheduled
to vest in the short-term. Details of these grants follow:
1. Ms. Fiorina was granted 290,000 shares of HP restricted stock.
Subject to earlier vesting, as described below, and continued employment,
the restricted stock vests one-third per year on each anniversary date of
employment.
2. Ms. Fiorina was also granted 290,000 shares of HP restricted stock
units. Subject to earlier vesting, as described below, and continued
employment, the restricted stock units vest one-third per year on each
anniversary date of employment. Payment of the restricted stock units will
occur on the first to occur of the fifth anniversary of employment, the date
of any termination of employment or a change of control of HP, whether by
merger or asset sale or acquisition of 35% or more of HP's voting
securities.
3. Ms. Fiorina was granted an option to purchase, within 10 years,
600,000 shares of HP common stock at a purchase price of $113.03 per share.
Subject to earlier vesting, as described below, and continued employment,
such options will vest as to 25% of the shares on each anniversary of
employment.
As part of her employment agreement, HP also agreed to pay Ms. Fiorina a
lump-sum hiring bonus of $3,000,000, to be reduced by any annual cash bonus she
receives from Lucent Technologies for its fiscal year ending September 30, 1999.
Ms. Fiorina's employment agreement also provided for specified relocation
benefits and paid time off.
In the event that Ms. Fiorina's employment is terminated involuntarily other
than for cause, death or disability, or if Ms. Fiorina terminates her employment
for good reason (generally a reduction in Ms. Fiorina's responsibilities or
compensation, breach by HP of its obligations under the employment agreement, or
failure to appoint Ms. Fiorina to the Board), then Ms. Fiorina will receive her
accrued benefits, prorated bonus, her guaranteed bonus for fiscal years 1999 and
2000 to the extent not previously paid, a severance amount of two times her base
salary and target variable pay payable over a 24-month period, a two-year
continuation of all welfare plans, full vesting of restricted stock and
restricted stock units, and 50% vesting of all unvested stock options. However,
if Ms. Fiorina's employment is terminated in contemplation of, at the time of,
or within two years after a change in control of HP, then she will receive
instead a severance amount of three times her base salary and specified variable
pay payable on a lump-sum basis, a three-year continuation of all welfare plans,
and 100% vesting of all unvested stock options.
In the event of a change of control of HP, all restricted stock and unvested
restricted stock units she holds will fully vest, and 50% of all unvested
options she holds will fully vest. Payments to Ms. Fiorina in connection with a
change in control will be increased to offset the effects of any golden
parachute excise taxes payable with respect to such payments.
34
<PAGE>
As a condition to receiving severance and other benefits in connection with
a termination of her employment, Ms. Fiorina agreed to execute a release in
favor of HP and that, during and for 24 months following her employment with HP,
she will not render services to certain companies and will not solicit employees
of HP or violate the confidentiality agreement she entered into with HP.
In connection with the realignment of HP and the search for a new Chief
Executive Officer, the Board adopted the Hewlett-Packard Company Executive
Transition Program (the "Program") to provide certain key employees of HP
(including Ms. Ticknor and Mr. Perez) with financial security and incentives to
remain with HP. The Program specifies that, until the second anniversary date of
the effective date of the Program (the "Transition Period"), HP will provide the
Program participants with a base salary and target pay in accordance with the
1999 Variable Pay Plan and eligibility to participate in HP's equity programs,
benefit programs and executive compensation programs. In addition, the Program
participants will receive protection of their existing retirement benefits
during the Transition Period. In the event that a Program participant is
terminated involuntarily other than for cause or if the participant terminates
his or her employment as a result of constructive termination (generally a
reduction in the participant's compensation or a material reduction in his or
her benefits) or the participant is terminated due to his or her disability,
then the participant will receive a severance payment equal to the participant's
annualized base pay plus target variable pay multiplied by a severance payment
factor specified in the participant's notice of participation. For the named
executive officers covered by the Program, the severance payment factor is as
follows: Ms. Ticknor, 1.5 and Mr. Perez, 1.5. Participants will also receive
full vesting of any stock options held and of restricted stock not subject to
performance criteria, partial vesting of restricted stock subject to performance
criteria, financial counseling benefits for one year and other benefits that may
be specified on the notice of participation. As a condition to receiving
severance and other benefits in connection with a termination of employment,
participants must execute a release in favor of HP and refrain from competing
with HP or soliciting its employees.
Mr. Platt entered into an individual Transition Agreement with HP on
May 20, 1999. Mr. Platt received a transition payment of 1.5 times his base
salary and a variable compensation amount payable under the agreement because he
resigned from his position as Chairman on December 31, 1999. As a condition of
receiving this transition payment, Mr. Platt agreed that, for 18 months
following the termination of his employment with HP, he will not compete with
HP, solicit its employees, or violate his confidentiality obligations to HP.
HP also entered into an employment agreement with Mr. Wayman as of May 20,
1999 for his employment as Executive Vice President, Finance and Administration
and Chief Financial Officer. The agreement provides for an initial base salary
of $930,000 per year and variable compensation of $270,000 per year. Pursuant to
the agreement, Mr. Wayman receives protection of his existing retirement
arrangements and a special restricted stock award of 38,300 shares,
corresponding to three times his targeted cash compensation divided by the fair
market value of HP common stock as of the date of grant. These shares will vest
upon a termination of Mr. Wayman's employment by HP other than for cause or by
Mr. Wayman as a result of constructive termination (generally a reduction in
Mr. Wayman's compensation, a material reduction in his benefits or HP's failure
to retain Mr. Wayman as its Executive Vice President, Finance and Administration
and Chief Financial Officer) or the distribution of shares in Agilent
Technologies to HP shareowners prior to May 20, 2001 (any of the foregoing, a
"Vesting Event"). Upon the occurrence of a Vesting Event, Mr. Wayman will also
receive full vesting of any stock options held, partial vesting of other
restricted stock held, financial counseling benefits for one year and other
retiree benefits. Payments by HP to Mr. Wayman under the agreement or otherwise
will be increased to offset the effects of any golden parachute excise taxes
payable with respect to such payments. As a condition to receiving severance and
other benefits under the agreement, Mr. Wayman agreed to execute a release in
favor of HP and agreed that, for 18 months following the termination of his
employment with HP, he will not compete with HP, solicit its employees, or
violate his confidentiality obligations to HP.
35
<PAGE>
PENSION PLANS
The following table shows the estimated annual benefits payable upon
retirement to HP employees in the United States under the Company's Deferred
Profit-Sharing Plan (the "Deferred Plan") and the Company's Retirement Plan (the
"Retirement Plan"), as well as the Company's Excess Benefit Retirement Plan (the
"Excess Benefit Plan").
ESTIMATED ANNUAL RETIREMENT BENEFITS(1)(2)
<TABLE>
<CAPTION>
HIGHEST
FIVE-YEAR YEARS OF SERVICE
AVERAGE ---------------------------------------------
COMPENSATION 15 20 25 30
- --------------------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C>
$ 400,000 $ 87,034 $116,046 $ 145,057 $ 174,069
500,000 109,534 146,046 182,557 219,069
600,000 132,034 176,046 220,057 264,069
700,000 154,534 206,046 257,557 309,069
800,000 177,034 236,046 295,057 354,069
900,000 199,534 266,046 332,557 399,069
1,000,000 222,034 296,046 370,057 444,069
1,100,000 244,534 326,046 407,557 489,069
1,200,000 267,034 356,046 445,057 534,069
1,300,000 289,534 386,046 482,557 579,069
1,400,000 312,034 416,046 520,057 624,069
1,500,000 334,534 446,046 557,557 669,069
1,600,000 357,034 476,046 595,057 714,069
1,700,000 379,534 506,046 632,557 759,069
1,800,000 402,034 536,046 670,057 804,069
1,900,000 424,534 566,046 707,557 849,069
2,000,000 447,034 596,046 745,057 894,069
2,100,000 469,534 626,046 782,557 939,069
2,200,000 492,034 656,046 820,057 984,069
2,300,000 514,534 686,046 857,557 1,029,069
2,400,000 537,034 716,046 895,057 1,074,069
2,500,000 559,534 746,046 932,557 1,119,069
2,600,000 582,034 776,046 970,057 1,164,069
2,700,000 604,534 806,046 1,007,557 1,209,069
</TABLE>
- ------------------------
(1) Amounts exceeding $135,000 would be paid pursuant to the Excess Benefit
Plan.
(2) No more than $160,000 (as adjusted from time to time by the Internal Revenue
Service) of cash compensation may be taken into account in calculating
benefits payable under the Retirement Plan.
The compensation covered by the plans whose benefits are summarized in the
table above equals base pay. The covered compensation for each of the named
executive officers is the highest five-year average of
36
<PAGE>
the amounts shown in the "Salary" column of the Summary Compensation Table.
Effective November 1, 1997, the compensation covered by the above-referenced
plans for any HP officer who participates in the Company's 1998 Variable Pay
Plan or the Company's 1999 Variable Pay Plan shall be the "total targeted cash
compensation" as defined under each of such variable pay plans. Effective
November 1, 1999, annual benefits payable upon retirement to HP employees will
be based on base pay and Short-Term Bonuses payable under the Company's
Pay-for-Results Plan, which is a successor to the Company's 1999 Variable Pay
Plan.
Officers named in the Summary Compensation Table have been credited with the
following years of service: Ms. Fiorina, no years; Mr. Platt, 30 years;
Mr. Wayman, 30 years; Ms. Ticknor, 21 years; Mr. Perez, 6 years; and
Mr. Barnholt, 30 years. In addition, Mr. Perez has been credited with 19 years
of service under the pension plan of Hewlett-Packard Espanola S.A.
Retirement benefits shown are payable at age 65 in the form of a single life
annuity to the employee and reflect the maximum offset allowance currently in
effect under Section 401(l) of the Code, to compute the offset for such benefits
under the plans. For purposes of calculating the benefit, an employee may not be
credited with more than 30 years of service.
37
<PAGE>
OFFICERS EARLY RETIREMENT PLAN
(TERMINATED EFFECTIVE NOVEMBER 1, 1999)
The following table shows the fully vested estimated annual benefits
payable(1) to certain Board-elected HP officers in the United States under the
HP Officers Early Retirement Plan (the "Officers Plan"). The Officers Plan
applies to officers who retired from HP and were receiving benefits pursuant to
the Officers Plan prior to October 31, 1999 (the "Retired Officers"). Effective
as of November 1, 1999, officers covered by the Officers Plan who were then
employed by HP (the "Continuing Officers") received a present value single
lump-sum settlement of benefits accrued under the Officers Plan, which amounts
were credited to such officers' deferral accounts under the Hewlett-Packard
Company Executive Deferred Compensation Plan (or, in the case of Continuing
Officers employed by Agilent Technologies, the Agilent Technologies Executive
Deferred Compensation Plan). Any amounts credited to an officer's deferral
account as described above will be subject to forfeiture if the officer
terminates his or her employment with HP or Agilent, as applicable, prior to
April 1, 2001, unless he or she is a retiree who had attained age 58 prior to
April 1, 1999.
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL ----------------------------------------------------------
COMPENSATION 15 20 25 30 35
- --------------------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 400,000 $120,000 $140,000 $ 160,000 $ 180,000 $ 200,000
600,000 180,000 210,000 240,000 270,000 300,000
800,000 240,000 280,000 320,000 360,000 400,000
1,000,000 300,000 350,000 400,000 450,000 500,000
1,200,000 360,000 420,000 480,000 540,000 600,000
1,400,000 420,000 490,000 560,000 630,000 700,000
1,600,000 480,000 560,000 640,000 720,000 800,000
1,800,000 540,000 630,000 720,000 810,000 900,000
2,000,000 600,000 700,000 800,000 900,000 1,000,000
2,200,000 660,000 770,000 880,000 990,000 1,100,000
2,400,000 720,000 840,000 960,000 1,080,000 1,200,000
2,600,000 780,000 910,000 1,040,000 1,170,000 1,300,000
</TABLE>
- ------------------------
(1) Benefits start no earlier than age 60, unless earlier benefits are approved
by the Board, and end upon reaching age 65. Annual benefits shown in the
table assume retirement at age 60. Benefits that start before age 60 are
reduced.
In addition to standard retirement benefits, a Retired Officer receives
under the Officers Plan a percentage of his or her annual salary at retirement
until age 65 (or his or her death, if earlier), at which time any benefits under
the Officers Plan terminate. The benefits are not subject to deduction for any
offset amounts other than HP-funded disability benefits. The percentage of
salary received by a Retired Officer retiring before age 65 is based on a
formula that includes age, date of election as an officer and years of service
as factors.
For Retired Officers, the compensation covered by the Officers Plan is the
retiring officer's base rate of pay (the "Rate of Pay") averaged over the last
four fiscal quarters of active employment with HP. To the extent an HP officer
covered under the Officers Plan is a participant in HP's 1999 Variable Pay Plan
or its predecessor, the compensation amounts used to determine "final
compensation" are the retiring officer's
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"total targeted cash compensation" amounts as defined in each of such variable
pay plans averaged over the last four fiscal quarters of active employment with
HP.
For purposes of determining the benefits accrued under the Officers Plan for
the Continuing Officers, the Rate of Pay for an officer means his or her monthly
rate of pay in effect at the beginning of each fiscal quarter for the 1999
fiscal year. For Continuing Officers who were participants in the Company's 1999
Variable Pay Plan, the monthly rate of pay is the monthly "total targeted cash
compensation."
As of October 31, 1999, each of the named executive officers was credited
with the following years of service: Ms. Fiorina, no years; Mr. Platt,
33 years; Mr. Wayman, 30 years; Mr. Perez, 24 years; Ms. Ticknor, 22 years; and
Mr. Barnholt, 32 years. In connection with the lump-sum payment of benefits
accrued under the Officers Plan to Continuing Officers, the named executive
officers received the following amounts payable to the Hewlett-Packard Company
Executive Deferred Compensation Plan: Mr. Platt, $4,960,958; Mr. Wayman,
$1,641,169; Mr. Perez, $795,516; and Ms. Ticknor, $749,320. Mr. Barnholt
received a payment of $1,976,051 to the Agilent Technologies Executive Deferred
Compensation Plan. Ms. Fiorina was not a participant in the Officers Plan.
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REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
HP's executive compensation program is administered by the Compensation
Committee of the Board of Directors (the "Committee"). The Committee, which is
composed of non-employee directors, is responsible for approving and reporting
to the Board on all elements of compensation for elected corporate officers. The
Committee has furnished the following report on executive compensation for
fiscal year 1999.
For fiscal year 2000, we have modified the executive compensation program.
The basis for rewarding executives will be determined by how well we perform
against our strongest competitors. We will have as the basis of the executive
compensation program five components: base pay, short-term bonus, mid-term
bonus, long-term incentives and benefits (each as described below).
COMPENSATION PHILOSOPHY
The goal of the executive compensation program is to provide a total
compensation package composed of pay, stock and benefits. The total package is
designed to inspire and reward superior performance by executives, business
units and HP, and to include executives in the success of HP.
EXECUTIVE COMPENSATION PRACTICES
Each year, we survey the executive compensation practices of approximately
fifty companies, 50% of which are in the S&P High Technology Composite Index and
the remaining 50% of which are Fortune 100 companies which are included within
the S&P 500 Index. Our practice is to target total direct compensation levels
for HP executives at the 50th percentile of total direct compensation of
surveyed companies. Total direct compensation includes base pay, short-term
bonus at target, mid-term bonus at target and long-term incentives. Overall,
individual performance is measured against the following factors (these factors
may vary as required by business conditions):
- long-term strategic goals,
- short-term business goals,
- revenue and profit goals,
- customer satisfaction,
- new business creation,
- total shareowner return,
- the development of employees, and
- the fostering of teamwork and other HP values.
In both setting goals and measuring an executive's performance against those
goals, HP considers the performance of its competitors and general economic and
market conditions. None of the factors included in HP's strategic and business
goals are assigned a specific weight. Instead, we recognize that the relative
importance of these factors may change in order to adapt HP's operations to
specific business challenges and to reflect changing economic and marketplace
conditions.
In fiscal year 1999, we modified our short-term bonus program (the 1999
Variable Pay Plan). The 1999 Variable Pay Plan included 82 of our top business,
sales and corporate managers. This performance-based compensation was designed
to provide executives with rewards based on individual performance and obtaining
short-term business goals. In fiscal year 2000, the 1999 Variable Pay Plan will
be replaced by the Pay-for-Results Plan described below.
COMPONENTS OF EXECUTIVE COMPENSATION
The compensation program for executive officers consists of the following
five components:
- base pay,
- short-term bonus,
- mid-term bonus,
- long-term incentives, and
- benefits.
BASE PAY
Base pay is baseline cash compensation and is determined by the competitive
market and individual performance. Base pay for each executive officer is
established each year based on (1) a
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compensation range which corresponds to the executive's job responsibilities and
(2) the executive officer's overall individual job performance.
SHORT-TERM BONUS
Short-term bonus is cash compensation that is paid semi-annually when
performance targets are achieved. During fiscal year 1999, our named executive
officers participated in the 1999 Variable Pay Plan. A portion of the
executive's cash compensation was placed "at risk" dependent on Company and
business unit results. The short-term bonus amount that was "at risk" was equal
to the greater of: (a) 22.5% of targeted total cash compensation (TTCC) or
(b) 100% of every dollar of TTCC that exceeded $1 million. TTCC represents the
portion of annual cash compensation, other than cash profit-sharing, which we
target for executive officers to receive during the fiscal year. Depending upon
the achievement of pre-determined performance metrics, we awarded executives
between 0 and 300% of the targeted short-term bonus. The performance metrics for
fiscal year 1999 were HP and business unit net profit dollars for Mr. Perez,
Ms. Ticknor and Mr. Barnholt, and HP net profit and economic value added for
Mr. Platt and Mr. Wayman. Ms. Fiorina's short-term bonus is described in her
employment contract under "Employment Contracts, Termination of Employment and
Change-in-Control Arrangements."
In fiscal year 2000, the short-term bonus component for the named executive
officers will have an increased percentage "at risk" based on achievement of
externally-based net profit and revenue growth goals.
MID-TERM BONUS
For fiscal year 1999, the mid-term bonus was composed of performance-based
restricted stock that covers a three year performance cycle. The bonus is
designed to recognize the creation of value as measured by earnings per share
and return on investments. The stock will vest only to the extent that HP
achieves stated performance goals with respect to earnings per share and return
on assets. If HP exceeds stated performance goals, additional shares of stock
may be granted with respect to the performance period. If performance goals are
not met, forfeiture of previously-granted restricted stock may be required.
Company results were reviewed in our November 1999 meeting, and we determined
that 100% of the mid-term bonus had been earned by our executives who were
eligible to receive such bonuses.
In fiscal year 2000, the mid-term bonus will be a discounted option grant,
covering a three-year performance cycle, with a new performance period beginning
each year. The metric is total shareowner return relative to a peer company
index (selected computer and imaging companies). The mid-term bonus target
ranges from 25% to 50% of base pay. An executive can earn from 0 to 200% of his
or her targeted mid-term bonus based on HP's total shareowner return relative to
the peer index.
LONG-TERM INCENTIVES
The long-term incentive program is designed to encourage creation of
long-term value for our shareowners and equity ownership by our executives. The
program consists of stock options for our executives. During fiscal year 1999,
we made stock option grants to each of HP's executive officers under HP's 1995
Incentive Stock Plan. Each grant allows the officer to acquire shares of HP's
common stock, subject to the completion of a four-year vesting period, continued
employment with HP, and terms of employment contracts (if applicable). These
shares may be acquired at a fixed price per share (the market price on the grant
date) over a ten-year period. Individual and business unit performance determine
an executive's grant amount.
BENEFITS
The global benefits philosophy provides employees protection from
catastrophic events and offers health and welfare benefits typical to the given
country in which HP operates. In addition, through the benefits survey process,
benefits offered by competitors as well as benefits that set HP apart as an
employer may be incorporated into the benefits package. Where applicable,
employees are responsible for managing benefit choices, balancing their own
level of risk and return.
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CASH PROFIT-SHARING
In fiscal year 1999, a portion of HP's profits was awarded to all employees,
including executive officers, who had been employed continuously for at least
six months. The profit sharing percentage was determined using a formula which
combines a percentage of HP's return on assets with a percentage of its revenue
growth.
Because of the upside potential of the short-term and mid-term bonus of our
fiscal year 2000 executive compensation program, our named executive officers
and other participants in our executive compensation program will no longer be
eligible to participate in cash profit-sharing.
CORPORATE TAX DEDUCTION ON COMPENSATION IN EXCESS OF $1 MILLION A YEAR
Section 162(m) of the Code generally disallows a tax deduction to public
companies for compensation in excess of $1 million paid to the company's Chief
Executive Officer or any of the four other most highly compensated executive
officers. Certain performance-based compensation is specifically exempt from the
deduction limit. In fiscal year 1999, an executive's salary in excess of
$1 million was placed "at risk" pursuant to the 1999 Variable Pay Plan.
STOCK OWNERSHIP GUIDELINES
Our stock ownership guidelines are designed to increase the executive's
equity stake in HP and more closely align his or her interests with those of our
shareowners. The guidelines provide that the President and CEO should attain an
investment position in HP's stock equal to five times her targeted cash
compensation and all other executive officers should attain an investment
position equal to three times their targeted cash compensation.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
On July 17, 1999, HP entered into an employment agreement with Ms. Carleton
S. Fiorina to become President and Chief Executive Officer of HP. All aspects of
Ms. Fiorina's fiscal year 1999 compensation were governed by this employment
agreement, as well as the related incentive stock plan stock option agreement,
restricted stock agreement and restricted stock unit agreement entered into
concurrently with the employment agreement.
The Board of Directors approved Ms. Fiorina's employment agreement after an
extensive search had been conducted by the Board, the Organization Review and
Nominating Committee and an Ad Hoc Committee established in connection with the
CEO search, with the assistance of an executive search firm. In determining the
final compensation amounts, we focused on the importance of hiring a president
and chief executive officer with an outstanding business and leadership record.
We also reviewed Ms. Fiorina's compensation package in comparison with the
compensation packages of CEOs of selected large industrial companies, with
particular emphasis on CEOs who had been hired externally and received packages
intended to compensate them partially for amounts forfeited from their former
employers. In setting total CEO compensation, we believe that it is especially
relevant to review companies that are not a part of the S&P High Tech Index
because of the possibility that a company outside of one industry may recruit a
CEO from another industry. We also considered the fact that HP does not have a
Chief Operating Officer and therefore Ms. Fiorina would assume the additional
responsibilities usually associated with that position. Finally, we recognized
the need to consider Ms. Fiorina's compensation at her previous employer, as
well as the value of benefits under various plans of her employer that would be
forfeited upon her resignation.
The terms of Ms. Fiorina's employment agreement are summarized in the
section entitled "Employment Contracts, Termination of Employment and
Change-in-Control Arrangements."
COMPENSATION AND SEPARATION PAYMENTS FOR THE FORMER CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
Lewis E. Platt served as President and Chief Executive Officer of HP from
November 1, 1992 through July 31, 1999. Mr. Platt also served as Chairman of the
Board from September 1993 through December 31, 1999. We used the executive
compensation practices described above to determine Mr. Platt's fiscal year 1999
compensation. In setting both the cash-based and equity-
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based elements of Mr. Platt's compensation, we made an overall assessment of
Mr. Platt's leadership in achieving HP's near-term and long-term strategic,
operational and business goals. Mr. Platt's TTCC reflects a consideration of
both competitive forces and HP's performance. We have not assigned specific
weights to these categories.
We surveyed the total direct compensation (including long-term incentives)
for chief executive officers of selected large industrial companies. Based upon
this information, we determined a median around which we built a competitive
range of total direct compensation for the former CEO. As a result of this
review, we concluded that Mr. Platt's TTCC was in the low end of the competitive
market and that his total direct compensation was competitive for CEOs running
companies comparable in size and complexity to HP.
We considered HP's financial and business results compared to other
companies within the high-technology industry, HP's financial performance
relative to its financial performance in prior periods, HP's progress in the
promotion of women and minorities, HP's employee survey scores relative to
industry norms, the fact that Mr. Platt assumed the additional responsibilities
of a Chief Operating Officer, as well as Mr. Platt's performance ranking and
total direct compensation history.
RESULTS
VARIABLE PAY
At our November 1998 meeting, we reviewed Mr. Platt's salary and, following
a review of the above factors and the adoption of the 1999 Variable Pay Plan,
decided to increase Mr. Platt's TTCC for fiscal year 1999 to $2,600,000 from his
TTCC in fiscal year 1998 of $2,000,000. However, pursuant to the 1999 Variable
Pay Plan, we placed $1,600,000 of Mr. Platt's $2,600,000 TTCC "at risk." That
is, Mr. Platt would receive the "at risk" portion of his TTCC only upon
attainment of certain performance objectives. In addition, Mr. Platt, under the
terms of the 1999 Variable Pay Plan, would also be entitled to receive up to an
additional $3,200,000 beyond his TTCC in the event the performance objectives
were exceeded. During our November 1998 meeting, we established that the fiscal
year 1999 performance objectives under the 1999 Variable Pay Plan for Mr. Platt
would be based on HP net profit dollars and economic value added.
For fiscal year 1999, we determined that Mr. Platt would receive a payout of
$2,972,241.
TRANSITION PAY
Under the terms of his Transition Agreement, Mr. Platt received $3,900,000,
representing 1.5 times his base salary and variable compensation amount payable,
because he resigned from his position as Chairman on December 31, 1999. See
"Employment Contracts, Termination of Employment and Change-in-Control
Arrangements."
CASH PROFIT SHARING
For fiscal year 1999, Mr. Platt received compensation under our cash-profit
sharing program in the following amounts: $62,920 for HP's fiscal year 1999
first-half results and $79,560 for its fiscal year 1999 second-half results.
STOCK OPTIONS; PERFORMANCE-BASED RESTRICTED STOCK
In determining Mr. Platt's stock incentive awards, we followed the same
policy described above for other executive officers.
FISCAL YEAR 1999 GRANTS OF STOCK OPTIONS AND
PERFORMANCE-BASED RESTRICTED STOCK
In November 1998, we granted Mr. Platt an option to purchase 300,000 shares
of HP common stock with an exercise price equal to the fair market value of HP
common stock on the date of grant. In granting the option to Mr. Platt, we
reviewed the option grant value pursuant to the guidelines described above under
"Long-term Incentives," evaluated Mr. Platt's performance against the
performance criteria described above and considered competitive data showing
total direct compensation for Mr. Platt and comparable CEOs. In November 1998,
we also granted Mr. Platt 20,000 shares of performance-based restricted stock.
In determining the size of this award, we considered Mr. Platt's performance and
the size of the grant as compared to the size of
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grants to Mr. Platt's senior staff executives. Working within these parameters,
we made an assessment that an award of 20,000 performance-based restricted
shares to Mr. Platt was appropriate, based upon the attainment of certain
earnings per share and return on assets goals over a three-year period. In
November 1999, we reviewed the results for the mid-term bonus (three year
performance period ending October 31, 1999) to determine awards for the
performance-based restricted stock granted in fiscal 1997. We determined that
the earnings per share and return on assets performance goals were achieved at
100%. Accordingly, the 50,000 shares (with a value of $4,495,500) that were
granted to Mr. Platt in fiscal 1997 were released.
COMPENSATION COMMITTEE
Susan P. Orr, Chair
John B. Fery
Sam Ginn
Dr. Thomas E. Everhart (member through
September 17, 1999)
Dr. David M. Lawrence (member through
September 17, 1999)
STOCK PERFORMANCE GRAPH
The graph below shows the five-year cumulative total shareowner return
assuming the investment of $100 on October 31, 1994 (and the reinvestment of
dividends thereafter) in each of HP common stock, the S&P 500 Index, the S&P
Technology Sector Index and a peer group.(1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HEWLETT-PACKARD PEER GROUP S & P 500 S & P TECHNOLOGY
COMPANY SECTOR
<S> <C> <C> <C> <C>
10/94 $100 $100 $100 $100
10/95 $191 $132 $126 $151
10/96 $184 $168 $157 $183
10/97 $259 $269 $207 $267
10/98 $256 $427 $253 $355
10/99 $318 $593 $299 $590
</TABLE>
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(1) The peer group is composed of large companies that we compete with on a
worldwide basis in the computing and imaging industry. They are: Apple
Computer, Inc., Compaq Computer Corporation, Data General Corporation, Dell
Computer Corp., EDS Corporation, EMC Corporation, Gateway, Inc., IBM
Corporation, Iomega Corporation, Lexmark International Group Inc., Quantum
Corporation, Seagate Technology, Inc., Sun Microsystems, Inc., Unisys
Corporation and Xerox Corporation.
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OTHER MATTERS
HP'S ANNUAL REPORT ON 10-K FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999, IS
AVAILABLE WITHOUT CHARGE TO EACH SHAREOWNER, UPON SUCH SHAREOWNER'S WRITTEN
REQUEST TO THE UNDERSIGNED AT HP'S ADDRESS INDICATED ON THE NOTICE OF MEETING ON
THE FIRST PAGE OF THIS PROXY STATEMENT.
By Order of the Board of Directors
/s/ ANN O. BASKINS
ANN O. BASKINS
Vice President, General
Counsel and Secretary
Dated: January 18, 2000
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APPENDIX A
HEWLETT-PACKARD COMPANY 2000 STOCK PLAN
1. PURPOSES OF THE PLAN.
The purpose of this Plan is to encourage ownership in the Company by key
personnel whose long-term employment is considered essential to the Company's
continued progress and, thereby, encourage recipients to act in the shareowner's
interest and share in the Company's success.
2. DEFINITIONS.
As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 4 of the Plan.
(b) "AFFILIATE" means any entity that is directly or indirectly controlled
by the Company or any entity in which the Company has a significant
ownership interest as determined by the Administrator.
(c) "APPLICABLE LAWS" means the requirements relating to the administration
of stock option plans under U.S. federal and state laws, any stock
exchange or quotation system on which the Common Stock is listed or
quoted and the applicable laws of any foreign jurisdiction where Awards
are, or will be, granted under the Plan.
(d) "AWARD" means a Cash Award, Stock Award, or Option granted in accordance
with the terms of the Plan.
(e) "AWARDEE" means the holder of an outstanding Award.
(f) "AWARD AGREEMENT" means a written or electronic agreement between the
Company and an Awardee evidencing the terms and conditions of an
individual Award. The Award Agreement is subject to the terms and
conditions of the Plan.
(g) "BOARD" means the Board of Directors of the Company.
(h) "CASH AWARDS" means cash awards granted pursuant to Section 12 of the
Plan.
(i) "CODE" means the United States Internal Revenue Code of 1986, as
amended.
(j) "COMMITTEE" means a committee of Directors appointed by the Board in
accordance with Section 4 of the Plan.
(k) "COMMON STOCK" means the common stock of the Company.
(l) "COMPANY" means Hewlett-Packard Company, a Delaware corporation.
(m) "CONSULTANT" means any person, including an advisor, engaged by the
Company or a Subsidiary to render services to such entity or any person
who is an advisor, director or consultant of an Affiliate.
(n) "DIRECTOR" means a member of the Board.
(o) "EMPLOYEE" means a regular employee of the Company, any Subsidiary or
any Affiliate, including Officers and Directors, who is treated as an
employee in the personnel records of the Company or its Subsidiary for
the relevant period, but shall exclude individuals who are classified by
the Company or its Subsidiary as (A) leased from or otherwise employed by
a third party; (B) independent contractors; or (C) intermittent or
temporary, even if any such classification is
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changed retroactively as a result of an audit, litigation or otherwise.
An Awardee shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or its Subsidiary or (ii) transfers
between locations of the Company or between the Company, any Subsidiary,
or any successor. Should an Awardee transfer from the Company to Agilent
Technologies, Inc. prior to the Distribution Date (as defined in
Section 1.20 of the Employees Matter Agreement between Agilent
Technologies, Inc. and the Company), the Awardee will cease to be an
Employee at the time of such transfer. Neither service as a Director nor
payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(p) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(q) "FAIR MARKET VALUE" means, as of any date, the average of the highest
and lowest quoted sales prices for such Common Stock as of such date (or
if no sales were reported on such date, the average on the last preceding
day a sale was made) as quoted on the stock exchange or a national market
system, with the highest trading volume, as reported in such source as
the Administrator shall determine.
(r) "GRANT DATE" means the date selected by the Administrator, from time to
time, upon which Awards are granted to Participants pursuant to this
Plan.
(s) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(t) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(u) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(v) "OPTION" means a stock option granted pursuant to the Plan. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options.
(w) "PARTICIPANT" means an Employee, Director or Consultant.
(x) "PLAN" means this 2000 Stock Plan.
(y) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant to a
grant of a Stock Award under Section 11 of the Plan.
(z) "SHARE" means a share of the Common Stock, as adjusted in accordance
with Section 14 of the Plan.
(aa) "STOCK AWARDS" means right to purchase or receive Common Stock pursuant
to Section 11 of the Plan.
(bb) "SUBSIDIARY" means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Section 14 and Section 6(d) of the Plan, the
maximum aggregate number of Shares that may be issued under the Plan is
125,000,000 Shares. The Shares may be authorized, but unissued, or reacquired
Common Stock. Preferred stock may be issued in lieu of Common Stock for Awards.
If an Award expires or becomes unexercisable without having been exercised
in full, the unpurchased Shares which were subject thereto, if any, shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Shares of Restricted Stock that are either forfeited or repurchased
by the
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Company at their original purchase price shall become available for future grant
or sale under the Plan. Shares that are tendered, whether by physical delivery
or by attestation, to the Company by the Awardee as full or partial payment of
the exercise price of any Award or in payment of any applicable withholding for
federal, state, city, local or foreign taxes incurred in connection with the
exercise of any Award shall become available for future grant or sale under the
Plan; provided, however, that the total number of Shares so tendered from which
Incentive Stock Options may be granted shall not exceed 125,000,000.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be administered by
different Committees with respect to different groups of
Participants.
(ii) SECTION 162(m). To the extent that the Administrator determines it
to be desirable to qualify Awards granted hereunder as
"performance-based compensation" within the meaning of
Section 162(m) of the Code, the Plan shall be administered by a
Committee of two or more "outside directors" within the meaning of
Section 162(m) of the Code.
(iii) RULE 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3 promulgated under the Exchange
Act ("Rule 16b-3"), the transactions contemplated hereunder shall
be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) OTHER ADMINISTRATION. The Board may delegate to the Executive
Committee of the Board (the "Executive Committee") the power to
approve Awards to Participants who are not (A) subject to
Section 16 of the Exchange Act or (B) at the time of such approval,
"covered employees" under Section 162(m) of the Code.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan, and
in the case of a Committee, subject to the specific duties delegated by
the Board to such Committee, the Administrator shall have the authority,
in its discretion:
(i) to select the Participants to whom Awards may be granted hereunder;
(ii) to determine the number of shares of Common Stock to be covered by
each Award granted hereunder;
(iii) to approve forms of agreement for use under the Plan;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the
time or times when an Award may be exercised (which may or may not
be based on performance criteria), any vesting acceleration or
waiver of forfeiture restrictions, and any restriction or
limitation regarding any Award or the Shares relating thereto,
based in each case on such factors as the Administrator, in its
sole discretion, shall determine;
(v) to construe and interpret the terms of the Plan and Awards granted
pursuant to the Plan;
(vi) to adopt rules and procedures relating to the operation and
administration of the Plan to accommodate the specific requirements
of local laws and procedures. Without limiting the generality of
the foregoing, the Administrator is specifically authorized (A) to
adopt the rules and procedures regarding the conversion of local
currency, withholding procedures and handling of stock certificates
which vary with local requirements, (B) to adopt sub-plans and Plan
addenda as the Administrator deems desirable, to accommodate
foreign tax laws, regulations and practice;
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(vii) to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules and regulations relating to sub-plans and
Plan addenda;
(viii) to modify or amend each Award, including the discretionary
authority to extend the post-termination exercisability period of
Options longer than is otherwise provided for in the Plan,
provided, however, that any such amendment is subject to
Section 15(c) of the Plan and may not impair any outstanding Award
unless agreed to in writing by the Awardee;
(ix) to allow Awardees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued
upon exercise of an Award that number of Shares having a Fair
Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on
the date that the amount of tax to be withheld is to be determined.
All elections by an Awardee to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable;
(x) to authorize conversion or substitution under the Plan of any or all
outstanding stock options or outstanding stock appreciation rights
held by service providers of an entity acquired by the Company (the
"Conversion Options"). Any conversion or substitution shall be
effective as of the close of the merger or acquisition. The
Conversion Options may be Nonstatutory Stock Options or Incentive
Stock Options, as determined by the Administrator; provided,
however, that with respect to the conversion of stock appreciation
rights in the acquired entity, the Conversion Options shall be
Nonstatutory Stock Options. Unless otherwise determined by the
Administrator at the time of conversion or substitution, all
Conversion Options shall have the same terms and conditions as
Options generally granted by the Company under the Plan;
(xi) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Award previously
granted by the Administrator;
(xii) to make all other determinations deemed necessary or advisable for
administering the Plan and any Award granted hereunder.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's decisions,
determinations and interpretations shall be final and binding on all
Awardees.
5. ELIGIBILITY.
Awards may be granted to Participants, provided, however, that Incentive
Stock Options may be granted only to Employees of the Company or any Subsidiary.
6. LIMITATIONS.
(a) Each Option shall be designated in the Award Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by the Awardee during any calendar
year (under all plans of the Company and any Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 6(a), Incentive Stock Options shall be taken
into account in the order in which they were granted. The Fair Market
Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(b) For purposes of Incentive Stock Options, no leave of absence may exceed
ninety (90) days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration of a
leave of absence approved by the Company is not so guaranteed, on
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the 91st day of such leave an Awardee's employment with the Company shall
be deemed terminated for Incentive Stock Option purposes and any
Incentive Stock Option held by the Awardee shall cease to be treated as
an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option three (3) months thereafter.
(c) No Participant shall have any claim or right to be granted an Award and
the grant of any Award shall not be construed as giving a Participant the
right to continue in the employ of the Company, its Subsidiaries or
Affiliates. Further, the Company, its Subsidiaries and Affiliates
expressly reserve the right, at any time, to dismiss a Participant at any
time without liability or any claim under the Plan, except as provided
herein or in any Award Agreement entered into hereunder.
(d) The following limitations shall apply to grants of Awards:
(i) No Participant shall be granted, in any fiscal year of the Company,
Options to purchase more than 5,000,000 Shares.
(ii) In connection with his or her initial service, a Participant may be
granted Options to purchase up to an additional 5,000,000 Shares
which shall not count against the limit set forth in subsection
(i) above.
(iii) If an Option is cancelled in the same fiscal year of the Company in
which it was granted (other than in connection with a transaction
described in Section 14), the cancelled Option will be counted
against the limits set forth in subsections (i) and (ii) above.
(iv) The maximum aggregate number of Shares underlying Stock Awards that
may be granted under this Plan is ten million (10,000,000) Shares.
(v) The maximum aggregate number of Shares underlying Non-Statutory
Stock Options with an exercise price of less than Fair Market Value
on the Grant Date that may be granted under Section 9(a)(ii) of this
Plan is fifteen million (15,000,000) Shares.
(vi) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as
described in Section 14.
7. TERM OF PLAN.
Subject to Section 20 of the Plan, the Plan shall become effective upon its
adoption by the Board. It shall continue in effect for a term of ten (10) years
from the later of the date the Plan or any amendment to add shares to the Plan
is adopted by the Board unless terminated earlier under Section 15 of the Plan.
8. TERM OF AWARD.
The term of each Award shall be determined by the Administrator and stated
in the Award Agreement. In the case of an Option, the term shall be ten
(10) years from the Grant Date or such shorter term as may be provided in the
Award Agreement; provided that the term may be 10 1/2 years in certain
jurisdictions outside the United States as determined by the Administrator.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share
on the Grant Date.
(ii) In the case of a Nonstatutory Stock Option, the per Share exercise
price shall be no less than seventy-five percent (75%) of the Fair
Market Value per Share on the Grant Date. In the
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case of a Nonstatutory Stock Option intended to qualify as
"performance-based compensation" within the meaning of
Section 162(m) of the Code, the per Share exercise price shall be
no less than 100% of the Fair Market Value per Share on the Grant
Date.
(iii) Notwithstanding the foregoing, at the Administrator's discretion,
Conversion Options (as defined in Section 4(b)(x)) may be granted
with a per Share exercise price of less than 100% of the Fair
Market Value per Share on the Grant Date and shall not be subject
to the provisions of Section 6(d)(v) above.
(iv) Other than in connection with a change in the Company's
capitalization (as described in Section 14(a)), Options may not be
repriced, replaced, regranted through cancellation or modified
without shareowner approval if the effect of such repricing,
replacement, regrant or modification would be to reduce the
exercise price of such Incentive Stock Options or Nonstatutory
Stock Options.
(b) VESTING PERIOD AND EXERCISE DATES. At the time an Option is granted,
the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied
before the Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine the acceptable
form of consideration for exercising an Option, including the method of
payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the Grant Date.
Acceptable forms of consideration may include:
(i) cash;
(ii) check or wire transfer (denominated in U.S. Dollars);
(iii) other Shares which (A) in the case of Shares acquired upon exercise
of an Option, have been owned by the Awardee for more than six
months on the date of surrender, and (B) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised;
(iv) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan;
(v) any combination of the foregoing methods of payment; or
(vi) such other consideration and method of payment for the issuance of
Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREOWNER. Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator
and set forth in the respective Award Agreement. No Option may be
exercised during any leave of absence other than an approved personal or
medical leave with an employment guarantee upon return. An Option shall
continue to vest during any authorized leave of absence and such Option
may be exercised to the extent vested upon the Awardee's return to active
employment status. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company receives
(i) written or electronic notice of exercise (in accordance with the
Award Agreement) from the person entitled to exercise the Option;
(ii) full payment for the Shares with respect to which the related Option
is exercised; and (iii) with respect to Nonstatutory Stock Options,
payment of all applicable withholding taxes due upon such exercise.
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Shares issued upon exercise of an Option shall be issued in the name of
the Awardee or, if requested by the Awardee, in the name of the Awardee
and his or her spouse. Until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or
any other rights as a shareowner shall exist with respect to the Shares
subject to an Option, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares promptly after
the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF EMPLOYMENT. Unless otherwise provided for by the
Administrator in the Award Agreement, if an Awardee ceases to be an
Employee, other than as a result of circumstances described in
Sections 10(c), (d), (e) and (f) below, the Awardee's Option, whether
vested or unvested, shall terminate immediately upon the Awardee's
termination. On the date of the Awardee's termination of employment, the
Shares covered by the unvested portion of his or her Option shall revert
to the Plan. If, prior to termination of employment, the Awardee does not
exercise his or her vested Option, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) DISABILITY OR RETIREMENT OF AWARDEE. Unless otherwise provided for by
the Administrator in the Award Agreement, if an Awardee ceases to be an
Employee as a result of the Awardee's total and permanent disability or
retirement due to age, in accordance with the Company's or its
Subsidiaries' retirement policy, all unvested Options shall immediately
vest and the Awardee may exercise his or her Option within three
(3) years of the date of such disability or retirement for a Nonstatutory
Stock Option; within three (3) months of the date of such disability or
retirement for an Incentive Stock Option; or if earlier, the expiration
of the term of such Option. If the Awardee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
(d) DEATH OF AWARDEE. Unless otherwise provided for by the Administrator in
the Award Agreement, if an Awardee dies while an Employee, all unvested
Options shall immediately vest and all Options may be exercised for one
(1) year following the Awardee's death. The Option may be exercised by
the beneficiary designated by the Awardee (as provided in Section 16),
the executor or administrator of the Awardee's estate or, if none, by the
person(s) entitled to exercise the Option under the Awardee's will or the
laws of descent or distribution. If the Option is not so exercised within
the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) VOLUNTARY SEVERANCE INCENTIVE PROGRAM. If an Awardee ceases to be an
Employee as a result of participation in the Company's or its
Subsidiaries' voluntary severance incentive program approved by the Board
or Executive Committee, all unvested Options shall immediately vest and
all outstanding Options shall be exercisable for three (3) months
following the Awardee's termination (or such other period of time as
provided for by the Administrator) or, if earlier, the expiration of the
term of such Option. If, after termination, of Awardee's employment the
Awardee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(f) DIVESTITURE. If an Employee ceases to be a Participant because of a
divestiture of the Company, the Administrator may, in its sole
discretion, make such Employee's outstanding Options fully vested and
exercisable and provide that such Options remain exercisable for a period
of time to
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be determined by the Administrator. The determination of whether a
divestiture will occur shall be made by the Administrator in its sole
discretion. If, after the close of the divestiture, the Awardee does not
exercise his or her Option within the time specified therein, the Option
shall terminate and the shares covered by such Option shall revert to the
Plan.
(g) BUYOUT PROVISIONS. At any time, the Administrator may, but shall not be
required to, offer to buy out for a payment in cash or Shares an Option
previously granted based on such terms and conditions as the
Administrator shall establish and communicate to the Awardee at the time
that such offer is made.
11. STOCK AWARDS.
(a) GENERAL. Stock Awards may be issued either alone, in addition to, or in
tandem with other Awards granted under the Plan. After the Administrator
determines that it will offer a Stock Award under the Plan, it shall
advise the Awardee in writing or electronically, by means of an Award
Agreement, of the terms, conditions and restrictions related to the
offer, including the number of Shares that the Awardee shall be entitled
to receive or purchase, the price to be paid, if any, and, if applicable,
the time within which the Awardee must accept such offer. The offer shall
be accepted by execution of an Award Agreement in the form determined by
the Administrator. The Administrator will require that all shares subject
to a right of repurchase or forfeiture be held in escrow until such
repurchase right or risk of forfeiture lapses.
(b) FORFEITURE. Unless the Administrator determines otherwise, the Award
Agreement shall provide for the forfeiture of the unvested Restricted
Stock upon the Awardee ceasing to be an Employee except as provided below
in Sections 11(c), (d) and (e). To the extent that the Awardee purchased
the Restricted Stock, the Company shall have a right to repurchase the
unvested Restricted Stock at the original price paid by the Awardee upon
Awardee ceasing to be a Participant for any reason, except as provided
below in Sections 11(c), (d) and (e).
(c) DISABILITY OR RETIREMENT OF AWARDEE. Unless otherwise provided for by
the Administrator in the Award Agreement, if an Awardee ceases to be an
Employee as a result of the Awardee's total and permanent disability or
retirement due to age, in accordance with the Company's or its
Subsidiaries' retirement policy, the Award shall continue to vest,
provided the following conditions are met:
(i) The Awardee shall not render services for any organization or engage
directly or indirectly in any business which, in the opinion of the
Administrator, competes with, or is in conflict with the interest
of, the Company. The Awardee shall be free, however, to purchase as
an investment or otherwise stock or other securities of such
organizations as long as they are listed upon a recognized
securities exchange or traded over-the-counter, or as long as such
investment does not represent a substantial investment to the
Awardee or a significant (greater than 10%) interest in the
particular organization. For the purposes of this subsection, a
company (other than a Subsidiary) which is engaged in the business
of producing, leasing or selling products or providing services of
the type now or at any time hereafter made or provided by the
Company shall be deemed to compete with the Company;
(ii) The Awardee shall not, without prior written authorization from the
Company, use in other than the Company's business, any confidential
information or material relating to the business of the Company,
either during or after employment with the Company;
(iii) The Awardee shall disclose promptly and assign to the Company all
right, title and interest in any invention or idea, patentable or
not, made or conceived by the Awardee during employment by the
Company, relating in any manner to the actual or anticipated
business, research or development work of the Company and shall do
anything reasonably necessary
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to enable the Company to secure a patent where appropriate in the
United States and in foreign countries; and
(iv) An Awardee retiring due to age shall render, as a Consultant and
not as an Employee, such advisory or consultative services to the
Company as shall be reasonably requested by the Board or the
Executive Committee in writing from time to time, consistent with
the state of the retired Awardee's health and any employment or
other activities in which such Awardee may be engaged. For purposes
of this Plan, the Awardee shall not be required to devote a major
portion of time to such services and shall be entitled to
reimbursement for any reasonable out-of-pocket expenses incurred in
connection with the performance of such services.
(d) DEATH OF AWARDEE. Unless otherwise provided for by the Administrator in
the Award Agreement, if an Awardee dies while an Employee, the Stock
Award shall immediately vest and all forfeiture provisions and repurchase
rights shall lapse as to a prorated number of shares determined by
dividing the number of whole years since the Grant Date by the number of
whole months between the Grant Date and the date that the Stock Award
would have fully vested (as provided for in the Award Agreement). The
vested portion of the Stock Award shall be delivered to the beneficiary
designated by the Awardee (as provided in Section 16), the executor or
administrator of the Awardee's estate or, if none, by the
person(s) entitled to receive the vested Stock Award under the Awardee's
will or the laws of descent or distribution.
(e) VOLUNTARY SEVERANCE INCENTIVE PROGRAM. If an Awardee ceases to be an
Employee as a result of participation in the Company's or its
Subsidiaries' voluntary severance incentive program approved by the Board
or Executive Committee, the Stock Award shall immediately vest and all
forfeiture provisions and repurchase rights shall lapse as to a prorated
number of shares determined by dividing the number of whole years since
the Grant Date by the number of whole years between the Grant Date and
the date that the Stock Award would have fully vested (as provided for in
the Award Agreement).
(f) RIGHTS AS A SHAREOWNER. Unless otherwise provided for by the
Administrator, once the Stock Award is accepted, the Awardee shall have
the rights equivalent to those of a shareowner, and shall be a shareowner
when his or her acceptance of the Stock Award is entered upon the records
of the duly authorized transfer agent of the Company.
12. CASH AWARDS.
Cash Awards may be granted either alone, in addition to, or in tandem with
other Awards granted under the Plan. After the Administrator determines that it
will offer a Cash Award, it shall advise the Awardee in writing or
electronically, by means of an Award Agreement, of the terms, conditions and
restrictions related to the Cash Award.
13. NON-TRANSFERABILITY OF AWARDS.
Unless determined otherwise by the Administrator, an Award may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by beneficiary designation, will or by the laws of descent or distribution
and may be exercised, during the lifetime of the Awardee, only by the Awardee.
If the Administrator makes an Award transferable, such Award shall contain such
additional terms and conditions as the Administrator deems appropriate.
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14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR ASSET
SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareowners of the Company, the number and kind of shares of Common Stock
covered by each outstanding Award, and the number and kind of shares of
Common Stock which have been authorized for issuance under the Plan but
as to which no Awards have yet been granted or which have been returned
to the Plan upon cancellation or expiration of an Award, as well as the
price per share of Common Stock covered by each such outstanding Award,
shall be proportionately adjusted for any increase or decrease in the
number or kind of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease
in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have
been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance
by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of
shares of Common Stock subject to an Award.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Awardee
as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an
Option to be fully vested and exercisable until ten (10) days prior to
such transaction. In addition, the Administrator may provide that any
restrictions on any Award shall lapse prior to the transaction, provided
the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously
exercised, an Award will terminate immediately prior to the consummation
of such proposed transaction.
(c) MERGER OR ASSET SALE. In the event there is a change of control of the
Company, as determined by the Board, the Board may, in its discretion,
(A) provide for the assumption or substitution of, or adjustment to, each
outstanding Award; (B) accelerate the vesting of Options and terminate
any restrictions on Cash Awards or Stock Awards; and (C) provide for the
cancellation of Awards for a cash payment to the Awardee.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) SHAREOWNER APPROVAL. The Company shall obtain shareowner approval of any
Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration, suspension
or termination of the Plan shall impair the rights of any Award, unless
mutually agreed otherwise between the Awardee and the Administrator,
which agreement must be in writing and signed by the Awardee and the
Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to
Awards granted under the Plan prior to the date of such termination.
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16. DESIGNATION OF BENEFICIARY.
(a) An Awardee may file a written designation of a beneficiary who is to
receive the Awardee's rights pursuant to Awardee's Award or the Awardee
may include his or her Awards in an omnibus beneficiary designation for
all benefits under the Plan. To the extent that Awardee has completed a
designation of beneficiary while employed with Hewlett-Packard Company,
such beneficiary designation shall remain in effect with respect to any
Award hereunder until changed by the Awardee.
(b) Such designation of beneficiary may be changed by the Awardee at any
time by written notice. In the event of the death of an Awardee and in
the absence of a beneficiary validly designated under the Plan who is
living at the time of such Awardee's death, the Company shall allow the
executor or administrator of the estate of the Awardee to exercise the
Award, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its discretion, may allow the
spouse or one or more dependents or relatives of the Awardee to exercise
the Award.
17. LEGAL COMPLIANCE.
Shares shall not be issued pursuant to the exercise of an Option or Stock
Award unless the exercise of such Option or Stock Award and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
18. INABILITY TO OBTAIN AUTHORITY.
To the extent the Company is unable to or the Administrator deems it
infeasible to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, the Company shall be relieved of any
liability with respect to the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
19. RESERVATION OF SHARES.
The Company, during the term of this Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
20. SHAREOWNER APPROVAL.
The Plan shall be subject to approval by the shareowners of the Company
within twelve (12) months of the date the Plan is adopted. Such shareowner
approval shall be obtained in the manner and to the degree required under
Applicable Laws.
21. NOTICE.
Any written notice to the Company required by any provisions of this Plan
shall be addressed to the Secretary of the Company and shall be effective when
received.
22. GOVERNING LAW.
This Plan and all determinations made and actions taken pursuant hereto
shall be governed by the substantive laws, but not the choice of law rules, of
the state of Delaware.
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23. UNFUNDED PLAN.
Insofar as it provides for Awards, the Plan shall be unfunded. Although
bookkeeping accounts may be established with respect to Participants who are
granted Awards of Shares under this Plan, any such accounts will be used merely
as a bookkeeping convenience. Except for the holding of Restricted Stock in
escrow pursuant to Section 11, the Company shall not be required to segregate
any assets which may at any time be represented by Awards, nor shall this Plan
be construed as providing for such segregation, nor shall the Company nor the
Administrator be deemed to be a trustee of stock or cash to be awarded under the
Plan. Any liability of the Company to any Awardee with respect to an Award shall
be based solely upon any contractual obligations which may be created by the
Plan; no such obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company. Neither the Company
nor the Administrator shall be required to give any security or bond for the
performance of any obligation which may be created by this Plan.
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APPENDIX B
HEWLETT-PACKARD COMPANY 2000
EMPLOYEE STOCK PURCHASE PLAN
(EFFECTIVE NOVEMBER 1, 2000)
1. PURPOSE.
The purpose of this Plan is to provide an opportunity for Employees of
Hewlett-Packard Company (the "Corporation") and its Designated Subsidiaries, to
purchase Common Stock of the Corporation and thereby to have an additional
incentive to contribute to the prosperity of the Corporation. It is the
intention of the Corporation that the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Corporation.
(b) "CODE" shall mean the Internal Revenue Code of 1986, of the USA, as
amended. Any reference to a section of the Code herein shall be a
reference to any successor or amended section of the Code.
(c) "COMMITTEE" shall mean the committee appointed by the Board in
accordance with Section 14 of the Plan.
(d) "COMMON STOCK" shall mean the Common Stock of the Corporation, or any
stock into which such Common Stock may be converted.
(e) "COMPENSATION" shall mean an Employee's base cash compensation,
commissions and shift premiums paid on account of personal services
rendered by the Employee to the Corporation or a Designated Subsidiary,
but shall exclude payments for overtime, incentive compensation,
incentive payments and bonuses, with any modifications determined by the
Committee. The Committee shall have the authority to determine and
approve all forms of pay to be included in the definition of Compensation
and may change the definition on a prospective basis.
(f) "CORPORATION" shall mean Hewlett-Packard Company, a Delaware
corporation.
(g) "DESIGNATED SUBSIDIARY" shall mean a Subsidiary that has been designated
by the Committee as eligible to participate in the Plan with respect to
its Employees.
(h) "EMPLOYEE" shall mean an individual classified as an employee (within
the meaning of Code Section 3401(c) and the regulations thereunder) by
the Corporation or a Designated Subsidiary on the Corporation's or such
Designated Subsidiary's payroll records during the relevant participation
period. Employees shall not include individuals whose customary
employment is for not more than five (5) months in any calendar year or
individuals classified as independent contractors.
(i) "ENTRY DATE" shall mean the first Trading Day of the Offering Period or,
for new Participants, the first Trading Day of their first Purchase
Period.
(j) "FAIR MARKET VALUE" shall be the closing sales price for the Common
Stock (or the closing bid, if no sales were reported) as quoted on the
New York Stock Exchange on the date of determination if that date is a
Trading Day, or if the date of determination is not a Trading Day, the
last market
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Trading Day prior to the date of determination, as reported in The Wall
Street Journal or such other source as the Committee deems reliable.
(k) "OFFERING PERIOD" shall mean the period of twenty-four (24) months
during which an option granted pursuant to the Plan may be exercised,
commencing on the first Trading Day on or after November 1, of every
other year and terminating on the last Trading Day in the period ending
twenty-four (24) months later. The duration and timing of Offering
Periods may be changed or modified by the Committee.
(l) "PARTICIPANT" shall mean a participant in the Plan as described in
Section 5 of the Plan.
(m) "PLAN" shall mean this Employee Stock Purchase Plan.
(n) "PURCHASE DATE" shall mean the last Trading Day of each Purchase Period.
(o) "PURCHASE PERIOD" shall mean the period of six (6) months commencing
after one Purchase Date and ending with the next Purchase Date, except
that the first Purchase Period shall commence on the Plan's effective
date. Subsequent Purchase Periods, if any, shall run consecutively after
the termination of the preceding Purchase Period.
(p) "PURCHASE PRICE" shall mean 85% of the Fair Market Value of a share of
Common Stock on the Entry Date or on the Purchase Date, whichever is
lower; provided however, that the Purchase Price may be adjusted by the
Committee pursuant to Section 7.4.
(q) "SHAREOWNER" shall mean a record holder of shares entitled to vote
shares of Common Stock under the Corporation's by-laws.
(r) "SUBSIDIARY" shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, as
described in Code Section 424(f).
(s) "TRADING DAY" shall mean a day on which U.S. national stock exchanges
and the NASDAQ System are open for trading.
3. ELIGIBILITY.
Any Employee regularly employed on a full-time or part-time (20 hours or
more per week on a regular schedule) basis by the Corporation or by any
Designated Subsidiary on an Entry Date shall be eligible to participate in the
Plan with respect to the Purchase Period commencing on such Entry Date, provided
that the Committee may establish administrative rules requiring that employment
commence some minimum period (e.g., one pay period) prior to an Entry Date to be
eligible to participate with respect to the Purchase Period beginning on that
Entry Date. The Committee may also determine that a designated group of highly
compensated Employees are ineligible to participate in the Plan so long as the
excluded category fits within the definition of "highly compensated employee" in
Code Section 414(q). No Employee may participate in the Plan if immediately
after an option is granted the Employee owns or is considered to own (within the
meaning of Code Section 424(d)) shares of stock, including stock which the
Employee may purchase by conversion of convertible securities or under
outstanding options granted by the Corporation, possessing five percent (5%) or
more of the total combined voting power or value of all classes of stock of the
Corporation or of any of its Subsidiaries. All Employees who participate in the
Plan shall have the same rights and privileges under the Plan, except for
differences that may be mandated by local law and that are consistent with Code
Section 423(b)(5); provided, however, that Employees participating in a sub-plan
adopted pursuant to Section 15 which is not designed to qualify under Code
section 423 need not have the same rights and privileges as Employees
participating in the Code section 423 Plan. The Board may impose restrictions on
eligibility and participation of Employees who are officers and directors to
facilitate compliance with federal or state securities laws or foreign laws.
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4. OFFERING PERIODS.
The Plan shall be implemented by consecutive Offering Periods with a new
Offering Period commencing on the first Trading Day on or after the date
twenty-four (24) months from the first date of the immediately preceding
Offering Period, or on such other date as the Committee shall determine, and
continuing thereafter for twenty-four (24) months or until terminated pursuant
to Section 13 hereof. The first Offering Period shall commence on November 1,
2000. The Committee shall have the authority to change the duration of Offering
Periods (including the commencement dates thereof) with respect to future
offerings without Shareowner approval if such change is announced at least five
(5) days prior to the scheduled beginning of the first Offering Period to be
affected thereafter.
5. PARTICIPATION.
5.1 An Employee who is eligible to participate in the Plan in accordance
with Section 3 may become a Participant by completing and submitting, on
a date prescribed by the Committee prior to an applicable Entry Date, a
completed payroll deduction authorization and Plan enrollment form
provided by the Corporation or by following an electronic or other
enrollment process as prescribed by the Committee. An eligible Employee
may authorize payroll deductions at the rate of any whole percentage of
the Employee's Compensation, not to exceed ten percent (10%) of the
Employee's Compensation. All payroll deductions may be held by the
Corporation and commingled with its other corporate funds where
administratively appropriate. No interest shall be paid or credited to
the Participant with respect to such payroll deductions. The Corporation
shall maintain a separate bookkeeping account for each Participant under
the Plan and the amount of each Participant's payroll deductions shall be
credited to such account. A Participant may not make any additional
payments into such account.
5.2 Under procedures established by the Committee, a Participant may
withdraw from the Plan during a Purchase Period, by completing and filing
a new payroll deduction authorization and Plan enrollment form with the
Corporation or by following electronic or other procedures prescribed by
the Committee, prior to the fifth business day preceding the Purchase
Date. If a Participant withdraws from the Plan during a Purchase Period,
his or her accumulated payroll deductions will be refunded to the
Participant without interest. The Committee may establish rules limiting
the frequency with which Participants may withdraw and re-enroll in the
Plan and may impose a waiting period on Participants wishing to re-enroll
following withdrawal.
5.3 A Participant may change his or her rate of contribution through payroll
deductions at any time by filing a new payroll deduction authorization
and Plan enrollment form or by following electronic or other procedures
prescribed by the Committee. If a Participant has not followed such
procedures to change the rate of contribution, the rate of contribution
shall continue at the originally elected rate throughout the Purchase
Period and future Purchase Periods (including Purchase Periods of
subsequent Offering Periods). In accordance with Section 423(b)(8) of the
Code, the Committee may reduce a Participant's payroll deductions to zero
percent (0%) at any time during a Purchase Period.
6. TERMINATION OF EMPLOYMENT.
In the event any Participant terminates employment with the Corporation or
any of its Designated Subsidiaries for any reason (including death) prior to the
expiration of a Purchase Period, the Participant's participation in the Plan
shall terminate and all amounts credited to the Participant's account shall be
paid to the Participant or, in the case of death, to the Participant's heirs or
estate, without interest. Whether a termination of employment has occurred shall
be determined by the Committee. The Committee may also establish
rules regarding when leaves of absence or changes of employment status will be
considered to be
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a termination of employment, including rules regarding transfer of employment
among Designated Subsidiaries, Subsidiaries and the Corporation, and the
Committee may establish termination-of-employment procedures for this Plan that
are independent of similar rules established under other benefit plans of the
Corporation and its Subsidiaries.
7. OFFERING.
7.1 Subject to adjustment as set forth in Section 10, the maximum number of
shares of Common Stock, which may be issued pursuant to the Plan, shall
be fifty million (50,000,000). If, on a given Purchase Date, the number
of shares with respect to which options are to be exercised exceeds the
number of shares then available under the Plan, the Corporation shall
make a pro rata allocation of the shares remaining available for purchase
in as uniform a manner as shall be practicable and as it shall determine
to be equitable.
7.2 Each Purchase Period shall be determined by the Committee. Unless
otherwise determined by the Committee, the Plan will operate with
successive six (6) month Purchase Periods commencing at the beginning of
each fiscal year half (November 1 and May 1). The Committee shall have
the power to change the duration of future Purchase Periods, without
Shareowner approval, and without regard to the expectations of any
Participants.
7.3 Each eligible Employee who has elected to participate as provided in
Section 5.1 shall be granted an option to purchase that number of whole
shares of Common Stock (not to exceed 5,000 shares) which may be
purchased with the payroll deductions accumulated on behalf of such
Employee during each Purchase Period at the purchase price specified in
Section 7.4 below, subject to the additional limitation that no Employee
participating in the Section 423 Plan shall be granted an option to
purchase Common Stock under the Plan at a rate which exceeds U.S.
twenty-five thousand dollars (U.S. $25,000) of the Fair Market Value of
such Common Stock (determined at the time such option is granted) for
each calendar year in which such option is outstanding at any time. The
foregoing sentence shall be interpreted so as to comply with Code
Section 423(b)(8).
7.4 The purchase price under each option shall be the lower of: (i)a
percentage (not less than eighty-five percent (85%)) established by the
Committee ("Designated Percentage") of the Fair Market Value of the
Common Stock on the Entry Date on which an option is granted, or
(ii) the Designated Percentage of the Fair Market Value on the Purchase
Date on which the Common Stock is purchased. The Committee may change the
Designated Percentage with respect to any future Offering Period, but not
below eighty-five percent (85%), and the Committee may determine with
respect to any prospective Offering Period that the option price shall be
the Designated Percentage of the Fair Market Value of the Common Stock on
the Purchase Date.
8. PURCHASE OF STOCK.
Upon the expiration of each Purchase Period, a Participant's option shall be
exercised automatically for the purchase of that number of whole shares of
Common Stock which the accumulated payroll deductions credited to the
Participant's account at that time shall purchase at the applicable price
specified in Section 7.4. Notwithstanding the foregoing, the Corporation or its
designee may make such provisions and take such action as it deems necessary or
appropriate for the withholding of taxes and/or social insurance which the
Corporation or its Designated Subsidiary is required by law or regulation of any
governmental authority to withhold. Each Participant, however, shall be
responsible for payment of all individual tax liabilities arising under the
Plan.
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9. PAYMENT AND DELIVERY.
As soon as practicable after the exercise of an option, the Corporation
shall deliver to the Participant a record of the Common Stock purchased and the
balance of any amount of payroll deductions credited to the Participant's
account not used for the purchase, except as specified below. The Committee may
permit or require that shares be deposited directly with a broker designated by
the Committee or to a designated agent of the Corporation, and the Committee may
utilize electronic or automated methods of share transfer. The Committee may
require that shares be retained with such broker or agent for a designated
period of time and/or may establish other procedures to permit tracking of
disqualifying dispositions of such shares. The Corporation shall retain the
amount of payroll deductions used to purchase Common Stock as full payment for
the Common Stock and the Common Stock shall then be fully paid and non-
assessable. No Participant shall have any voting, dividend, or other Shareowner
rights with respect to shares subject to any option granted under the Plan until
the shares subject to the option have been purchased and delivered to the
Participant as provided in this Section 9.
10. RECAPITALIZATION.
If after the grant of an option, but prior to the purchase of Common Stock
under the option, there is any increase or decrease in the number of outstanding
shares of Common Stock because of a stock split, stock dividend, combination or
recapitalization of shares subject to options, the number of shares to be
purchased pursuant to an option, the price per share of Common Stock covered by
an option and the maximum number of shares specified in Section 7.1 may be
appropriately adjusted by the Board, and the Board shall take any further
actions which, in the exercise of its discretion, may be necessary or
appropriate under the circumstances.
The Board's determinations under this Section 10 shall be conclusive and
binding on all parties.
11. MERGER, LIQUIDATION, OTHER CORPORATION TRANSACTIONS.
In the event of the proposed liquidation or dissolution of the Corporation,
the Offering Period will terminate immediately prior to the consummation of such
proposed transaction, unless otherwise provided by the Board in its sole
discretion, and all outstanding options shall automatically terminate and the
amounts of all payroll deductions will be refunded without interest to the
Participants.
In the event of a proposed sale of all or substantially all of the assets of
the Corporation, or the merger or consolidation of the Corporation with or into
another corporation, then in the sole discretion of the Board, (1) each option
shall be assumed or an equivalent option shall be substituted by the successor
corporation or parent or subsidiary of such successor corporation, (2) a date
established by the Board on or before the date of consummation of such merger,
consolidation or sale shall be treated as a Purchase Date, and all outstanding
options shall be exercised on such date, or (3) all outstanding options shall
terminate and the accumulated payroll deductions will be refunded without
interest to the Participants.
12. TRANSFERABILITY.
Options granted to Participants may not be voluntarily or involuntarily
assigned, transferred, pledged, or otherwise disposed of in any way, and any
attempted assignment, transfer, pledge, or other disposition shall be null and
void and without effect. If a Participant in any manner attempts to transfer,
assign or otherwise encumber his or her rights or interests under the Plan,
other than as permitted by the Code, such act shall be treated as an election by
the Participant to discontinue participation in the Plan pursuant to
Section 5.2.
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13. AMENDMENT OR TERMINATION OF THE PLAN.
13.1 The Plan shall continue until November 1, 2010 unless otherwise
terminated in accordance with Section 13.2.
13.2 The Board may, in its sole discretion, insofar as permitted by law,
terminate or suspend the Plan, or revise or amend it in any respect
whatsoever, except that, without approval of the Shareowners, no such
revision or amendment shall increase the number of shares subject to
the Plan, other than an adjustment under Section 10 of the Plan.
14. ADMINISTRATION.
The Board shall appoint a Committee consisting of at least two members who
will serve for such period of time as the Board may specify and whom the Board
may remove at any time. The Committee will have the authority and responsibility
for the day-to-day administration of the Plan, the authority and responsibility
specifically provided in this Plan and any additional duty, responsibility and
authority delegated to the Committee by the Board, which may include any of the
functions assigned to the Board in this Plan. The Committee may delegate to one
or more individuals the day-to-day administration of the Plan. The Committee
shall have full power and authority to promulgate any rules and regulations
which it deems necessary for the proper administration of the Plan, to interpret
the provisions and supervise the administration of the Plan, to make factual
determinations relevant to Plan entitlements and to take all action in
connection with administration of the Plan as it deems necessary or advisable,
consistent with the delegation from the Board. Decisions of the Board and the
Committee shall be final and binding upon all participants. Any decision reduced
to writing and signed by a majority of the members of the Committee shall be
fully effective as if it had been made at a meeting of the Committee duly held.
The Corporation shall pay all expenses incurred in the administration of the
Plan. No Board or Committee member shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
hereunder.
15. COMMITTEE RULES FOR FOREIGN JURISDICTIONS.
The Committee may adopt rules or procedures relating to the operation and
administration of the Plan to accommodate the specific requirements of local
laws and procedures. Without limiting the generality of the foregoing, the
Committee is specifically authorized to adopt rules and procedures regarding
handling of payroll deductions, payment of interest, conversion of local
currency, payroll tax, withholding procedures and handling of stock certificates
which vary with local requirements.
The Committee may also adopt sub-plans applicable to particular Subsidiaries
or locations, which sub-plans may be designed to be outside the scope of Code
section 423. The rules of such sub-plans may take precedence over other
provisions of this Plan, with the exception of Section 7.1, but unless otherwise
superseded by the terms of such sub-plan, the provisions of this Plan shall
govern the operation of such sub-plan.
16. SECURITIES LAWS REQUIREMENTS.
The Corporation shall not be under any obligation to issue Common Stock upon
the exercise of any option unless and until the Corporation has determined
that: (i) it and the Participant have taken all actions required to register the
Common Stock under the Securities Act of 1933, or to perfect an exemption from
the registration requirements thereof; (ii) any applicable listing requirement
of any stock exchange on which the Common Stock is listed has been satisfied;
and (iii) all other applicable provisions of state, federal and applicable
foreign law have been satisfied.
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17. GOVERNMENTAL REGULATIONS.
This Plan and the Corporation's obligation to sell and deliver shares of its
stock under the Plan shall be subject to the approval of any governmental
authority required in connection with the Plan or the authorization, issuance,
sale, or delivery of stock hereunder.
18. NO ENLARGEMENT OF EMPLOYEE RIGHTS.
Nothing contained in this Plan shall be deemed to give any Employee the
right to be retained in the employ of the Corporation or any Designated
Subsidiary or to interfere with the right of the Corporation or Designated
Subsidiary to discharge any Employee at any time.
19. GOVERNING LAW.
This Plan shall be governed by Delaware law, without regard to that State's
choice of law rules.
20. EFFECTIVE DATE.
This Plan shall be effective November 1, 2000, subject to approval of the
Shareowners of the Corporation within 12 months before or after its adoption by
the Board.
21. REPORTS.
Individual accounts shall be maintained for each Participant in the Plan.
Statements of account shall be given to Participants at least annually, which
statements shall set forth the amounts of payroll deductions, the Purchase
Price, the number of shares purchased and the remaining cash balance, if any.
22. DESIGNATION OF BENEFICIARY FOR OWNED SHARES.
With respect to shares of Common Stock purchased by the Participant pursuant
to the Plan and held in an account maintained by the Corporation or its assignee
on the Participant's behalf, the Participant may be permitted to file a written
designation of beneficiary. The Participant may change such designation of
beneficiary at any time by written notice. Subject to local legal requirements,
in the event of a Participant's death, the Corporation or its assignee shall
deliver such shares of Common Stock to the designated beneficiary.
Subject to local law, in the event of the death of a Participant and in the
absence of a beneficiary validly designated who is living at the time of such
Participant's death, the Corporation shall deliver such shares of Common Stock
to the executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed (to the knowledge of the
Corporation), the Corporation in its sole discretion, may deliver (or cause its
assignee to deliver) such shares of Common Stock to the spouse, dependent or
relative of the Participant, or if no spouse, dependent or relative is known to
the Corporation, then to such other person as the Corporation may determine.
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APPENDIX C
HEWLETT-PACKARD COMPANY
PAY-FOR-RESULTS PLAN
(AMENDED AND RESTATED AS OF NOVEMBER 1, 1999)
1. PURPOSE.
The purpose of the Hewlett-Packard Company Pay-For-Results Plan (formerly
known as the Hewlett-Packard Company Variable Pay Plan) is to provide certain
employees of Hewlett-Packard Company and its subsidiaries with incentive
compensation based upon the level of achievement of financial, business and
other performance criteria. The incentive compensation provided under the Plan
is comprised of Short-Term Bonuses and Mid-Term Bonuses, as more fully described
herein.
2. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "AFFILIATE" shall mean (i) any entity that, directly or indirectly, is
controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, in either case as determined by the
Committee.
(b) "AFM" shall mean the Company's Accounting and Financial Manual, as
posted from time to time on the Company's internal web site.
(c) "BASE PAY" shall mean the annual base rate of cash compensation,
excluding bonuses, commissions, overtime pay, Bonuses, Target Bonuses,
shift differential, payments under the Hewlett-Packard Company Employee
Benefits Organization Income Protection Plan and the Hewlett-Packard
Company Supplemental Income Protection Plan, or any other additional
compensation.
(d) "BOARD" shall mean the Board of Directors of the Company.
(e) "BONUS" shall mean:
(i) a Short-Term Bonus ("STB") which shall be a cash payment; or
(ii) a Mid-Term Bonus ("MTB") which shall be a Stock Award, a Cash
Award, or a discounted non-statutory stock option granted under,
and in accordance with the terms of, the Hewlett-Packard Company
1995 Incentive Stock Plan and/or the Hewlett-Packard Company 2000
Stock Plan (and successors thereto). "Stock Award," "Cash Award,"
and non-statutory stock option" shall have the meanings set forth
in such plans.
A Bonus may be an addition to Base Pay made pursuant to the Plan with
respect to a particular Performance Period. The amount of a Bonus may be
less than, equal to, or greater than the Target Bonus; provided, however,
that a STB shall not be greater than an amount equal to three hundred
percent (300%) of the STB Target Bonus and a MTB shall not be greater
than two hundred percent (200%) of the MTB Target Bonus.
(f) "CODE" shall mean the Internal Revenue Code of 1986 and the regulations
promulgated thereunder, all as amended from time to time, and any
successors thereto.
(g) "COMMITTEE" shall mean the Committee designated pursuant to Section 4 of
the Plan.
(h) "COMPANY" shall mean Hewlett-Packard Company, a Delaware corporation.
(i) "COVERED OFFICER" shall mean at any date (i) any individual who, with
respect to the previous taxable year of the Company, was a "covered
employee" of the Company within the meaning of
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Section 162(m); provided, however that the term "Covered Officer" shall
not include any such individual who is designated by the Committee, in
its sole discretion, at the time of any Bonus or at any subsequent time,
as reasonably expected not to be such a "covered employee," with respect
to the then current taxable year of the Company, and (ii) any individual
who is designated by the Committee, in its sole discretion, at the time
of any Bonus or at any subsequent time, as reasonably expected to be such
a "covered employee" with respect to the then current taxable year of the
Company or with respect to the taxable year of the Company in which any
applicable Bonus will be paid.
(j) "FISCAL YEAR" shall mean the twelve-month period from November 1 through
October 31.
(k) "NET ORDER DOLLARS" shall be as defined in the Company's Corporate
Marketing Policy, as posted on the Company's internal web site at the
start of the Performance Period.
(l) "NET PROFIT DOLLARS" shall be as defined in the AFM at the start of the
Performance Period.
(m) "NET PROFIT GROWTH" shall be, with respect to any Performance Period, as
defined by the Committee, in its sole discretion.
(n) "NET REVENUE DOLLARS" shall be as defined in the AFM at the start of the
Performance Period.
(o) "PARTICIPANT" shall mean each salaried employee of the Company or its
Affiliates in active service whose position is designated by the
Committee as eligible for participation in the Plan; provided, however,
that Participants must be selected prior to the Predetermination Date.
(p) "PERFORMANCE MEASURE" shall mean any measurable criteria tied to the
Company's success that the Committee may determine, including, but not
limited to, Net Order Dollars, Net Profit Dollars, Net Profit Growth, Net
Revenue Dollars, Revenue Growth, Total Shareowner Return Relative to Peer
Index, individual performance, earnings per share, return on assets,
return on equity, other Company and business unit financial objectives,
customer satisfaction indicators and operational efficiency measures.
(q) "PERFORMANCE PERIOD" shall mean:
(i) with respect to a STB, a six-month period of time based upon the
halves of the Company's Fiscal Year, or such other time period as
shall be determined by the Committee.
(ii) with respect to a MTB, a period of three (3) consecutive Fiscal
Years, with a new Performance Period beginning on the first day of
each Fiscal Year of the Company, or such other time period as shall
be determined by the Committee.
(r) "PLAN" shall mean the Hewlett-Packard Company Pay-For-Results Plan as
amended from time to time.
(s) "PREDETERMINATION DATE" shall mean (i) a date not later than the
expiration of 25% of the Performance Period, provided that the
satisfaction of selected Performance Measures is substantially uncertain
at such time, or (ii) such other date on which a performance goal is
considered to be pre-established pursuant to Section 162(m).
(t) "REVENUE GROWTH" shall be, with respect to any Performance Period, as
defined by the Committee, in its sole discretion.
(u) "SECTION 162(m)" shall mean Section 162(m) of the Code.
(v) "TARGET BONUS" shall mean a Bonus amount that may be paid if 100% of all
applicable Performance Measures are achieved in the Performance Period.
The Target Bonus shall be equal to a fixed percentage of the
Participant's Base Pay for such Performance Period. Such percentage shall
be determined by the Committee prior to the Predetermination Date.
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(w) "TOTAL SHAREOWNER RETURN RELATIVE TO PEER INDEX" shall be, with respect
to any Performance Period, as defined by the Committee, in its sole
discretion.
3. ELIGIBILITY.
Persons employed by the Company or any of its Affiliates during a
Performance Period and in active service are eligible to be Participants under
the Plan for such Performance Period (whether or not so employed or living at
the date a Bonus is made) and may be considered by the Committee for a Bonus. A
Participant is not rendered ineligible to be a Participant by reason of being a
member of the Board. Notwithstanding anything herein to the contrary, the
Committee shall have sole discretion to designate or approve the Participants
for any given Performance Period.
4. ADMINISTRATION.
(a) Unless otherwise designated by the Board, the Compensation Committee of
the Board shall be the Committee under the Plan. A director may serve as
a member or an alternate member of the Committee only during periods in
which the director is an "outside director" as described in
Section 162(m). The Committee shall have full power and authority to
construe, interpret and administer the Plan. It may issue rules and
regulations for administration of the Plan and shall meet at such times
and places as it may determine. A majority of the members of the
Committee shall constitute a quorum and all decisions of the Committee
shall be final, conclusive and binding upon all parties, including the
Company, its shareowners, employees and Participants. In the case of
Participants who are not Covered Officers, the Committee may empower
certain person(s) or a committee to administer the Plan, whose decisions
shall similarly be final, conclusive and binding upon all parties.
(b) The expenses of the administration of the Plan shall be borne by the
Company.
5. TERM.
Subject to Section 10(g), the Plan shall be effective as of November 1, 1999
and shall be applicable for future Fiscal Years of the Company unless amended or
terminated by the Board or the Committee pursuant to Section 10(e).
6. BONUSES.
Prior to the Predetermination Date, the Committee shall designate or approve
(i) the employees who will be Participants for a Performance Period, (ii) the
maximum Bonuses, the Target Bonuses and the applicable Performance Measures for
each Participant, (iii) the percentages allocated to each Participant for each
Performance Measure, and (iv) the Performance Period. Notwithstanding the
foregoing, all Performance Measures pertaining to any Covered Officer shall be
of such a nature that an objective third party having knowledge of all the
relevant facts could determine whether performance results with respect to such
Performance Measures have been achieved.
7. DETERMINATION OF AMOUNT OF BONUS.
(a) CALCULATION. Within 30 days after the end of the relevant Performance
Period, the Committee, or, in the case of a Bonus to a Participant who is
not a Covered Officer, the person(s) or committee empowered by the
Committee or the Board, shall determine the amount of the Bonus for each
Participant by:
(i) Determining the actual performance results for each Performance
Measure;
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(ii) Determining the amount to which each Participant is entitled based
on the percentage allocated by the Committee to each Performance
Measure against the Target Bonus for each Participant; and
(iii) Certifying by resolution duly adopted by the Committee (or by the
person(s) or committee empowered by the Committee in the case of
Participants who are not Covered Officers) the value of the Bonus
for each Participant so determined.
(b) ADJUSTMENTS TO BONUSES. In its sole discretion, the Committee may, but
is not required to, make an adjustment to a Participant's Bonus to take
into account: (i) aggregate out-of-pocket purchase price amounts paid for
all acquisitions and investments that (A) closed in the applicable
Performance Period, (B) were not already taken into account in the
Participant's Performance Measures for such period, and (C) exceeded U.S.
$50 million; (ii) the effect of any major change in U.S. accounting
principles in the applicable Performance Period; and/or (iii) the effect
of any major reorganization within the Company during the applicable
Performance Period.
(c) NO ADJUSTMENTS FOR COVERED OFFICERS. Notwithstanding the provisions of
Section 7(b) above, any adjustments made in accordance with or for the
purposes of Section 7(b) shall be disregarded for purposes of calculating
the Bonus to any Covered Officer to the extent that such adjustments
would have the effect of increasing such Bonus.
(d) COMMITTEE DISCRETION. Notwithstanding any other provision of this Plan,
the Committee may, in the exercise of its sole discretion and based on
any factors the Committee deems appropriate, reduce or eliminate to zero
the amount of a Bonus to a Participant otherwise calculated in accordance
with the provisions of Section 7(a) prior to payment thereof. The
Committee shall make a determination of whether and to what extent to
reduce Bonuses under the Plan for each Performance Period at such time or
times following the close of the Performance Period as the Committee
shall deem appropriate. The reduction in the amount of a Bonus to a
Participant for a Performance Period shall have no effect on the amount
of the Bonus to any other Participant for such period.
(e) MAXIMUM. Notwithstanding any other provision of this Plan, the maximum
STB that may be paid to a Covered Officer under the Plan with respect to
a particular Performance Period is $4 million and the maximum MTB that
may be paid to a Covered Officer under the Plan with respect to a
particular Performance Period is $8 million. To the extent the period of
time defining a Performance Period is changed by the Committee, then the
maximum STB or MTB Bonus that may be paid to a Covered Officer under the
Plan is an amount that bears the same pro rata relationship to the new
period of time as the above amount does to the current six-month or
three-year (as applicable) Performance Period as set by the Committee.
8. PAYMENT OF BONUSES.
(a) Payment of a Bonus to a Participant shall be made as soon as practicable
after determination of the amount of the Bonus under Section 7 above,
except to the extent a Participant has made a timely election to defer
the payment of all or any part of the portion of such Bonus (if otherwise
payable in cash) under the Hewlett-Packard Company Executive Deferred
Compensation Plan. Payment of a STB, and of a MTB paid in the form of a
Cash Award, shall be made in a single, lump-sum cash payment.
(b) The payment of a Bonus with respect to a specific Performance Period
requires that the employee be on the Company's payroll as of the end of
such Performance Period. In the case of death, permanent and total
disability or retirement, the Committee, in its sole discretion, may make
exceptions to this requirement. No Bonus shall be paid unless and until
the Committee has
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certified in writing the amount and, with respect to a MTB, the form
(Stock Award, Cash Award, or discounted non-statutory stock option) to be
paid under the Plan to the Participant.
(c) Payments of Bonuses to Participants who are on the payroll of Affiliates
of the Company shall be paid directly by such entities; except that if a
MTB is in the form of a Stock Award or discounted non-statutory stock
option, such payment shall be made by the Company.
9. CHANGES IN STATUS.
(a) If during a Performance Period a person is promoted into a position
previously designated by the Committee for participation under the Plan,
that person will be able to commence participation in the Plan with
respect to a STB and/or MTB at the beginning of the next applicable
Performance Period.
(b) If a Participant transfers from one eligible position to another during
a Performance Period, any STB Bonus will be prorated based on the
performance of the Participant in each position. Such change will have no
effect on a MTB.
(c) If during a Performance Period a Participant transfers into a position
that is not eligible for participation under the Plan, any STB will be
prorated based upon the employee's time spent in the eligible position.
Such change will have no effect on a MTB.
(d) If a Participant is on a Company approved leave of absence during a
Performance Period, any Bonus will be prorated based upon the employee's
time spent actively at work.
(e) A Participant will forfeit any Bonus for a Performance Period during
which a Participant is involuntarily terminated for cause or voluntarily
terminates his or her employment with the Company for any reason, except
that if the reason for termination is the Participant's death, permanent
and total disability or retirement at the age and service-year level set
by the Company or the local law requirements where the Participant is
employed, the Committee, in its sole discretion, may determine that this
forfeiture provision shall not apply.
(f) If a Participant's Base Pay changes during a Performance Period, any STB
will be based on the Participant's average Base Pay for the Performance
Period, as determined by the Committee. Any MTB will be based on the
Participant's Base Pay at the beginning of the Performance Period.
10. MISCELLANEOUS.
(a) NO ASSIGNMENT. No portion of any Bonus under the Plan may be assigned or
transferred otherwise than by will or the laws of descent and
distribution prior to the payment thereof.
(b) TAX REQUIREMENTS. All payments made pursuant to the Plan or deferred
pursuant to Section 8(a) shall be subject to all applicable taxes or
contributions required by federal, state or local law to be withheld, in
accordance with the procedures to be established by the Committee.
(c) NO ADDITIONAL PARTICIPANT RIGHTS. The selection of an individual for
participation in the Plan shall not give such Participant any right to be
retained in the employ of the Company or any of its Affiliates, and the
right of the Company and any such Affiliate to dismiss such Participant
or to terminate any arrangement pursuant to which any such Participant
provides services to the Company, with or without cause, is specifically
reserved. No person shall have claim to a Bonus under the Plan, except as
otherwise provided for herein, or to continued participation under the
Plan. There is no obligation for uniformity of treatment of Participants
under the Plan. The benefits provided for Participants under the Plan
shall be in addition to and shall in no way preclude other forms of
compensation to or in respect of such Participants. It is expressly
agreed and understood that the employment is terminable at the will of
either party and, if such
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Participant is a party to an employment contract with the Company or one
of its Affiliates, in accordance with the terms and conditions of the
Participant's employment contract.
(d) LIABILITY. The Board and the Committee shall be entitled to rely on the
advice of counsel and other experts, including the independent auditors
for the Company. No member of the Board or of the Committee, any officers
of the Company or its Affiliates or any of their designees shall be
liable for any act or failure to act under the Plan, except in
circumstances involving bad faith on the part of such member, officer or
designee.
(e) AMENDMENT; SUSPENSION; TERMINATION. The Board or Committee may, at any
time and from time to time, amend, suspend or terminate the Plan or any
part of the Plan as it may deem proper and in the best interests of the
Company. In the case of Participants employed outside the United States,
the Board, the Committee or their designees may vary the provisions of
the Plan as deemed appropriate to conform with local laws, practices and
procedures. In addition, the Executive Committee of the Board or any of
the General Counsel, Secretary or Assistant Secretary of the Company is
authorized to make certain minor or administrative changes required by or
made desirable by government regulation. Any modification of the Plan may
affect present and future Participants and the amount of any Bonus
hereunder.
(f) OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the Plan shall
prevent the Company or any Affiliate of the Company from adopting or
continuing in effect other compensation arrangements, which arrangements
may be either generally applicable or applicable only in specific cases.
(g) GOVERNING LAW. The validity, construction and effect of the Plan and any
rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable federal
law.
(h) NO TRUST. Neither the Plan nor any Bonus shall create or be construed to
create a trust or separate fund of any kind or a fiduciary relationship
between the Company or any Participant. To the extent that the
Participant acquires a right to receive payments from the Company in
respect of any Bonus, such right shall be no greater than the right of
any unsecured general creditor of the Company.
(i) SECTION 162(m). All payments under this Plan are designed to satisfy the
special requirements for performance-based compensation set forth in
Section 162(m)(4)(C) of the Code, and the Plan shall be so construed.
Furthermore, if a provision of the Plan causes a payment to fail to
satisfy these special requirements, it shall be deemed amended to satisfy
the requirements to the extent permitted by law and subject to Committee
approval.
(j) DESIGNATION OF BENEFICIARIES. A Participant may, if the Committee
permits, designate a beneficiary or beneficiaries to receive all or part
of the Bonuses which may be paid to the Participant, or may be payable,
after such Participant's death. A designation of beneficiary shall be
made in accordance with procedures specified by the Company and may be
replaced by a new designation or may be revoked by the Participant at any
time. In case of the Participant's death, a Bonus with respect to which a
designation of beneficiary has been made (to the extent it is valid and
enforceable under applicable law) shall be paid to the designated
beneficiary or beneficiaries. Any Bonus granted or payable to a
Participant who is deceased and not subject to such a designation shall
be distributed to the Participant's estate. If there shall be any
question as to the legal right of any beneficiary to receive a Bonus
under the Plan, the amount in question may be paid to the estate of the
Participant, in which event the Company or its Affiliates shall have no
further liability to anyone with respect to such amount.
(k) EFFECT ON COMPANY BENEFIT PLANS. With the exception of the
Hewlett-Packard Company Executive Deferred Compensation Plan and the
Hewlett-Packard Company Excess Benefit Plan (except that a MTB shall not
be taken into account for purposes of determining retirement benefits),
it is
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<PAGE>
the intent of the Company that Company benefits payable or accruable to
Participants, to the extent such benefits are based on earnings or
compensation level, shall be based on Base Pay. Notwithstanding the
foregoing, this paragraph (k) shall apply to Participants outside of the
United States to the extent permissible under applicable local laws.
(l) EFFECT ON FY99 PLAN AND SHAREOWNER APPROVAL. This Plan amends and
supersedes the Hewlett-Packard Company Variable Pay Plan effective
November 1, 1998. At the Company's Annual Meeting of Shareowners in
February 2000, shareowners of the Company will be asked to approve the
amended Plan only if and to the extent necessary to allow the Company
under Section 162(m) to preserve the tax deductibility of payments for
performance-based compensation made under the plan to Covered Officers.
Future Plan amendments shall require shareowner approval only if and to
the extent required by applicable law or the applicable rules of any
stock exchange.
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DIRECTIONS TO THE FLINT CENTER
FROM SAN FRANCISCO:
Take 280 South to 85 South towards Gilroy. [MAP]
Exit at Stevens Creek Blvd. (1st off-ramp).
Turn East (left) onto Stevens Creek Blvd. (over freeway), then turn right onto
Mary Ave. (2nd light).
Upon entering De Anza College campus, bear right and follow signs to parking.
At stop sign turn left.
Parking is available in the parking structure on your right.
FROM SAN JOSE:
Take 280 North to the De Anza Blvd. exit.
Turn South (left) onto De Anza Blvd. and proceed to Stevens Creek Blvd., turn
right onto Stevens Creek then left onto Mary Ave.
Upon entering De Anza College campus, bear right and follow signs to parking.
At stop sign turn left.
Parking is available in the parking structure on your right.
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<TABLE>
<S> <C>
[LOGO] [LOGO]
ANNUAL MEETING OF SHAREOWNERS ANNUAL MEETING OF SHAREOWNERS
Flint Center for the Performing Arts Flint Center for the Performing Arts
21250 Stevens Creek Boulevard 21250 Stevens Creek Boulevard
Cupertino, California Cupertino, California
February 29, 2000 February 29, 2000
2:00 P.M. 2:00 P.M.
ADMIT ONE ADMIT ONE
</TABLE>
[5968-8588E]
<PAGE>
HEWLETT-PACKARD COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
[ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR 1-5. WITHHOLD FOR ALL
FOR ALL EXCEPT
1. ELECTION OF DIRECTORS - 01-P.M. Condit, 02-P.C.
Dunn, 03-C.S. Fiorina, 04-S. Ginn, 05-R.A. [ ] [ ] [ ]
Hackborn, 06-W.B. Hewlett, 07-G.A. Keyworth II,
08-S.P. Orr, 09-R.P. Wayman
_________________________________________________
(Except nominee(s) written above)
FOR AGAINST ABSTAIN
2. Proposal to ratify PricewaterhouseCoopers LLP
as the Company's independent accountants. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Proposal to approve the Company's 2000 Stock
Plan and the reservation of shares thereunder. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
4. Proposal to approve the Company's 2000 Employee
Stock Purchase Plan and the reservation of shares [ ] [ ] [ ]
thereunder.
FOR AGAINST ABSTAIN
5. Proposal to approve the Company's Pay-for-Results
Plan. [ ] [ ] [ ]
In their discretion the Proxies are
authorized to vote upon such other
business as may properly come before
the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKOWNER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ITEMS 1 THROUGH 5.
____________________ ____________________ Dated: _________, 2000
Signature Signature
Please sign exactly as your name or names appear above. For joint accounts,
each owner should sign. When signing as executor, administrator, attorney,
trustee or guardian, etc., please give your full title.
- -------------------------------------------------------------------------------
DETACH PROXY CARD HERE
CONTROL NUMBER
[LOGO]
invent
YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET!
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
HEWLETT-PACKARD COMPANY encourages you to take advantage of convenient ways
to vote your shares. If voting by proxy, you may vote by mail, or choose one
of the two methods described below. Your telephone or Internet vote
authorizes the named proxies to vote your shares in the same manner as if you
marked, signed, and returned your proxy card. To vote by telephone or
Internet, read the 2000 proxy statement and then follow these easy steps:
--------------------------------------------------
TO VOTE BY PHONE Call toll free 1-888-776-5651 in the United
States or Canada any time on a touch tone
telephone. There is NO CHARGE to you for the
call.
Enter the 6-digit CONTROL NUMBER located above.
Option #1: To vote as the Board of Directors
recommends on ALL proposals: Press 1
When asked, please confirm your vote
by pressing 1
Option #2: If you choose to vote on each
proposal separately, press 0 and
follow the simple recorded
instructions.
--------------------------------------------------
--------------------------------------------------
TO VOTE BY INTERNET Go to the following Website:
www.harrisbank.com/wproxy
Enter the information requested on your computer
screen, including your 6-digit CONTROL NUMBER
located above.
Follow the simple instructions on the screen.
--------------------------------------------------
If you vote by telephone or the Internet, DO NOT mail back the proxy card.
THANK YOU FOR VOTING!
4916--HEWLETT-PACKARD COMPANY
<PAGE>
[LOGO] PROXY
invent
HEWLETT-PACKARD COMPANY
ANNUAL MEETING OF STOCKHOLDERS -- FEBRUARY 29, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Carleton S. Fiorina and Ann O. Baskins and
each of them as proxies for the undersigned, with full power of substitution,
to act and to vote all the shares of Common Stock of Hewlett-Packard Company
held of record by the undersigned on December 31, 1999, at the annual meeting
of stockholders to be held on Tuesday, February 29, 2000, or any adjournment
thereof.
IMPORTANT--THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
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Dear Stockholder:
On the reverse side of this card are instructions on
how to vote your shares for the election of directors and
all other proposals by telephone or over the Internet.
Please consider voting by telephone or over the Internet.
Your vote is recorded as if you mailed in your proxy card.
We believe voting this way is convenient.
Thank you for your attention to these matters.
HEWLETT-PACKARD COMPANY
4916--HEWLETT-PACKARD COMPANY