SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
HEWLETT-PACKARD COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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CARLETON S. FIORINA HEWLETT-PACKARD COMPANY
Chairman and [HP LOGO] 3000 Hanover Street
Chief Executive Officer Palo Alto, CA 94304
www.hp.com
To our Shareowners:
I am pleased to invite you to attend the annual meeting of shareowners of
Hewlett-Packard Company to be held on Friday, April 26, 2002 at 2:00 p.m. at the
Flint Center 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.
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
2002 ANNUAL MEETING OF SHAREOWNERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS
NOTICE OF ANNUAL MEETING OF SHAREOWNERS..................... 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 ITEMS OF BUSINESS WILL BE VOTED ON AT THE ANNUAL
MEETING?................................................ 2
HOW DOES THE BOARD OF DIRECTORS RECOMMEND THAT I VOTE?.... 2
WHAT SHARES CAN I VOTE?................................... 2
WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A
SHAREOWNER OF RECORD AND AS A BENEFICIAL OWNER?......... 2
HOW CAN I ATTEND THE ANNUAL MEETING?...................... 3
HOW CAN I VOTE MY SHARES IN PERSON AT THE ANNUAL
MEETING?................................................ 3
HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE ANNUAL
MEETING?................................................ 3
CAN I CHANGE MY VOTE?..................................... 4
AS A SHAREOWNER, WHO CAN HELP ANSWER MY QUESTIONS?........ 4
HOW ARE VOTES COUNTED?.................................... 4
WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH OF THE
PROPOSALS?.............................................. 5
WHAT SHOULD I DO IF I RECEIVE MORE THAN ONE SET OF VOTING
MATERIALS?.............................................. 5
HOW DO I OBTAIN A SEPARATE SET OF VOTING MATERIALS?....... 5
WHERE CAN I FIND THE VOTING RESULTS OF THE ANNUAL
MEETING?................................................ 5
WHAT HAPPENS IF ADDITIONAL MATTERS ARE PRESENTED AT THE
ANNUAL MEETING?......................................... 5
WHAT SHARES ARE ENTITLED TO BE VOTED?..................... 5
WHAT ARE THE QUORUM AND VOTING REQUIREMENTS FOR THE ANNUAL
MEETING?................................................ 5
IS CUMULATIVE VOTING PERMITTED FOR THE ELECTION OF
DIRECTORS?.............................................. 6
WHO WILL COUNT THE VOTES?................................. 6
IS MY VOTE CONFIDENTIAL?.................................. 6
WHO WILL BEAR THE COST OF SOLICITING VOTES FOR THE ANNUAL
MEETING?................................................ 6
MAY I PROPOSE ACTIONS FOR CONSIDERATION AT NEXT YEAR'S
ANNUAL MEETING OF SHAREOWNERS OR NOMINATE INDIVIDUALS TO
SERVE AS DIRECTORS?..................................... 7
BOARD STRUCTURE AND COMPOSITION............................. 8
DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES........ 10
PROPOSALS TO BE VOTED ON.................................... 11
PROPOSAL NO. 1 Election of Directors.................... 11
PROPOSAL NO. 2 Ratification of Independent Auditors..... 16
PROPOSAL NO. 3 Shareowner Proposal Entitled "China
Business Principles"................................... 17
PROPOSAL NO. 4 Shareowner Proposal Entitled "Report on
Producer Responsibility for Product Take-Back and
Recycling"............................................. 20
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 23
Beneficial Ownership Table.............................. 23
Section 16(a) Beneficial Ownership Reporting
Compliance............................................. 27
EXECUTIVE COMPENSATION...................................... 28
Summary Compensation Table.............................. 28
Option Grants in Last Fiscal Year....................... 33
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values.......................... 34
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements......................... 35
Pension Plan............................................ 39
Report of the Compensation Committee of the Board of
Directors on Executive Compensation.................... 41
Stock Performance Graphs................................ 46
EXECUTIVE OFFICERS.......................................... 47
INDEPENDENT AUDITORS........................................ 49
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS..... 50
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HEWLETT-PACKARD COMPANY
3000 HANOVER STREET
PALO ALTO, CALIFORNIA 94304
(650) 857-1501
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
TIME AND DATE 2:00 p.m. local time on Friday, April 26, 2002
PLACE The Flint Center
21250 Stevens Creek Boulevard
Cupertino, California
ITEMS OF BUSINESS (1) To elect directors.
(2) To ratify the appointment of independent auditors.
(3) To consider and vote upon a shareowner proposal entitled "China
Business Principles."
(4) To consider and vote upon a shareowner proposal entitled "Report
on Producer Responsibility for Product Take-Back and Recycling."
(5) To consider such other business as may properly come before the
meeting.
ADJOURNMENTS AND Any action on the items of business described above may be considered
POSTPONEMENTS at the annual meeting at the time and on the date specified above or
at any time and date to which the annual meeting may be properly
adjourned or postponed.
RECORD DATE You are entitled to vote only if you were a holder or joint holder of
HP common stock at the close of business on March 18, 2002.
MEETING ADMISSION You are entitled to attend the annual meeting only if you were an HP
shareowner or joint holder as of the close of business on March 18,
2002 or hold a valid proxy for the annual meeting. You should be
prepared to present photo identification for admittance. In addition,
if you are a record holder or hold your shares through HP's TAXCAP or
Share Ownership Plan, your name will be verified against the list of
record holders or plan participants on the record date prior to being
admitted to the meeting. If you are not a record holder but hold
shares through a broker or nominee (i.e., in street name), you should
provide proof of beneficial ownership on the record date, such as your
most recent account statement prior to March 18, 2002, a copy of the
voting instruction card provided by your broker or nominee, or other
similar evidence of ownership. If you do not provide photo
identification or comply with the other procedures outlined above upon
request, you will not be admitted to the annual meeting.
The annual meeting will begin promptly at 2:00 p.m., local time.
Check-in will begin at 12:30 p.m., local time, and you should allow
ample time for the check-in procedures.
VOTING YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING, WE ENCOURAGE YOU TO READ THIS PROXY STATEMENT AND
SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE. YOU MAY
SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS FOR THE ANNUAL MEETING BY
COMPLETING, SIGNING, DATING AND RETURNING THE PROXY CARD OR VOTING
INSTRUCTION CARD IN THE ACCOMPANYING PRE-ADDRESSED ENVELOPE, OR, IN
MOST CASES, BY USING THE TELEPHONE OR THE INTERNET. FOR SPECIFIC
INSTRUCTIONS ON HOW TO VOTE YOUR SHARES, PLEASE REFER TO THE SECTION
ENTITLED QUESTIONS AND ANSWERS BEGINNING ON PAGE 2 OF THIS PROXY
STATEMENT AND THE INSTRUCTIONS ON THE PROXY CARD OR VOTING INSTRUCTION
CARD.
By Order of the Board of Directors,
/s/ Ann O. Baskins
ANN O. BASKINS
Vice President, General Counsel and Secretary
THIS NOTICE OF ANNUAL MEETING AND PROXY STATEMENT AND ACCOMPANYING PROXY CARD
ARE BEING DISTRIBUTED ON OR ABOUT APRIL 4, 2002.
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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 April 26, 2002. As a shareowner, you
are invited to attend the annual meeting and are entitled to and requested
to vote on the items of business 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 annual meeting, the voting process, the compensation of
directors and most highly paid executive officers, and certain other
required information. Our 2001 Annual Report, which includes our 2001
Form 10-K/ A, is also enclosed.
Q: WHAT ITEMS OF BUSINESS WILL BE VOTED ON AT THE ANNUAL MEETING?
A: There are four items of business scheduled to be voted on at the annual
meeting:
- The election of directors,
- The ratification of independent auditors,
- A shareowner proposal entitled "China Business Principles," and
- A shareowner proposal entitled "Report on Producer Responsibility for
Product Take-Back and Recycling."
We will also consider other business that properly comes before the annual
meeting.
Q: HOW DOES THE BOARD OF DIRECTORS RECOMMEND THAT I VOTE?
A: Our Board of Directors recommends that you vote your shares "FOR" each of
the nominees to the Board, "FOR" the ratification of independent auditors,
and "AGAINST" each of the shareowner proposals.
Q: WHAT SHARES CAN I VOTE?
A: You may vote all shares owned by you as of the close of business on
March 18, 2002, the RECORD DATE. These shares include (1) shares held
directly in your name as the SHAREOWNER OF RECORD, including shares
purchased through HP's Dividend Reinvestment Plan, HP's prior Employee Stock
Purchase Plan and HP's Direct Registration Service, and (2) shares held for
you as the BENEFICIAL OWNER through a broker or other nominee such as a
bank, including shares purchased through HP's 401(k) plan, the Tax Saving
Capital Accumulation Plan ("TAXCAP") or the Share Ownership Plan.
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 broker 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, Computershare Investor Services Limited, 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 or sent a proxy card for you to use.
BENEFICIAL OWNER
If your shares are held in a brokerage account or by another 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
together with a voting instruction card. As the beneficial owner, you have
the right to direct your broker or nominee how to vote and are also invited
to attend the annual meeting.
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However, since you are not the SHAREOWNER OF RECORD, you may not vote these
shares in person at the meeting unless you obtain a "legal proxy" from the
broker or nominee that holds your shares, giving you the right to vote the
shares. Your broker or nominee has enclosed or provided voting instructions
for you to use in directing the broker or nominee how to vote your shares.
Q: HOW CAN I ATTEND THE ANNUAL MEETING?
A: You are entitled to attend the annual meeting only if you were an HP
shareowner or joint holder as of the close of business on March 18, 2002, or
you hold a valid proxy for the annual meeting. You should be prepared to
present photo identification for admittance. In addition, if you are a
record holder or hold your shares through HP's TAXCAP or Share Ownership
Plan, your name will be verified against the list of record holders or plan
participants on the record date prior to being admitted to the annual
meeting. If you are not a record holder but hold shares through a broker or
nominee (i.e., in street name), you should provide proof of beneficial
ownership on the record date, such as your most recent account statement
prior to March 18, 2002, a copy of the voting instruction card provided by
your broker or nominee, or other similar evidence of ownership. If you do
not provide photo identification or comply with the other procedures
outlined above upon request, you will not be admitted to the annual meeting.
The annual meeting will begin promptly at 2:00 p.m. Check-in will begin at
12:30 p.m., and you should allow ample time for the check-in procedures.
Q: HOW CAN I VOTE MY SHARES IN PERSON AT THE ANNUAL MEETING?
A: Shares held directly in your name as the SHAREOWNER OF RECORD may be voted
in person at the annual meeting. Shares held in street name may be voted in
person only if you obtain a legal proxy from the broker or nominee that
holds your shares giving you the right to vote the shares. EVEN IF YOU
CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING, WE RECOMMEND THAT YOU ALSO
SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS DESCRIBED BELOW SO THAT YOUR
VOTE WILL BE COUNTED IF YOU LATER DECIDE NOT TO ATTEND THE MEETING.
Q: HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE ANNUAL MEETING?
A: Whether you hold shares directly as the shareowner of record or beneficially
in street name, you may direct how your shares are to be voted without
attending the meeting. If you are a shareowner of record, you may vote by
granting a proxy. If you hold shares in street name, you may vote by
submitting voting instructions to your broker or nominee. For directions on
how to vote, please refer to the instructions below and those included on
your proxy card or, for shares held in street name, the voting instruction
card provided by your broker or nominee.
BY INTERNET--Record holders of shares of HP common stock with Internet
access may submit proxies from any location in the world by following the
"Vote by Internet" instructions on their proxy cards. Most HP shareowners
who hold shares in street name may vote by accessing the website specified
on the voting instruction cards provided by their brokers or nominees.
Please check the voting instruction card for Internet voting availability.
BY TELEPHONE--Record holders of HP common stock who live in the United
States or Canada may submit proxies by following the "Vote by Phone"
instructions on their proxy cards. Most HP shareowners who hold shares in
street name and live in the United States or Canada may vote by phone by
calling the number specified on the voting instruction cards provided by
their brokers or nominees. Please check the voting instruction card for
telephone voting availability.
BY MAIL--Record holders of HP common stock may submit proxies by completing,
signing and dating their proxy cards and mailing them in the accompanying
pre-addressed envelopes. HP shareowners who hold shares in street name may
vote by mail by completing, signing and dating the voting instruction cards
provided by their brokers or nominees
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and mailing them in the accompanying pre-addressed envelopes.
Q: CAN I CHANGE MY VOTE?
A: You may change your vote 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 you hold
beneficially, you may change your vote by submitting new voting instructions
to your broker or nominee, or, if you have obtained a legal proxy from your
broker or nominee giving you the right to vote your shares, by attending the
meeting and voting in person.
Q: AS A SHAREOWNER, WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the annual meeting or how to vote or revoke
your proxy, you should contact:
Georgeson Shareholder
111 Commerce Road
Carlstadt, New Jersey 07072
Shareowners: (888) 921-5724
International Calls: (416) 847-7199
Banks and Brokers: (212) 440-9800
If you need additional copies of this proxy statement or voting materials,
you should contact Georgeson Shareholder as described above or send an
e-mail to hp@georgeson.com.
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. Please
note that proxies are being solicited by HP for two different slates of
directors, since the actual slate to be voted upon at the annual meeting
will depend on whether HP's proposed merger transaction involving Compaq
Computer Corporation (the "Compaq merger") is completed prior to the annual
meeting. You should vote on each slate to ensure that your votes are counted
regardless of whether the Compaq merger has been completed prior to the
annual meeting.
- If the Compaq merger is completed prior to the annual meeting,
12 directors will be voted upon at the annual meeting and you may vote
"FOR" all of these nominees or your vote may be "WITHHELD" with respect to
one or more of the 12 nominees.
- If the Compaq merger is not completed prior to the annual meeting, eight
directors will be voted upon at the annual meeting and you may vote "FOR"
all of these nominees or your vote may be "WITHHELD" with respect to one
or more of the eight nominees.
YOU MUST GIVE SEPARATE INSTRUCTIONS WITH RESPECT TO EACH SLATE OF NOMINEES
FOR YOUR INSTRUCTIONS TO BE COUNTED IN BOTH THE CASE WHERE THE COMPAQ MERGER
IS COMPLETED PRIOR TO THE ANNUAL MEETING AND THE CASE WHERE THE COMPAQ
MERGER IS NOT COMPLETED PRIOR TO THE ANNUAL MEETING. SUBJECT TO THE
DISCUSSION BELOW "IS CUMULATIVE VOTING PERMITTED FOR THE ELECTION OF
DIRECTORS?", IF YOU FAIL TO GIVE INSTRUCTIONS WITH RESPECT TO EITHER SLATE
OF NOMINEES, YOUR SHARES WILL BE VOTED "FOR" ALL OF THE NOMINEES ON SUCH
SLATE OF DIRECTORS.
For the other items of business, you may vote "FOR," "AGAINST" or "ABSTAIN."
If you "ABSTAIN," it has the same effect as a vote "AGAINST." If you provide
specific instructions, your shares will be voted as you instruct. If you
sign your proxy card or 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" ratification of the independent auditors, and "AGAINST" each of
the shareowner proposals 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.
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Q: WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH OF THE PROPOSALS?
A: In the election of directors, if the Compaq merger is completed prior to the
annual meeting, the 12 persons receiving the highest number of "FOR" votes
at the annual meeting will be elected. If the Compaq merger is not completed
prior to the annual meeting, the eight persons receiving the highest number
of "FOR" votes at the annual meeting will be elected. All other proposals
require the affirmative "FOR" vote of a majority of those shares present in
person or represented by proxy and entitled to vote on that proposal at the
annual meeting. 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 ARE THE QUORUM AND VOTING
REQUIREMENTS 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 SHOULD I DO IF I RECEIVE MORE THAN ONE SET OF VOTING MATERIALS?
A: You may receive more than one set of voting materials, including multiple
copies of this proxy statement and multiple proxy cards or voting
instruction cards. For example, if you hold your shares in more than one
brokerage account, you will receive a separate voting instruction card for
each brokerage account in which you hold shares. If you are a shareowner of
record and your shares are registered in more than one name, you will
receive more than one proxy card. Please complete, sign, date and return
each HP proxy card and voting instruction card that you receive.
Q: HOW DO I OBTAIN A SEPARATE SET OF VOTING MATERIALS?
A: If you share an address with another shareowner and have received only one
set of voting materials, you may write or call us to request a separate copy
of these materials at no cost to you. You may write to us at 3000 Hanover
Street, Palo Alto, CA 94304, Attn: Investor Relations, call us at
800-TALK HWP or go to our website at http:/
/www.hp.com/hpinfo/investor/main.htm.
Q: WHERE CAN I FIND THE VOTING RESULTS OF THE ANNUAL MEETING?
A: We intend to announce preliminary voting results at the annual meeting and
publish final results in our quarterly report on Form 10-Q for the second
quarter of fiscal 2002.
Q: WHAT HAPPENS IF ADDITIONAL MATTERS ARE PRESENTED AT THE ANNUAL MEETING?
A: Other than the four items of business described in this proxy statement, we
are not aware of any other business to be acted upon at the annual meeting.
If you grant a proxy, the persons named as proxy holders, Carleton S.
Fiorina, HP's Chairman 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.
Q: WHAT SHARES ARE ENTITLED TO BE VOTED?
A: Each share of HP common stock issued and outstanding as of the close of
business on March 18, 2002, the RECORD DATE, is entitled to be voted on all
items being voted upon at the annual meeting. On the RECORD DATE, we had
approximately 1,943,724,761 shares of common stock issued and outstanding.
Q: WHAT ARE THE QUORUM AND VOTING REQUIREMENTS FOR THE ANNUAL MEETING?
A: The quorum requirement for holding the annual meeting and transacting
business is a majority of shares of HP common stock issued and outstanding
that are 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
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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 on a matter when a broker is not permitted
to vote on that item without instructions from the beneficial owner and
instructions are not given.
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 among the director nominees, 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 you hold. For
example, if you own 100 shares of stock, and the Compaq merger is completed
before the annual meeting, so there are 12 directors to be voted upon at the
annual meeting, you could allocate 1,200 "FOR" votes (12 X 100) among as few
or as many of the 12 persons to be voted upon at the annual meeting if the
Compaq merger is completed prior to the annual meeting as you choose. If the
Compaq merger is not completed before the annual meeting, so there are eight
directors to be voted upon at the annual meeting, you could allocate 800
"FOR" votes (8 X 100) among as few or as many of the eight persons to be
voted upon at the annual meeting if the Compaq merger is not completed prior
to the annual meeting as you choose.
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 indicating in writing on your ballot when voting at the
annual meeting.
Please note that if you wish to cumulate your votes in the election of
directors, you must cumulate your votes separately among the slate of 12
directors to be voted upon at the annual meeting if the Compaq merger is
completed before the annual meeting and among the slate of eight directors
to be voted upon at the annual meeting if the Compaq merger is not completed
before the annual meeting.
Carleton S. Fiorina and Ann O. Baskins, as proxyholders, reserve the right
to cumulate and cast your votes in favor of the election of some or all of
the applicable nominees in their sole discretion, except that none of your
votes will be cast for any nominee as to whom you instruct that your votes
be withheld.
Cumulative voting only applies to the election of directors. For all other
matters, each share of common stock outstanding as of the close of business
on the RECORD DATE is entitled to one vote.
Q: WHO WILL COUNT THE VOTES?
A: An inspector or inspectors of election will tabulate the votes. We expect
that the inspector of election will be a representative of Computershare
Investor Services Limited, HP's transfer agent.
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. 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 ANNUAL MEETING?
A: HP is making this solicitation and 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, you are
responsible for Internet access charges you may incur. In addition to the
mailing of these proxy materials, the solicitation of proxies or votes may
be made in person, by telephone or by electronic communication by our
directors,
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officers and employees, who will not receive any additional compensation for
such solicitation activities. We also have hired Georgeson Shareholder
("Georgeson") to assist us in the distribution of proxy materials and the
solicitation of votes. We will pay Georgeson a fee of $15,000 plus customary
out-of-pocket expenses for these services. HP has agreed to indemnify
Georgeson against certain liabilities arising out of or in connection with
its agreement. Upon request, 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 the annual meeting next year, the
written proposal must be received by the corporate secretary of HP no later
than December 5, 2002. Such proposals also will need to comply with
Securities and Exchange Commission regulations under Rule 14a-8 regarding
the inclusion of shareowner proposals in company-sponsored proxy materials.
If the date of next year's annual meeting is moved more than 30 days before
or after the anniversary date of this year's annual meeting, the deadline
for inclusion of proposals in HP's proxy statement is a reasonable time
before HP begins to print and mail its proxy materials. For a shareowner
proposal that is not intended to be included in HP's proxy statement under
Rule 14a-8, the shareowner must have delivered a proxy statement and form of
proxy to holders of a sufficient number of shares of HP common stock to
approve the proposal, provide the information required by the bylaws of HP
and give timely notice to the corporate secretary of HP in accordance with
the bylaws of HP, which, in general, require that the notice be received by
the corporate secretary of HP:
- Not earlier than the close of business on December 27, 2002, and
- Not later than the close of business on January 28, 2003.
However, if the date of the shareowner meeting is moved more than 30 days
before or 60 days after the anniversary of the HP annual meeting for the
prior year, then notice must be received no earlier no than the close of
business 120 days prior to the meeting and no later than the close of
business on the later of the following two dates:
- 90 days prior to the meeting; and
- 10 days after public announcement of the meeting date.
NOMINATION OF DIRECTOR CANDIDATES: You may propose director candidates for
consideration by our Board's Nominating and Governance Committee. Any such
recommendations should be directed to the corporate secretary of HP at our
principal executive offices. In addition, the bylaws of HP permit
shareowners to nominate directors at an annual shareowner meeting. To
nominate a director, the shareowner must have delivered a proxy statement
and form of proxy to holders of a sufficient number of shares of HP common
stock to elect such nominee and provide the information required by the
bylaws of HP, as well as a statement by the nominee acknowledging that he or
she will owe a fiduciary obligation exclusively to HP and its shareowners.
In addition, the shareowner must give timely notice to the corporate
secretary of HP in accordance with the bylaws of HP, which require that the
notice be received by the corporate secretary of HP within the time periods
described above under "Shareowner Proposals."
COPY OF BYLAW PROVISIONS: You may contact the HP corporate secretary at our
principal executive offices for a copy of the relevant bylaw provisions
regarding the requirements for making shareowner proposals and nominating
director candidates.
7
BOARD STRUCTURE AND COMPOSITION
As of the date of this proxy statement our Board has 9 directors and the
following five committees: (1) Audit, (2) Compensation, (3) Executive,
(4) Finance and Investment, and (5) Nominating and Governance. The membership
and the function of each committee during the last fiscal year are described
below. During fiscal 2001, the Board held 18 meetings and each director attended
at least 75% of all Board and applicable committee meetings.
FINANCE AND NOMINATING AND
NAME OF DIRECTOR AUDIT COMPENSATION EXECUTIVE INVESTMENT GOVERNANCE
--------------------------------------------- -------- ------------- --------- ----------- ---------------
NON-EMPLOYEE DIRECTORS:
Philip M. Condit X* X
Patricia C. Dunn X X*
Sam Ginn X X*
Richard A. Hackborn X X
Walter B. Hewlett(1) X X
Dr. George A. Keyworth II X* X
Robert E. Knowling Jr. X X
Susan Packard Orr(2) X X
EMPLOYEE DIRECTORS
Carleton S. Fiorina X* X
Robert P. Wayman X X
Number of Meetings in Fiscal 2001 6 10 0(3) 6 4
------------------------------
X = Committee member; * = Chair
(1) Walter B. Hewlett is not a nominee for election as director at the annual
meeting.
(2) Susan Packard Orr did not stand for re-election to the Board at the 2001
Annual Meeting. Ms. Orr previously served on the Compensation Committee and
Nominating and Governance Committee.
(3) 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 matters during the fiscal year.
8
THE AUDIT COMMITTEE
The Audit Committee reviews our auditing, accounting, financial reporting and
internal control functions and selects our independent auditors. In discharging
its duties, the committee:
- reviews and approves the scope of the annual audit and the independent
auditors' fees;
- meets independently with our internal auditing staff, our independent
auditors 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 and review of interim
financial statements, auditor independence issues, and the adequacy of the
Audit Committee charter.
The Audit Committee operates under a written charter adopted by the Board, which
was published in last year's proxy statement.
COMPENSATION COMMITTEE
The Compensation Committee determines, approves and reports to the Board on, all
elements of compensation for our elected officers including bonuses, as
described below in pages 41 through 45 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 the bylaws of HP, 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, it
provides oversight and guidance to the Board regarding significant financial
matters, including the payment of dividends.
NOMINATING AND GOVERNANCE COMMITTEE
The Nominating and Governance 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.
9
DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES
The following table provides information on HP's compensation and
reimbursement practices during fiscal 2001 for non-employee directors, as well
as the range of compensation paid to non-employee directors who served the
entire 2001 fiscal year. The directors who also are employed by HP, Ms. Fiorina
and Mr. Wayman, did not receive any separate compensation for their Board
activities.
NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
FOR FISCAL 2001
Annual director retainer.................................... $100,000
Minimum percentage of annual retainer to be paid in HP
stock(1)................................................... 75%
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)...................................................... $100,000 - $105,000
------------------------------
(1) Each director may elect to receive the annual director retainer in a grant
of stock or stock options. Under special circumstances, less than 75% may
be paid in stock.
Under the Company's stock ownership guidelines for directors, 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.
10
PROPOSALS TO BE VOTED ON
PROPOSAL NO. 1
ELECTION OF DIRECTORS
This proposal consists of two slates of nominees for election as directors.
One slate, consisting of 12 nominees, will be voted on at the annual meeting if
the Compaq merger is completed prior to the annual meeting. The other slate,
consisting of eight nominees, will be voted on at the annual meeting if the
Compaq merger is not completed prior to the annual meeting. HP requests your
vote with respect to each of the two slates.
As of the date of this proxy statement, HP has nine directors, including
Walter B. Hewlett, who is not a nominee for reelection.
Upon completion of the merger, the HP Board has agreed to appoint five
directors of Compaq to the Board and HP has agreed that only two directors will
be HP employees. Accordingly, Robert P. Wayman has indicated that he intends to
tender his resignation from the Board, contingent upon completion of the Compaq
merger. If the Compaq merger is completed prior to the annual meeting, there are
12 persons who will be voted upon at the annual meeting for election to the
Board, eight of whom will have served as directors since the last annual
meeting.
If the Compaq merger is not completed prior to the annual meeting, then
there are eight persons who will be voted upon at the annual meeting for
election to the Board, all of whom will have served as directors since the last
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 successors are elected. There are no family relationships among our
executive officers and directors.
If the Compaq merger is completed prior to the annual meeting, the
proxyholders, Carleton S. Fiorina and Ann O. Baskins, will vote in favor of the
12 persons listed below under the section "HP Nominees Following the Completion
of the Compaq Merger," unless contrary instructions are given. If the Compaq
merger has not been completed prior to the annual meeting, the proxyholders,
Carleton S. Fiorina and Ann O. Baskins, will vote in favor of the eight persons
described below under the section "HP Nominees Prior to the Completion of the
Compaq Merger," unless contrary instructions are given.
If you sign your proxy or voting instruction card but do not give
instructions with respect to the voting of directors and if the Compaq merger is
completed prior to the annual meeting, your shares will be voted for the 12
persons recommended by the Board. If you sign your proxy or voting instruction
card but do not give instructions with respect to the voting of directors and if
the Compaq merger is not completed prior to the annual meeting, your shares will
be voted for the eight persons recommended by the Board in that case. If you
wish to give specific instructions with respect to the voting of directors, you
must do so with respect to both the slate of 12 persons who will be voted upon
at the annual meeting if the Compaq merger is completed prior to the annual
meeting and the slate of eight persons who will be voted upon at the annual
meeting if the Compaq merger is not completed prior to the annual meeting.
The Board expects that all of the nominees will be available to serve as
directors as indicated. In the event that any nominee should become unavailable,
however, the proxyholders, Carleton S. Fiorina and Ann O. Baskins, would vote
for a nominee or nominees who would be designated by the Board, unless the Board
chooses to reduce the number of directors serving on the Board.
11
VOTE REQUIRED
If the Compaq merger is completed prior to the annual meeting, the 12
persons receiving the highest number of votes represented by shares of HP common
stock present in person or represented by proxy and entitled to be voted at the
annual meeting will be elected. If the Compaq merger is not completed prior to
the annual meeting, the eight persons receiving the highest number of votes
represented by shares of HP common stock present in person or represented by
proxy and entitled to be voted at the annual meeting will be elected.
You may cumulate your votes in favor of one or more directors. However, if
you wish to cumulate your votes, you will need to cumulate your votes SEPARATELY
among the nominees on each slate, by cumulating your votes among any of the 12
persons who will be voted upon at the annual meeting in the event that the
Compaq merger is completed prior to the annual meeting and SEPARATELY cumulating
your votes among the eight persons who will be voted upon at the annual meeting
if the Compaq merger is not completed prior to the annual meeting. Carleton S.
Fiorina and Ann O. Baskins, as proxyholders, reserve the right to cumulate votes
and cast such votes in favor of the election of some or all of the applicable
nominees in their sole discretion, except that a shareowner's votes will not be
cast for a nominee as to which such shareowner instructs that such votes be
withheld.
HP NOMINEES FOLLOWING THE COMPLETION OF THE COMPAQ MERGER
IF THE COMPAQ MERGER IS COMPLETED PRIOR TO THE ANNUAL MEETING, THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION TO THE BOARD OF EACH OF THE
FOLLOWING NOMINEES.
LAWRENCE T. BABBIO, JR.* Mr. Babbio has served as Vice Chairman and President of
Age 57 Verizon Communications, Inc. (formerly Bell Atlantic
Corporation) since 2000. In 1997 he was elected President
and Chief Operating Officer--Network Group, and
Chairman--Global Wireless Group of Bell Atlantic. In 1995,
he was elected Vice Chairman of Bell Atlantic. Mr. Babbio
has been a director of Compaq since 1995. Mr. Babbio is also
a director of ARAMARK Corporation.
MICHAEL D. CAPELLAS* Mr. Capellas was elected to serve as Chairman and Chief
Age 47 Executive Officer of Compaq in 2000. Prior to that time he
served as President and Chief Executive Officer and was
appointed a director in 1999, and also served as Chief
Operating Officer earlier that year. Mr. Capellas joined
Compaq in 1998 as Senior Vice President, Information
Management and Chief Information Officer. Prior to joining
Compaq, he was Senior Vice President and General Manager of
the global energy business of Oracle Corporation from 1997
through 1998, and Director of Supply Chain Management for
SAP America, Inc. from 1996 through 1997. From 1981 through
1996, Mr. Capellas held several management positions at
Schlumberger Limited, including serving as head of worldwide
information services. Mr. Capellas also serves as a director
of Dynegy, Inc.
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 60 and a member of its board since 1992. He served as President
of The Boeing Company from August 1992 until becoming
Chairman.
------------------------
* To be appointed to the Board upon completion of the Compaq merger pursuant
to HP's merger agreement with Compaq.
12
PATRICIA C. DUNN Ms. Dunn has been Global Chief Executive of Barclays Global
Director since 1998 Investors (BGI) since 1998 and its Co-Chairman from October
Age 48 1995 through June 1999. Ms. Dunn oversees the activities and
strategy of BGI, the world's largest institutional
investment manager, having joined the firm's predecessor
organization, Wells Fargo Investment Advisors, in 1978.
CARLETON S. FIORINA Ms. Fiorina became Chairman of the Board in September 2000
Director since 1999 and was named President, Chief Executive Officer and
Age 47 director of HP in July 1999. Prior to joining HP, she served
as Executive Vice President, Computer Operations for Lucent
Technologies, Inc. and oversaw the formation and spin-off of
Lucent from AT&T. She also served as Lucent's President,
Global Service Provider Business and President, Consumer
Products. Ms. Fiorina is a member of the Board of Directors
of Cisco Systems, Inc.
SAM GINN Mr. Ginn served as Chairman of Vodafone AirTouch Plc from
Director since 1996 1999, following the merger of Vodafone and AirTouch, until
Age 64 his retirement in May 2000. He was Chairman of the Board and
Chief Executive Officer of AirTouch from December 1993 to
June 1999. Mr. Ginn is also a director of ChevronTexaco
Corporation and the Fremont Group.
RICHARD A. HACKBORN Mr. Hackborn served as Chairman of the Board from January
Director since 1992 2000 to September 2000. He was HP's Executive Vice
Age 64 President, Computer Products Organization from 1990 until
his retirement in 1993 after a 33-year career with our
company. He is a director of the Boise Art Museum.
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 62 institute, since 1995. He is a director of General Atomics.
Dr. Keyworth holds various honorary degrees and is an
honorary professor at Fudan University in Shanghai, People's
Republic of China.
ROBERT E. KNOWLING, JR. Mr. Knowling has been Chairman and Chief Executive Officer
Director since 2000 of Internet Access Technologies Inc., a software development
Age 46 company specializing in ASP-based productivity suites
provided through the Internet, since February 2001. From
July 1998 through October 2000 he was President and Chief
Executive Officer of Covad Communications Company, a
national broadband service provider of high speed Internet
and network access using DSL Technology. He also served as
Chairman of Covad from September 1999 to October 2000. From
1997 though July 1998, Mr. Knowling served as the Executive
Vice President of Operations and Technologies at US WEST
Communications, Inc. Mr. Knowling is a director of Ariba,
Inc., Broadmedia Inc., Heidrick & Struggles International,
Inc. and the Juvenile Diabetes Foundation International. He
also serves as a member of the advisory board for both
Northwestern University's Kellogg Graduate School of
Management and the University of Michigan Graduate School of
Business.
13
SANFORD M. LITVACK* Mr. Litvack is of counsel with the law firm of Dewey
Age 65 Ballantine LLP. Mr. Litvack served as Vice Chairman of the
Board of The Walt Disney Company from 1999 to 2000. From
1994 until his appointment as Vice Chairman, he served as
Senior Executive Vice President and Chief of Corporate
Operations. Prior to joining Disney in 1991, Mr. Litvack was
a member of the Executive Committee and Chairman of the
Litigation Department of Dewey Ballantine LLP. Mr. Litvack
has been a director of Compaq since 2001. Mr. Litvack is
also a director of PacifiCare Health Systems, Inc.,
Antigenics, Inc., Cyber Capital and EuroDisney S.C.A.
THOMAS J. PERKINS* Mr. Perkins has been a General Partner of Kleiner Perkins
Age 70 Caufield & Byers, a private investment partnership, since
1972, and has served as either a general or limited partner
of numerous funds formed by Kleiner Perkins Caufield &
Byers. Mr. Perkins served as Chairman of the Board of
Directors of Tandem Computers Incorporated from 1974 until
1997. Mr. Perkins has been a director of Compaq since 1997.
He is also a director of News Corporation.
LUCILLE S. SALHANY* Ms. Salhany has been Chairman of LifeFX, Inc. since March
Age 55 2002. She was Co-President and Chief Operating Officer of
LifeFX Networks, Inc. since 1999. She was President and
Chief Executive Officer of JHMedia from 1997 to 1999.
Ms. Salhany served as President and Chief Executive Officer
of the United Paramount Network from 1994 to 1997. From 1993
to 1994, she served as Chairman of FOX Broadcasting Company
and from 1991 to 1993 she served as Chairman of Twentieth
Century Fox Television. She was a member of the Board of
Directors of Fox, Inc. from 1991 to 1993. Ms. Salhany has
served as a director of Compaq since 1997. Ms. Salhany is
also a director of Boston Restaurant Associates, Inc.
------------------------
* To be appointed to the Board upon completion of the Compaq merger pursuant
to HP's merger agreement with Compaq.
HP NOMINEES PRIOR TO THE COMPLETION OF THE COMPAQ MERGER
IF THE COMPAQ MERGER IS NOT COMPLETED PRIOR TO THE ANNUAL MEETING, THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION TO THE BOARD OF EACH OF THE
FOLLOWING NOMINEES.
PHILIP M. CONDIT See biography above.
Director since 1998
Age 60
PATRICIA C. DUNN See biography above.
Director since 1998
Age 48
CARLETON S. FIORINA See biography above.
Director since 1999
Age 47
14
SAM GINN See biography above.
Director since 1996
Age 64
RICHARD A. HACKBORN See biography above.
Director since 1992
Age 64
GEORGE A. KEYWORTH II See biography above.
Director since 1986
Age 62
ROBERT E. KNOWLING, JR. See biography above.
Director Since 2000
Age 46
ROBERT P. WAYMAN Mr. Wayman has served as Executive Vice President, Finance
Director since 1993 and Administration since December 1992 and Chief Financial
Age 56 Officer of HP since 1984. Mr. Wayman is a director of CNF
Transportation, Inc., Sybase Inc., and Portal Software, Inc.
He also serves as a member of the Kellogg Advisory Board to
Northwestern University School of Business and is a director
of the Private Sector Council and Cultural Initiatives
Silicon Valley.
15
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT AUDITORS
The Audit Committee of the Board has appointed Ernst & Young LLP as
independent auditors to audit HP's consolidated financial statements for the
fiscal year ending October 31, 2002. During fiscal 2001, Ernst & Young served as
HP's independent auditors and also provided certain tax and accounting services.
Representatives of Ernst & Young are expected to attend the meeting, where they
are expected to be available to respond to questions and, if they desire, to
make a statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS HP'S INDEPENDENT AUDITORS FOR THE 2002
FISCAL YEAR. If the appointment is not ratified, the Board will consider whether
it should select other independent auditors.
VOTE REQUIRED
Ratification of the appointment of Ernst & Young LLP as HP's independent
auditors for fiscal 2002 requires the affirmative vote of a majority of the
shares of HP common stock present in person or represented by proxy and entitled
to be voted at the meeting.
16
PROPOSAL NO. 3
SHAREOWNER PROPOSAL ENTITLED "CHINA BUSINESS PRINCIPLES"
Occasionally, we receive suggestions from our shareowners. Some are received
as formal shareowner proposals. All are given careful attention by HP and, in
the past, management has adopted a number of suggestions.
The author and proponent of the following shareowner proposal is John C.
Harrington, P.O. Box 6108, Napa, California 94581-1108. Mr. Harrington has
requested the Company to include the following proposal and supporting statement
in its proxy statement for the 2002 Annual Meeting of Shareowners, and if
properly presented this proposal will be voted on at the annual meeting.
Mr. Harrington beneficially owns 200 shares of HP's common stock. The shareowner
proposal is quoted verbatim in italics, below.
Management of HP disagrees strongly with the adoption of the resolution
proposed below and asks shareowners to read through Management's response, which
follows the shareowner proposal.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL NO. 3.
VOTE REQUIRED
Approval of the shareowner proposal requires the affirmative vote of a
majority of the shares of HP common stock present in person or represented by
proxy and entitled to be voted on the proposal at the annual meeting.
PROPONENT'S PROPOSAL:
"CHINA BUSINESS PRINCIPLES
WHEREAS: OUR COMPANY'S BUSINESS PRACTICES IN CHINA RESPECT HUMAN AND LABOR
RIGHTS OF WORKERS. THE ELEVEN PRINCIPLES BELOW WERE DESIGNED TO COMMIT A COMPANY
TO A WIDELY ACCEPTED AND THOROUGH SET OF HUMAN AND LABOR RIGHTS STANDARDS FOR
CHINA. THEY WERE DEFINED BY THE INTERNATIONAL LABOR ORGANIZATION, AND THE UNITED
NATIONS COVENANTS ON ECONOMIC, SOCIAL AND CULTURAL RIGHTS, AND CIVIL, AND
POLITICAL RIGHTS. THEY HAVE BEEN SIGNED BY THE CHINESE GOVERNMENT AND CHINA'S
NATIONAL LAWS.
(1) NO GOODS OR PRODUCTS PRODUCED WITHIN OUR COMPANY'S FACILITIES OR THOSE
OF SUPPLIERS SHALL BE MANUFACTURED BY BONDED LABOR, FORCED LABOR, WITHIN PRISON
CAMPS OR AS PART OF REFORM-THROUGH-LABOR OR REEDUCATION-THROUGH-LABOR PROGRAMS.
(2) OUR FACILITIES AND SUPPLIERS SHALL ADHERE TO WAGES THAT MEET WORKERS'
BASIC NEEDS, FAIR AND DECENT WORKING HOURS, AND AT A MINIMUM, TO THE WAGE AND
HOUR GUIDELINES PROVIDED BY CHINA'S NATIONAL LABOR LAWS.
(3) OUR FACILITIES AND SUPPLIERS SHALL PROHIBIT THE USE OF CORPORAL
PUNISHMENT, ANY PHYSICAL, SEXUAL OR VERBAL ABUSE OR HARASSMENT OF WORKERS.
(4) OUR FACILITIES AND SUPPLIERS SHALL USE PRODUCTION METHODS THAT DO NOT
NEGATIVELY AFFECT THE WORKER'S OCCUPATIONAL SAFETY AND HEALTH.
(5) OUR FACILITIES AND SUPPLIERS SHALL NOT CALL ON POLICE OR MILITARY TO
ENTER THEIR PREMISES TO PREVENT WORKERS FROM EXERCISING THEIR RIGHTS.
(6) WE SHALL UNDERTAKE TO PROMOTE THE FOLLOWING FREEDOMS AMONG OUR EMPLOYEES
AND THE EMPLOYEES OF OUR SUPPLIERS: FREEDOM OF ASSOCIATION AND ASSEMBLY,
INCLUDING THE RIGHTS TO FORM UNIONS AND BARGAIN COLLECTIVELY; FREEDOM OF
EXPRESSION, AND FREEDOM FROM ARBITRARY ARREST OR DETENTION.
(7) COMPANY EMPLOYEES AND THOSE OF OUR SUPPLIERS SHALL NOT FACE
DISCRIMINATION IN HIRING, REMUNERATION OR PROMOTION BASED ON AGE, GENDER,
MARITAL STATUS, PREGNANCY, ETHNICITY OR REGION OF ORIGIN.
(8) COMPANY EMPLOYEES AND THOSE OF OUR SUPPLIERS SHALL NOT FACE
DISCRIMINATION IN HIRING, REMUNERATION OR PROMOTION BASED ON LABOR, POLITICAL OR
RELIGIOUS ACTIVITY, OR ON INVOLVEMENT IN DEMONSTRATIONS, PAST RECORDS OF ARRESTS
OR INTERNAL EXILE FOR PEACEFUL PROTEST, OR MEMBERSHIP IN ORGANIZATIONS COMMITTED
TO NON-VIOLENT SOCIAL OR POLITICAL CHANGE.
(9) OUR FACILITIES AND SUPPLIERS SHALL USE ENVIRONMENTALLY RESPONSIBLE
METHODS OF PRODUCTION THAT
17
HAVE MINIMUM ADVERSE IMPACT ON LAND, AIR AND WATER QUALITY.
(10) OUR FACILITIES AND SUPPLIERS SHALL PROHIBIT CHILD LABOR, AT A MINIMUM
COMPLY WITH GUIDELINES ON MINIMUM AGE FOR EMPLOYMENT WITHIN CHINA'S NATIONAL
LABOR LAWS.
(11) WE WILL ISSUE ANNUAL STATEMENTS TO THE HUMAN RIGHTS FOR WORKERS IN
CHINA WORKING GROUP DETAILING OUR EFFORTS TO UPHOLD THESE PRINCIPLES AND TO
PROMOTE THESE BASIC FREEDOMS.
RESOLVED: STOCKHOLDERS REQUEST THE BOARD OF DIRECTORS TO MAKE ALL POSSIBLE
LAWFUL EFFORTS TO IMPLEMENT AND/OR INCREASE ACTIVITY ON EACH OF THE PRINCIPLES
NAMED ABOVE IN THE PEOPLE'S REPUBLIC OF CHINA.
SUPPORTING STATEMENT: AS U.S. COMPANIES IMPORT MORE GOODS, CONSUMER AND
SHAREHOLDER CONCERN IS GROWING ABOUT WORKING CONDITIONS IN CHINA THAT FALL BELOW
BASIC STANDARDS OF FAIR AND HUMANE TREATMENT. WE HOPE THAT OUR COMPANY CAN PROVE
TO BE A LEADER IN ITS INDUSTRY AND EMBRACE THESE PRINCIPLES."
MANAGEMENT STATEMENT IN OPPOSITION TO SHAREOWNER PROPOSAL
More than 90% of shares voted on a substantially identical proposal from
Mr. Harrington at the annual meeting last year were voted against the proposal;
however, the proponent may submit it again because the proposal received more
than 3% of the vote. While HP continues to demonstrate its commitment to the
general intent of the China Business Principles, HP opposes the adoption of this
shareowner proposal as it interferes with HP's ability to manage complex and
sensitive issues related to its operations in China. Today, as HP's business
operations have become more dependent upon relationships with suppliers and
other third parties, the situation has become more complex, but HP's commitment
to labor and environmental issues remains very much intact. Adopting the China
Business Principles, which requires the release of an annual statement on the
Company's efforts to uphold the principles, will impair HP's ability to manage
its operations in China and to control the scope and timing of the disclosure of
sensitive business information. After careful review of these principles and
HP's policies and practices in China, we believe that the proposal is
unnecessary, vague, beyond HP's ability to implement and costly, as described
below. HP also opposes the proposal because it would grant undue influence to
individuals or groups that have no major stake in HP's business and no
governmental legitimacy.
The China Business Principles are unnecessary to the extent that they
address issues covered by labor and environmental laws in China and call for
implementing policies HP has already implemented worldwide, including in China.
We adhere to hundreds of local, state, federal and international laws and
regulations on labor and environmental matters. Our suppliers in China are also
subject to local laws on labor and environmental issues. The China Business
Principles do not supersede any of these laws or regulations. In addition, HP
has numerous policies in place to maintain a work environment free from
harassment and discrimination and to insist that employees be treated with
dignity, respect and courtesy. HP's operations worldwide are also subject to
corporate employee, health and safety standards that in many cases are more
stringent than local law. Thus, HP already implements many of the policies
advocated by the China Business Principles in adhering to applicable laws and
the Company's internal policies.
Furthermore, the China Business Principles are unnecessary to the extent
that they attempt to redress practices that are more likely to be associated
with other industries. HP produces personal computers and printers and related
products at its facilities in China, and does not manufacture goods and products
using forced labor, child labor, etc. Because of the high-skilled nature of the
work performed, HP's wages significantly exceed the local averages in China.
The reports requested in the China Business Principles would require
management to release sensitive labor and environmental compliance information
and would be difficult and costly to prepare because the language in the
proposal is vague and the standards advocated are not clear. For example, the
proposal calls for wages that meet workers' "basic needs," using production
methods that do not "negatively affect" worker health and have "minimum adverse
impact" on
18
land, air and water quality, and "promoting" enumerated freedoms. Under the
circumstances, preparing the annual statement will be difficult, time consuming
and costly. In addition, the great diversity of relationships that HP has with
its suppliers in China, when combined with the breadth of the China Business
Principles, would require HP to generate a set of very complex and detailed
reports.
In some cases, the China Business Principles are beyond HP's ability to
implement as they relate to functions of various Chinese governments, such as
prohibiting police or military presence and promoting freedom from arbitrary
arrest or detention.
HP cannot grant undue influence to individuals or groups that have no major
stake in HP's business and no governmental legitimacy. The areas being addressed
by this proposal are very sensitive and involve complex issues. Submitting
statements to the Human Rights for Workers in China Working Group or any other
third party non-governmental organization would impair the ability of HP's
management to manage operations in China and to control the scope and timing of
disclosures of sensitive business information.
Promotion of fair labor and environmental practices is a key component of
HP's citizenship objectives, and we continue to build a strong record on these
issues. Adoption of the China Business Principles would not improve our ability
to address our responsibilities relating to our employees and operations in
China, and forced disclosure of HP's policies and standards to a third party may
actually harm HP's ability to address these issues constructively. The new data
gathering and reporting requirements would also be very costly in terms of both
time and money.
For the reasons described above, we recommend a vote AGAINST this proposal.
19
PROPOSAL NO. 4
SHAREOWNER PROPOSAL ENTITLED "REPORT ON PRODUCER RESPONSIBILITY FOR PRODUCT
TAKE-BACK AND RECYCLING"
HP also has received a shareowner proposal from the Calvert Social
Investment Fund Equity Portfolio, the Calvert Social Investment Fund Managed
Index Portfolio and the Calvert Social Index Portfolio (collectively, the
"Calvert Funds"), 4550 Montgomery Avenue, Bethesda, Maryland 20814. The Calvert
Funds have requested the Company include the following proposal and supporting
statement in its proxy statement for the 2002 Annual Meeting of Shareowners, and
if properly presented this proposal will be voted on at the annual meeting. The
Calvert Funds beneficially own approximately 112,800 shares of HP's common
stock. The shareowner proposal is quoted verbatim in italics, below.
Management of HP disagrees strongly with the adoption of the resolution
proposed below and asks shareowners to read through Management's response, which
follows the shareowner proposal.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL NO. 4.
VOTE REQUIRED
Approval of the shareowner proposal requires the affirmative vote of a
majority of the shares of HP common stock present in person or represented by
proxy and entitled to be voted on the proposal at the annual meeting.
PROPONENTS' PROPOSAL:
"REPORT ON PRODUCER RESPONSIBILITY FOR PRODUCT TAKE-BACK AND RECYCLING
WHEREAS HEWLETT-PACKARD CO. EMPHASIZES ITS COMMITMENT TO ENVIRONMENTAL
LEADERSHIP. YET THE TECHNICAL INNOVATION RESPONSIBLE FOR OUR LEADERSHIP IN
DESIGNING AND MARKETING COMPUTERS HAS NOT YET EXTENDED TO FULL RESPONSIBILITY
FOR MINIMIZING THE ENVIRONMENTAL IMPACTS OF PRODUCTS DURING THEIR MANUFACTURE,
USE AND END-OF-LIFE.
THE MANUFACTURE OF ONE COMPUTER WORK STATION CAN REQUIRE MORE THAN 700
CHEMICAL COMPOUNDS, ABOUT HALF OF WHICH ARE HAZARDOUS, INCLUDING ARSENIC,
BROMINATED FLAME-RETARDANTS, CADMIUM, HEXAVALENT CHROMIUM, LEAD, AND MERCURY.
CATHODE RAY TUBES IN MONITORS CAN CONTAIN SEVERAL POUNDS OF LEAD, AND HAVE BEEN
IDENTIFIED AS HAZARDOUS WASTE AND BANNED FROM LANDFILLS IN CALIFORNIA. FOR THESE
REASONS IT IS IMPORTANT TO CONSIDER THE MANAGEMENT OF DISCARDED PRODUCTS.
CURRENTLY, MOST COMPUTERS ARE NOT RECYCLED. A STUDY BY THE NATIONAL SAFETY
COUNCIL CONCLUDED THAT 20 MILLION COMPUTERS BECAME OBSOLETE IN 1998 AND
ESTIMATED THAT ONLY 11% WERE RECYCLED. MORE THAN 40 MILLION COMPUTERS ARE
EXPECTED TO BECOME OBSOLETE IN 2001.
COMPANIES COMMITTED TO ENVIRONMENTAL LEADERSHIP SHOULD HELP TO FIND
SOLUTIONS FOR THE GROWING PROBLEMS CREATED BY ELECTRONIC WASTE.
AS A GLOBAL COMPANY, WE MUST PREPARE TO COMPLY WITH THE EUROPEAN UNION'S NEW
LAW MANDATING EXTENDED PRODUCER RESPONSIBILITY. THIS LAW REQUIRES MANUFACTURERS
OF ELECTRONIC EQUIPMENT MARKETED IN EUROPE TO REDUCE USE OF HAZARDOUS COMPONENTS
AND PAY FOR RECYCLING OF THEIR PRODUCTS.
HEWLETT-PACKARD TAKES SOME PRODUCTS BACK IF INDIVIDUAL CUSTOMERS PAY A FEE
FOR IT. WHILE TAKE-BACK IS LAUDABLE, WE BELIEVE THE FEES PROVIDE A SIGNIFICANT
DISINCENTIVE FOR CONSUMERS TO RECYCLE.
PRODUCER RESPONSIBILITY CREATES A POWERFUL INCENTIVE TO DESIGN PRODUCTS THAT
ARE ENVIRONMENTALLY PREFERABLE, EASIER TO UPGRADE, DISASSEMBLE AND RECYCLE.
INNOVATION AND COMPETITIVENESS ARE KEY TO SOLVING THE CHALLENGES POSED BY TOXIC
COMPONENTS AND END-OF-LIFE MANAGEMENT OF OUR PRODUCTS.
WE BELIEVE OUR COMPANY CAN AVOID FINANCIAL, LEGAL AND REPUTATIONAL RISK,
GAIN COMPETITIVE ADVANTAGE, AND BUILD BRAND NAME IN THE MARKETPLACE BY ASSUMING
RESPONSIBILITY FOR ITS PRODUCTS.
BE IT RESOLVED THAT SHAREOWNERS OF HEWLETT-PACKARD REQUEST THAT THE BOARD OF
DIRECTORS PREPARE A REPORT, AT REASONABLE COST, ON THE FEASIBILITY OF
20
ADOPTING A POLICY, IMPLEMENTING PROGRAMS, AND AUDITING PROGRESS OF PRODUCER
RESPONSIBILITY FOR THEIR PRODUCTS. THE COMPANY AGREES TO RELEASE A REPORT WITHIN
SIX MONTHS OF THE ANNUAL MEETING OF SHAREHOLDERS.
SUPPORTING STATEMENT
THE REPORT SHOULD STUDY THE FEASIBILITY OF TAKING FINANCIAL AND/OR PHYSICAL
RESPONSIBILITY FOR PRODUCTS THROUGHOUT THEIR LIFE CYCLE. IT SHOULD INCLUDE A
COMMITMENT TO SETTING GOALS FOR REDUCED USE OF HAZARDOUS MATERIALS IN
MANUFACTURING; AND FOR COLLECTION, DETOXIFICATION, DISASSEMBLY AND RECYCLING OF
DISCARDED EQUIPMENT TO THE HIGHEST DEGREE PRACTICABLE. THE REPORT SHOULD DISCUSS
MEASURES BEING TAKEN TO ENSURE THAT RECYCLING IS ACCOMPLISHED IN A MANNER THAT
MINIMIZES RISKS TO WORKERS; ASSESS OUR COMPANY'S LIABILITY IF OUR PRODUCTS ARE
DISCOVERED TO HAVE LEACHED TOXIC CONTAMINANTS INTO GROUNDWATER IN A MANNER THAT
HARMS HUMAN HEALTH; AND ASSESS THE IMPACT ON OUR COMPANY'S REPUTATION IF WE DO
NOT ESTABLISH COMPREHENSIVE PRODUCER RESPONSIBILITY FOR OUR PRODUCTS."
MANAGEMENT STATEMENT IN OPPOSITION TO SHAREOWNER PROPOSAL
Our substantial record of achievements in the environmental area
demonstrates HP's commitment to environmental issues. While sharing the
environmental concerns of the proponent and agreeing that product stewardship is
a priority for the Company, HP opposes publishing a report on the feasibility of
adopting a policy for producer responsibility, product take-back and recycling.
For many years, HP has evaluated policies, logistics and financial issues
associated with these, among other, environmental issues, and so the report
sought in the resolution would be of little added value. Since HP continually
considers the financial and competitive implications of expanding and revising
our environmental programs, a public report on these issues would detract from
these efforts and could impair our competitive advantage because it essentially
requires public disclosure of HP's business plans and strategies. We believe it
would be detrimental to disclose these plans in a public report. HP will
continue to evaluate and implement initiatives aimed at improving the
environmental profile of our products; however, we oppose the report requested
by the proponent because we believe HP is already addressing these issues.
HP's environmental goals as set out in our corporate environmental policy
are to provide products and services that are environmentally sound throughout
their lifecycles and to conduct our operations worldwide in an environmentally
responsible manner. It also includes a commitment to product stewardship, i.e.,
to "[d]esign our products and services to be safe to use, to minimize use of
hazardous materials, energy and other resources, and to enable recycling or
reuse."
HP operates large-scale recycling facilities that refurbish and recycle
millions of pounds of used computer products each month. For example, HP's
recycling center in Roseville, California, recycles approximately 4 million
pounds of material each month, with approximately 40 percent of the materials
being reused as whole products or component parts and 60 percent being recovered
as commodity materials. These recycling facilities are operated in an
environmentally sound manner to conserve resources, reduce wastes and minimize
risks to workers. HP has developed these facilities with strategic partners and
uses selected vendors to ensure economical and environmentally sound management
of end-of-life electronics hardware. Our recycling processes enable us to turn
unwanted products into valuable commodities that can be reused to produce new
products, thus conserving natural resources.
In countries with laws mandating the recycling of end-of-life computer
hardware, HP complies with these legal requirements. HP also has launched
programs to provide customers with the opportunity to recycle the computer
hardware products they no longer wish to use. For example, in May 2001 HP
announced our hardware recycling service that provides customers in the U.S.
with an accessible easy-to-use program for recycling their used computers and
peripherals (whether HP brand products or not).
HP is actively working to assist in the development of appropriate recycling
policies and programs around the world. HP participates in technical conferences
and other efforts to share best practices, provide data, and shape public
policies
21
to facilitate increased recycling of computer products and peripherals. In
addition, HP actively supports pilot projects to assist states and localities in
building an efficient recycling infrastructure. In short, HP is widely
recognized as a leader and a responsible corporate citizen in this arena.
HP also has a longstanding "design for the environment" program that seeks
to reduce adverse environmental impacts of our products through innovative
product design. Environmental stewards identify design changes that may reduce
the environmental impact throughout the product's life cycle. This program has
resulted in many of our products being designed to reduce and/or eliminate the
presence of substances of concern and to be easier to disassemble and recycle.
For example, this program has allowed HP to reduce the number and types of
materials used in some models and standardize the types of plastic resins used
wherever possible.
One key priority of HP's design for the environment program is energy
efficiency. In order to reduce the energy consumption associated with the use of
our products, many HP products are designed with a power management feature to
automatically consume less energy during periods of inactivity. HP has over
three hundred products--including computers, printers, scanners, and
multifunction devices--that meet the specifications established under the ENERGY
STAR-Registered Trademark-(1) program of the U.S. Environmental Protection
Agency. Numerous HP products also have obtained certification under eco-labels
worldwide, and many of these labels consider a wide variety of environmental
attributes of products.
HP has for many years evaluated the environmental, policy, logistical and
financial issues associated with producer responsibility, product take-back and
recycling. The report sought in the resolution would be of little added value.
For the reasons described above, we recommend a vote AGAINST this proposal.
------------------------
(1) ENERGY STAR-Registered Trademark- is a U.S. registered service mark of the
U.S. Environmental Protection Agency.
22
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 18, 2002 concerning:
- The David and Lucile Packard Foundation, a beneficial owner of more than
5% of HP's common stock, as well as Mr. Walter B. Hewlett and Mr. Edwin E.
van Bronkhorst;
- beneficial ownership by all other current HP directors, director nominees
and the named executive officers set forth in the Summary Compensation
table on page 28; and
- beneficial ownership by all current HP directors and HP executive officers
as a group.
The information provided in the table is based on the Company's records,
information filed with the Securities and Exchange Commission and information
provided to the Company, except where otherwise noted.
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 and a related charitable institution, and (2) The William R. Hewlett
Revocable Trust, 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 May 17, 2002 (60 days after the record date of March 18, 2002)
through the exercise of any stock option or other right. Unless otherwise
indicated, each person has sole voting and investment power (or shares such
powers with his or her spouse) with respect to the shares set forth in the
following table.
BENEFICIAL OWNERSHIP TABLE
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) CLASS
------------------------------------------------------ ---------------------------- ----------
THE DAVID AND LUCILE PACKARD FOUNDATION (THE "PACKARD
FOUNDATION")
300 Second Street, Suite 200
Los Altos, CA 94022................................. 201,279,656 10.4%
THE PACKARD HUMANITIES INSTITUTE ("PHI")(3)
300 Second Street, Suite 201
Los Altos, CA 94022................................. 25,760,000 1.3%
THE WILLIAM R. HEWLETT REVOCABLE TRUST DATED FEBRUARY
3, 1995 (THE "HEWLETT TRUST")(4)
c/o Los Trancos Management, LLC
1501 Page Mill Road, MS 3U-10
Palo Alto, CA 94304................................. 72,802,148 3.7%
THE WILLIAM AND FLORA HEWLETT FOUNDATION (THE "HEWLETT
FOUNDATION")(5)
525 Middlefield Road, Suite 200
Menlo Park, CA 94025................................ 35,683,840 1.8%
23
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) CLASS
------------------------------------------------------ ---------------------------- ----------
WALTER B. HEWLETT(6)(7)
c/o Los Trancos Management, LLC
1501 Page Mill Road, MS 3U-10
Palo Alto, CA 94304................................. 401,896 Direct
37,905 Vested Options
2,506,645 Indirect(8) *(1)
-----------
2,946,446
EDWIN E. VAN BRONKHORST(7)(9)
c/o Los Trancos Management, LLC
1501 Page Mill Road, MS 3U-10
Palo Alto, CA 94304................................. 176 Direct
5,887,160 Indirect(10) *(1)
-----------
5,887,336
ALL OTHER DIRECTORS, DIRECTOR NOMINEES AND NAMED
EXECUTIVE OFFICERS NOT LISTED ABOVE:
LAWRENCE T. BABBIO, JR.(11)........................... 0 *
MICHAEL D. CAPELLAS(11)............................... 0 *
PHILLIP M. CONDIT..................................... 10,023 Direct
10,000 Vested Options *
-----------
20,023
PATRICIA C. DUNN...................................... 32,047 Direct
10,000 Vested options *
-----------
42,047
CARLETON S. FIORINA................................... 407,629 Direct
1,657,826 Vested Options *
-----------
2,065,455
SAM GINN.............................................. 12,167 Direct
21,092 Vested Options *
-----------
33,259
RICHARD A. HACKBORN................................... 17,126 Direct
10,000 Vested Options *
-----------
27,126
GEORGE A. KEYWORTH II................................. 8,080 Direct
32,665 Vested Options *
-----------
40,745
ROBERT E. KNOWLING, JR................................ 4,000 Direct
17,707 Vested Options *
-----------
21,707
SANFORD M. LITVACK(11)................................ 390 Direct *
THOMAS J. PERKINS(11)................................. 0 *
24
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) CLASS
------------------------------------------------------ ---------------------------- ----------
LUCILLE S. SALHANY(11)................................ 0 *
ROBERT P. WAYMAN...................................... 299,877 Direct
1,124,152 Vested Options
120 Indirect(12) *
-----------
1,424,149
PRADEEP JOTWANI....................................... 34,857 Direct
203,024 Vested Options *
-----------
237,881
ANN M. LIVERMORE...................................... 121,698 Direct
769,396 Vested Options *
-----------
891,094
DUANE E. ZITZNER...................................... 98,016 Direct
855,401 Vested Options *
-----------
953,417
ALL CURRENT DIRECTORS AND EXECUTIVE OFFICERS AS A
GROUP (19 PERSONS).................................. 82,970,533 (13)(14) 4.3%
------------------------
* 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
Mr. Walter B. Hewlett and Mr. Edwin E. van Bronkhorst. Based on the total
of 1,943,724,761 shares outstanding as of March 18, 2002, Mr. Hewlett and
Mr. van Bronkhorst beneficially own 3.9% and 4.0%, respectively. 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
family. 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 PHI, the Hewlett Trust or the Hewlett Foundation.
(2) Pursuant to Rule 13d-3(d)(1) of the Securities Exchange Act of 1934, as
amended, "Vested Options" are options that may be exercised as of May 17,
2002.
(3) The directors of PHI include Mr. Hewlett (who is currently a director of
HP) and Mr. 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.
Furthermore, Mr. Hewlett and Mr. van Bronkhorst indicated in their
preliminary proxy statement filed January 14, 2002 with the Securities and
Exchange Commission that they have irrevocably agreed to abstain from
voting as directors of the PHI with respect to the voting or disposition of
such shares until the later of (i) 90 days after November 13, 2001, or (ii)
the date on which the Compaq merger terminates or closes.
(4) Mr. Hewlett and Mr. van Bronkhorst are co-trustees of the Hewlett Trust. As
co-trustees of the Hewlett Trust, Mr. 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;
25
however, Mr. 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.
(5) Mr. Hewlett is a director of the Hewlett Foundation; however, he does not
have voting or investment power over the Hewlett Foundation shares as
voting and dispositive power are exercised by an independent stock
committee, and Mr. Hewlett is not a member of the independent stock
committee. Mr. Hewlett disclaims any beneficial interest in the Hewlett
Foundation shares because he has no economic interest in any of these
shares.
(6) Son of the late Mr. William R. Hewlett, director of HP, PHI and the Hewlett
Foundation, co-trustee of the Hewlett Trust and co-executor of the estate
of the late Mr. William R. Hewlett.
(7) In their Schedule 13D filed with the Securities and Exchange Commission on
November 14, 2001, Mr. Hewlett and Mr. van Bronkhorst, Ms. Eleanor H. Gimon
and Ms. Mary Hewlett Jaffe acknowledged that publicly stating their
opposition to the Compaq merger could be viewed as holding shares of HP
stock with the purpose or effect of changing or influencing control of HP
and that issuing a press release on November 6, 2001 announcing their
intent to vote against the proposed Compaq merger could lead to an
allegation that a "group" has been formed within the meaning of
Rule 13(d)-5(b)(1) of the Securities Exchange Act of 1934, as amended. The
filing specifically states that the reporting persons do not concede that
such a "group" has been formed.
(8) Indirect holdings include 17,240 shares held by Mr. Hewlett as custodian
for his children. Mr. Hewlett disclaims any beneficial interest in all of
these shares. Indirect holdings also include 768,520 shares held by the
Public Policy Institute of California ("PPIC"). Mr. Hewlett also disclaims
beneficial ownership of these shares because, while he shares voting and
dispositive authority with the other directors of the PPIC, he has no
economic interest in such shares. Indirect holdings also include 1,720,885
shares held by the estate of the late Mr. William R. Hewlett. Mr. Hewlett
also disclaims any interest in these shares because, while he and Mr. van
Bronkhorst share voting and investment power over such shares, they have no
economic interest in any of them.
(9) Director of PHI, co-executor of the estate of the late William R. Hewlett
and trustee of certain Hewlett family trusts.
(10) Indirect holdings include 1,601,875 shares held in a trust for Ms. Mary
Hewlett Jaffe and 398,400 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. Indirect
holdings also include 1,720,885 shares held by the estate of the late
Mr. William R. Hewlett; however, Mr. van Bronkhorst disclaims any
beneficial interest in such shares because, while Mr. van Bronkhorst and
Mr. Hewlett share voting and investment power over such shares, they have
no economic interest in any of them. Indirect holdings also include
2,166,000 shares held in The Flora L. Hewlett Trust for the grandchildren
of the late Mr. William R. Hewlett. Mr. van Bronkhorst is a trustee with
shared voting and investment power over such shares; however, Mr. van
Bronkhorst disclaims any beneficial interest in all of these shares because
he has no economic interest in any of these shares.
(11) Mr. Babbio, Mr. Capellas, Mr. Litvack, Mr. Perkins and Ms. Salhany will be
voted upon for election to the Board at the annual meeting only if the
Compaq merger is completed prior to the annual meeting.
(12) Includes 120 shares held by Mr. Wayman as custodian for his son.
(13) Includes an aggregate of 5,932,780 shares that the current directors and
executive officers have the right to acquire as of May 17, 2002 through the
exercise of options.
(14) Includes an aggregate of 81,241,693 shares held by current directors and
executive officers in fiduciary or beneficial capacities.
26
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, 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 2001, its directors, executive officers and 10% shareowners
complied with all Section 16(a) filing requirements with the following
exceptions: three late reports filed by Susan D. Bowick regarding a sale of
shares held in her brokerage account and two sales of shares from her account in
the Tax Saving Capital Accumulation Plan, a 401(k) plan, and two late reports
filed by Duane Zitzner in connection with the sale of shares held in his
brokerage account in fiscal 2000. In making this statement, HP has relied upon
examination of the copies of Forms 3, 4 and 5, and amendments thereto, provided
to the Company and the written representations of its directors, executive
officers and 10% shareowners.
27
EXECUTIVE COMPENSATION
The following table discloses compensation received by HP's Chief Executive
Officer during fiscal 2001 and HP's four other most highly paid executive
officers ("named executive officers") during fiscal 2001 as well as their
compensation for each of the fiscal years ending October 31, 2000 and
October 31, 1999.
Unless otherwise indicated, option, restricted stock and restricted stock
unit amounts outstanding on May 2, 2000 (the record date with respect to the
distribution of Agilent Technologies, Inc. ("Agilent Technologies") shares) have
been adjusted in order to restore their intrinsic value for the impact of HP's
common stock market value from the Agilent Technologies spin-off. Holders of
options that were exercised and shares of restricted stock that were released
prior to May 2, 2000 received shares of Agilent Technologies in connection with
the spin-off. Although adjustments were made to the number of shares of
restricted stock and restricted stock units as described above, the dollar
values of restricted stock and restricted stock unit awards represent the dollar
value on the date originally granted in order to reflect the intrinsic value of
the compensation received at the time of grant. All option, restricted stock and
restricted stock unit amounts have also been adjusted to reflect the two-for-one
stock split in the form of a stock dividend effective October 27, 2000.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
------------------------------------------------
Annual Compensation Awards Payouts
--------------------------------------- ------------------------------------ ---------
(a) (b) (c) (d) (e) (f) (g) (h)
Securities
Other Annual Underlying LTIP
Name and Principal Bonus Compensation Restricted Options/ Payouts
Position Year Salary ($) ($)(1) ($)(2) Stock Award(s) ($)(3) SARs(#) ($)(4)
------------------ -------- ---------- ---------- ------------- ----------------------- ---------- ---------
Carleton S. 2001 $1,000,000 $ 0 $ 74,811 $ 0 1,000,000 N/A
Fiorina ............ 2000 1,000,000 1,766,250 205,113 0 1,280,042 N/A
Chairman and Chief 1999 287,933 366,438 * 65,557,400 1,535,810 N/A
Executive Officer
Robert P. Wayman ..... 2001 925,000 0 * 0 350,000 $(682,520)
Executive Vice 2000 845,250 402,633 * 41,048 358,576 450,057
President, 1999 930,000 471,590 * 4,208,840 294,362 0
Chief Financial
Officer
and Director
Duane E. Zitzner ..... 2001 725,000 0 * 0 350,000 (303,349)
President-- 2000 575,000 273,900 * 26,522 1,015,902 N/A
Computing Systems 1999 449,500 364,991 * 1,428,002 255,968 N/A
Ann M. Livermore ..... 2001 700,000 0 * 0 350,000 (530,875)
President--HP 2000 527,084 273,900 * 24,540 785,532 N/A
Services 1999 499,313 187,721 * 4,713,851 255,968 N/A
Pradeep Jotwani ...... 2001 625,000 0 * 0 300,000 N/A
President--Consumer 2000 353,036 122,424 * 16,347 251,092 N/A
Business 1999 337,848 147,502 * 443,219 47,354 N/A
Organization
(a) (i)
All Other
Name and Principal Compensation
Position ($)(5)(6)
------------------ -------------
Carleton S. $ 173,262
Fiorina ............ 755,266
Chairman and Chief 3,551,678
Executive Officer
Robert P. Wayman ..... 6,885
Executive Vice 6,885
President, 264,384
Chief Financial
Officer
and Director
Duane E. Zitzner ..... 6,085
President-- 6,885
Computing Systems 6,485
Ann M. Livermore ..... 6,085
President--HP 6,085
Services 5,799
Pradeep Jotwani ...... 6,885
President--Consumer 6,885
Business 6,485
Organization
------------------------------
* Does not exceed reporting thresholds for perquisites and other personal
benefits.
28
(1) The amounts shown in this column reflect payments under HP's Executive
Pay-for-Results Plan, as amended and restated as of November 1, 2000 (the
"Executive Pay-for-Results Plan," which term includes its predecessors, as
applicable) and HP's prior cash profit-sharing plan. All HP officers subject
to Section 162(m) of the Internal Revenue Code of 1986, as amended, and
selected other employees were eligible to participate in the Executive
Pay-for-Results Plan. During the fiscal years shown, all of the named
executive officers participated in the Executive Pay-for-Results Plan.
The Executive Pay-for-Results Plan permits the Compensation Committee to
designate a portion of the annual cash compensation planned for certain
executive officers as variable pay. Under the Executive Pay-for-Results
Plan, the percentage of the targeted variable amount to be paid is dependent
upon the degree to which performance metrics defined on a semi-annual basis
were met. In November 2000 and May 2001, the Compensation Committee
established the performance metrics for the first and second halves of
fiscal 2001, respectively. These metrics varied for each participant, but at
least a portion of each person's pay was dependent on Company-wide revenue
and net profit metrics. For fiscal 2001, the Compensation Committee
determined that the variable compensation for the named executive officers
would be zero for both periods.
For fiscal 2000, pursuant to the terms of her employment contract,
Ms. Fiorina was entitled to receive a minimum guaranteed bonus of
$1,250,000. During the second half of fiscal 2000, Ms. Fiorina received a
prorated portion of the minimum annual guaranteed bonus, or $625,000, in
accordance with normal payroll practices. In light of the Company falling
short of meeting its net profit objectives for the second half of fiscal
2000, resulting in no payout to the other named executive officers and
Executive Council members, Ms. Fiorina initiated a dialogue with the
Compensation Committee and recommended that her guaranteed bonus for the
second half of fiscal 2000 be zero. The Compensation Committee agreed with
Ms. Fiorina's recommendation and modified Ms. Fiorina's fiscal 2001 bonus
opportunity by reducing it by $625,000. After it was determined there would
be no bonus payout to Ms. Fiorina for fiscal 2001, Ms. Fiorina paid the
Company an amount equal to the after-tax amount of her second half fiscal
2000 guaranteed bonus of $625,000. In the first half of fiscal 2000,
Ms. Fiorina received a short-term bonus of $1,141,250, as determined by the
Compensation Committee.
During fiscal 2000 and 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 that are not associated
with bonuses payable under the Executive Pay-for-Results Plan are payments
pursuant to HP's prior cash profit-sharing plan.
(2) For Ms. Fiorina, in fiscal 2001 this column includes $40,739 for incremental
cost of company-required personal use of corporate aircraft, $19,122 in tax
reimbursements and certain other perquisites, and in fiscal 2000 this column
includes $105,657 for incremental cost of company-required personal use of
corporate aircraft, $83,290 in tax reimbursements and certain other
perquisites. The other named executive officers did not have perquisites and
personal benefits in excess of reporting thresholds but did receive tax
reimbursements in the following amounts during fiscal 2001: Mr. Wayman,
$1,635, Mr. Zitzner, $1,635, Ms. Livermore, $1,635 and Mr. Jotwani, $1,635.
(3) The amounts disclosed in this column reflect for fiscal 2001, 2000, and 1999
the dollar values of (a) performance-based restricted stock granted to the
named executive officers other than Ms. Fiorina and Mr. Jotwani,
(b) time-based restricted stock granted to Ms. Livermore,
(c) employment/transition agreement awards granted to the named executive
officers in 1999, and (d) HP common stock that HP
29
contributed under its previous 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:
Performance-based Time-based Employment/Transition Employee Stock
Restricted Stock Restricted Stock Agreement Awards Purchase Plan
--------------------- ---------------------- -------------------------- --------------------
Name # Shares $ Amount # Shares $ Amount # Shares $ Amount # Shares $ Amount
---- -------- --------- -------- ---------- --------- ----------- -------- ---------
Carleton S. Fiorina
2001.................... 0 0 0 0 0 0 N/A N/A
2000.................... 0 0 0 0 0 0 0 0
1999.................... 0 0 0 0 1,486,336 $65,557,400 0 0
Robert P. Wayman
2001.................... 0 0 0 0 0 0 N/A N/A
2000.................... 0 0 0 0 0 0 842 $41,048
1999.................... 23,062 $532,710 0 0 98,148 3,614,754 1,896 61,376
Duane E. Zitzner
2001.................... 0 0 0 0 0 0 N/A N/A
2000.................... 0 0 0 0 0 0 544 26,522
1999.................... 10,250 236,760 0 0 31,622 1,164,649 818 26,593
Ann M. Livermore
2001.................... 0 0 0 0 0 0 N/A N/A
2000.................... 0 0 0 0 0 0 504 24,540
1999.................... 17,938 414,330 64,066 $2,699,250 42,590 1,568,596 980 31,675
Pradeep Jotwani
2001.................... 0 0 0 0 0 0 N/A N/A
2000.................... 0 0 0 0 0 0 309 16,347
1999.................... 0 0 0 0 9,020 425,654 426 17,565
As shown above, in connection with her employment as President and Chief
Executive Officer, during fiscal 1999 Ms. Fiorina received 743,168 shares of
restricted stock and 743,168 shares of restricted stock units that 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. Ms. Fiorina's employment arrangements are described more fully under
"Employment Contracts, Termination of Employment and Change-in-Control
Arrangements" below.
The performance-based restricted stock shown above vests 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, 2001 for
the performance-based restricted stock granted in fiscal 1999, and vests at
the end of the three-year period. Because the stated performance goals for
the three-year period ended October 31, 2001 were not met, 100% of the
performance based restricted stock granted in fiscal 1999 to each of
Mr. Wayman, Mr. Zitzner and Ms. Livermore was forfeited in fiscal 2001, as
further described in footnote 4 below. The time-based restricted stock
granted to Ms. Livermore are not subject to performance-based goals and vest
at the end of a three-year period. The employment/ transition agreement
awards granted to Mr. Wayman, Mr. Zitzner, Ms. Livermore and Mr. Jotwani in
1999 were based on a Transition Agreement with each named executive officer,
as described more fully in "Employment Contracts, Termination of Employment
and Change-in-Control Arrangements." 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 that was available to all HP employees until
its replacement in November 2000. Under the terms of the ESPP in effect
during the fiscal years shown, matching shares were provided that 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. The matching shares are reported for the year they were
allocated rather than in the year they vested. The ESPP was replaced with a
new employee stock purchase plan, known as the Share Ownership Plan,
effective November 1, 2000 that does not provide matching shares.
30
At the end of fiscal 2001, the aggregate share amount and dollar value of
the restricted stock (and, in the case of Ms. Fiorina, restricted stock
units) held by the named executive officers was as follows:
Number of Shares $ Value
---------------- -----------
Carleton S. Fiorina............................. 1,006,375 $16,937,291
Robert P. Wayman................................ 23,062 388,133
Duane E. Zitzner................................ 35,876 603,794
Ann M. Livermore................................ 120,442 2,027,039
Pradeep Jotwani................................. 0 0
The named executive officers receive non-preferential dividends on
restricted shares held by them.
(4) In November 2001, the Compensation Committee reviewed the results for the
three-year performance period ended October 31, 2001 and determined that the
performance objectives associated with performance-based restricted stock
granted in fiscal 1999 had not been met. Therefore, Mr. Wayman, Mr. Zitzner
and Ms. Livermore forfeited 100% of the performance-based restricted stock
granted to them in fiscal 1999. The value of the forfeiture is reflected in
the Summary Compensation table as a negative LTIP payout in fiscal 2001
based upon the value of HP stock as of the date of the grant in fiscal 1999
adjusted for the Agilent Technologies spinoff.
In November 2000, the Compensation Committee reviewed the results for the
three-year performance period ended October 31, 2000 and determined that the
performance objectives associated with performance-based restricted stock
granted in fiscal year 1998 had been exceeded. Therefore, a 25% bonus to the
restricted stock granted to Mr. Wayman in 1998 was made and the value of
this bonus is reflected in the LTIP Payouts column in fiscal 2000 based upon
the value of HP stock as of the date of the grant in fiscal 1998.
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 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.
31
(5) For the named executive officers, this column includes the following
payments by HP:
Term-
Life Accrued Sick Leave
401(k) Insurance Payment for
Name (TAXCAP) Payment Discontinued Plan
---- -------- --------- ------------------
Carleton S. Fiorina
2001.................................. $6,000 $85
2000.................................. 6,000 85
1999.................................. 0 24 N/A
Robert P. Wayman
2001.................................. 6,800 85
2000.................................. 6,800 85
1999.................................. 6,400 85 $257,899
Duane E. Zitzner
2001.................................. 6,000 85
2000.................................. 6,800 85
1999.................................. 6,400 85 N/A
Ann M. Livermore
2001.................................. 6,000 85
2000.................................. 6,000 85
1999.................................. 5,714 85 0
Pradeep Jotwani
2001.................................. 6,800 85
2000.................................. 6,800 85
1999.................................. 6,400 85 N/A
For Ms. Fiorina, this column also includes a sign-on bonus of $3,000,000
paid in fiscal 1999 and the following Company-sponsored relocation expenses:
$167,177 fiscal 2001 mortgage assistance, $218,104 fiscal 2000 relocation
tax reimbursement, $203,520 fiscal 2000 mortgage assistance, $327,557 other
fiscal 2000 relocation expenses, $187,500 fiscal 1999 relocation allowance,
$156,257 fiscal 1999 relocation tax reimbursement, $36,343 fiscal 1999
mortgage assistance and $171,554 other fiscal 1999 relocation expenses.
(6) 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 (terminated effective November 1, 1999)
in the amount of $1,641,169 for Mr. Wayman, $389,518 for Mr. Zitzner and
$280,333 for Ms. Livermore.
32
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 2001 to
each of the named executive officers. HP did not grant any stock appreciation
rights to the named executive officers during fiscal 2001.
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Expiration Grant Date Present
Name Granted(1)(2) Fiscal Year(3) ($/Share)(4) Date Value ($)(5)
---- -------------- -------------- ------------ ---------- ------------------
Carleton S. Fiorina........... 1,000,000 1.5% $35.13 Nov. 2010 $13,519,781
Robert P. Wayman.............. 350,000 0.5% $35.13 Nov. 2010 $ 4,731,923
Duane E. Zitzner.............. 350,000 0.5% $35.13 Nov. 2010 $ 4,731,923
Ann M. Livermore.............. 350,000 0.5% $35.13 Nov. 2010 $ 4,731,923
Pradeep Jotwani............... 300,000 0.5% $35.13 Nov. 2010 $ 4,055,934
------------------------
(1) All options granted in fiscal 2001 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 vest upon a change of control of HP (see
"Employment Contracts, Termination of Employment and Change-in-Control
Arrangements" below).
(3) HP granted options to purchase approximately 65,628,000 shares to employees
in fiscal 2001.
(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. Unless otherwise
indicated, 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: risk free rate of return of 5.1%; annual dividend yield of
1.4%; and volatility of 39%. The resulting values are reduced by 10.5% to
reflect the Company's experience with forfeitures.
33
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal 2001
by each of the named executive officers and the values of each of such officer's
unexercised options at October 31, 2001. There were no stock appreciation rights
exercised or outstanding.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Fiscal Options at
Number of Year-End(1) Fiscal Year-End(2)
Shares Acquired Value --------------------------- ---------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------- ----------- ------------- ----------- -------------
Carleton S. Fiorina............ 0 $0 1,087,865 2,727,987 $ 0 $0
Robert P. Wayman............... 0 0 835,078 817,362 1,958,328 0
Duane E. Zitzner............... 0 0 487,295 1,252,317 469,742 0
Ann M. Livermore............... 0 0 416,329 1,081,139 78,552 0
Pradeep Jotwani................ 0 0 76,510 516,494 0 0
------------------------
(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 vest 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 closing market price on October 31, 2001, which was
$16.83.
34
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
HP entered into an employment agreement with Ms. Fiorina, Chairman,
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, Inc. and that were
scheduled to vest in the short-term. Details of these grants follow:
1. Ms. Fiorina was granted 743,168 shares (as adjusted to reflect the
distribution of shares of Agilent Technologies and the two-for-one stock
split) 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 743,168 shares (on an adjusted basis)
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,
1,535,810 shares (on an adjusted basis) of HP common stock at a purchase
price of $44.16 per share (on an adjusted basis). 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, reduced by any annual cash bonus she
received from Lucent Technologies, Inc. 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 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
35
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.
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 agreed 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 Mr. Zitzner, Ms. Livermore and Mr. Jotwani) with financial security
and incentives to remain with HP. The Program specified that, until the second
anniversary date of the effective date of the Program (the "Transition Period"),
HP would 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 would receive protection of their existing
retirement benefits during the Transition Period. In the event that a Program
participant was 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 was terminated due
to his or her disability, then the participant would 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 was 1.5. Pursuant to the Program, the following named
executive officers received special restricted stock awards which vested in full
in May 2001 in the following amounts (on an adjusted basis): Mr. Zitzner, 31,622
shares, Ms. Livermore, 42,590 shares and Mr. Jotwani, 9,020 shares. In the event
of a qualifying termination as described above, participants would have also
been entitled to 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 specified on the notice of participation. As a
condition to receiving severance and other benefits in connection with a
termination of employment, participants would have been required to execute a
release in favor of HP and refrain from competing with HP or soliciting its
employees.
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 provided for an initial base salary
of $930,000 per year and variable compensation of $270,000 per year. Pursuant to
the agreement, Mr. Wayman received protection of his existing retirement
arrangements and a special restricted stock award of 98,148 shares (on an
adjusted basis), 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 would 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 would 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 would 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.
The Compensation Committee of the HP Board of Directors has adopted a
retention program that includes the payment of retention bonuses to specified
employees of HP that are contingent upon the
36
completion of the business combination transaction with Compaq Computer
Corporation. Ms. Fiorina would have been entitled to receive retention bonuses
under this program totaling two times the sum of her current salary and target
annual bonus (a total of $8.0 million), but she has declined to accept the right
to participate in this program. Mr. Jotwani, Ms. Livermore, Mr. Wayman and
Mr. Zitzner may receive three times current salary plus target bonus under this
program, in each case payable in two equal installments, with the first
installment payable on September 4, 2002 and the second installment payable on
September 4, 2003, assuming that they remain employed through the installment
payment dates.
As a part of its retention program, HP also agreed to provide the executive
officers who are receiving retention bonuses as described above certain payments
and benefits in the event of a "qualifying termination" within two years after
the completion date of the merger. A qualifying termination is defined as any
termination by HP other than for cause, resignation of the executive for good
cause (including a reduction in the executive's total salary plus target bonus,
a reduction of the executive's base salary or a material reduction in the kind
or level of the executive's employee benefits) or termination of the executive
for disability. In the event of a qualifying termination within two years after
the completion of the merger, the executive will become entitled to the
following payments and benefits, offset by any retention payments described
above previously paid to the executive:
- a cash payment equal to 1.5 times the executive's then-current base salary
plus target bonus;
- the executive's stock options will become fully exercisable and will
remain exercisable until the earlier of:
- the third anniversary of the executive's termination date; and
- the expiration of the term of the stock option;
- any unvested restricted stock granted to the executive under HP's stock
plans will vest and a portion of other restricted stock held by the
executive will vest; and
- continuation of certain health benefits.
The retention bonuses operate to provide incentives to stay with the
post-merger entity because executive officers and other participants will be
financially better off if they remain with the combined company following the
merger through the relevant payment dates for retention bonuses. Under the
retention program, certain executive officers, including Mr. Jotwani,
Ms. Livermore, Mr. Wayman and Mr. Zitzner, will receive 1.5 times their current
salary plus target bonus if they remain employed by HP until September 4, 2002.
If HP terminates their employment prior to September 4, 2002, in an event that
is a "qualifying termination" as described above, they would receive 1.5 times
their base salary and target bonus as well as other benefits described above.
They will therefore have an incentive not to resign voluntarily, because in that
case they would not receive a payment under either program. In addition, these
executive officers will receive 1.5 times their salary and target bonus if they
remain employed through September 4, 2003. If HP terminates their employment in
a qualifying termination after September 4, 2003, the amount that they would
have been entitled to receive under the severance program will be offset
entirely by amounts previously paid under the retention program.
NEW EMPLOYMENT AGREEMENTS BETWEEN HP AND CERTAIN EXECUTIVES
At the time of the execution of the Compaq merger agreement, HP expressed
the intention to negotiate with certain HP executives employment agreements to
take effect following the closing of the merger, based on terms for such
agreements that were then under discussion but upon which agreement was not
then, or at any later time, reached. Following execution of the Compaq merger
agreement, HP determined that it would be more appropriate for the compensation
committee of the newly constituted board following completion of the merger to
analyze, review and determine the appropriate structure and size of compensation
packages for executives of the combined company. HP agreed that this process
would
37
involve obtaining market information and other input from outside compensation
experts and HP has determined that the employment terms previously discussed
would not serve as a benchmark for any future terms. Accordingly, HP plans to
negotiate promptly following the completion of the merger new employment
agreements with Ms. Fiorina and certain executive officers of HP, including
Mr. Jotwani, Ms. Livermore, Mr. Wayman, and Mr. Zitzner, and certain executive
officers of Compaq, including Mr. Capellas. It is currently expected that the
employment agreements will include increases to the executives' current salaries
to reflect their expanded responsibilities within the combined company, as well
as the potential for a bonus that may be equal to or greater than the
executives' base salaries. HP also currently expects the employment agreements
to provide for the grant of the stock options. It is contemplated that the
options will vest based upon continued service with HP and, in significant part,
upon the attainment of certain performance goals. Such goals may include
operational milestones and increases in HP stock prices following the merger. In
addition, HP currently expects that the employment agreements will contain
severance terms that will provide the officers with payments of severance if,
during the term of the agreement, the executive is terminated without cause,
resigns for certain reasons or terminates employment due to death or disability.
These severance payments may include cash payments, continued employee benefits,
additional payments in connection with any golden parachute excise taxes and the
acceleration of vesting of stock options and other equity awards, but are
expected to be offset by any payments under the retention/severance plan
described above.
38
PENSION PLAN
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)
Highest
Five-Year Years of Service
Average ---------------------------------------------
Compensation 15 20 25 30
--------------------- -------- -------- ---------- ----------
$ 400,000 $ 86,662 $115,549 $ 144,436 $ 173,323
500,000 109,162 145,549 181,936 218,323
600,000 131,662 175,549 219,436 263,323
700,000 154,162 205,549 256,936 308,323
800,000 176,662 235,549 294,436 353,323
900,000 199,162 265,549 331,936 398,323
1,000,000 221,662 295,549 369,436 443,323
1,100,000 244,162 325,549 406,936 488,323
1,200,000 266,662 355,549 444,436 533,323
1,300,000 289,162 385,549 481,936 578,323
1,400,000 311,662 415,549 519,436 623,323
1,500,000 334,162 445,549 556,936 668,323
1,600,000 356,662 475,549 594,436 713,323
1,700,000 379,162 505,549 631,936 758,323
1,800,000 401,662 535,549 669,436 803,323
1,900,000 424,162 565,549 706,936 848,323
2,000,000 446,662 595,549 744,436 893,323
2,100,000 469,162 625,549 781,936 938,323
2,200,000 491,662 655,549 819,436 983,323
2,300,000 514,162 685,549 856,936 1,028,323
2,400,000 536,662 715,549 894,436 1,073,323
2,500,000 559,162 745,549 931,936 1,118,323
2,600,000 581,662 775,549 969,436 1,163,323
2,700,000 604,162 805,549 1,006,936 1,208,323
2,800,000 626,662 835,549 1,044,436 1,253,323
2,900,000 649,162 865,549 1,081,936 1,298,323
3,000,000 671,662 895,549 1,119,436 1,343,323
------------------------
(1) Amounts exceeding $160,000 (as adjusted from time to time by the Internal
Revenue Service) would be paid pursuant to the Excess Benefit Plan.
(2) No more than $200,000 (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.
39
The compensation covered by the plans whose benefits are summarized in the
table above equals base pay and bonuses paid pursuant to the Executive
Pay-for-Results Plan. The covered compensation for each of the named executive
officers is the highest five-year average of the amounts shown in the "Salary"
column of the Summary Compensation table and amounts paid pursuant to the
Executive Pay-for-Results Plan as shown in the "Bonus" column of the Summary
Compensation table. Benefits payable upon retirement will be based on the total
of the amounts shown in the "Salary" column of the Summary Compensation table
and amounts paid pursuant to the Executive Pay-for-Results Plan as shown in the
"Bonus" column of the Summary Compensation table.
Named executive officers named in the Summary Compensation table have been
credited with the following years of service: Ms. Fiorina, two years;
Mr. Wayman, 32 years; Mr. Zitzner, 12 years; Ms. Livermore, 19 years; and
Mr. Jotwani, 19 years.
Retirement benefits shown are payable at age 65 in the form of (1) a single
life annuity, (2) a joint annuity, or (3) a lump sum to the employee, and
reflect the maximum offset allowance currently in effect under Section 401(l) of
the Internal Revenue Code to compute the offset for such benefits under the
plans. For purposes of calculating the benefit, an employee may not be credited
with more than 30 years of service.
40
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 2001.
EXECUTIVE COMPENSATION PHILOSOPHY
The executive compensation Total Rewards program was developed with the
overall idea to encourage and support the behaviors that enable HP to compete as
a company of integrated, fast-moving teams. It is designed to inspire and reward
superior performance by executives, business units and HP, and to include
executives in the success of HP. The executive compensation Total Rewards
program has a goal of providing executives with base pay, short-term and
long-term incentives and benefits.
THE GUIDING PRINCIPLES BEHIND TOTAL REWARDS:
- Measure success against external benchmarks
- Reward aspirational performance
- Recognize individual achievement
- Promote employee ownership in the Company
- Attract and retain top talent
- Balance risk and reward
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 that are included within
the S&P 500 Index. Our practice is to target our Total Rewards program for
executive compensation at the 50th percentile of equivalent programs of surveyed
companies.
COMPONENTS OF EXECUTIVE COMPENSATION
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 compensation range which corresponds to the
executive's job responsibilities and (2) the executive officer's overall
individual job performance.
SHORT-TERM BONUS/VARIABLE PAY
Our short-term bonus/variable pay programs were developed to focus on
matching reward with results. Effective November 1, 2000, the HP Pay-for-Results
Plan was divided into two plans: Pay-for-Results Short-term Bonus Plan and
Executive Pay-for-Results Plan. We have three plans: Executive Pay-for-Results
(which applies to the named executive officers), Pay-for-Results Short-term
Bonus (which applies to high-level employees) and Company Performance Bonus
(which applies to all employees except those participating in the Executive
Pay-for-Results Plan or the Pay-for-Results Plan).
The philosophy is simple: a basic reward for reaching minimally acceptable
goals--the performance that meets the expectations of customers and shareowners,
and a considerable upside for reaching our aspirational goals--the performance
that sets the standard and leads the market. To balance reward with risk, if HP
does not meet its minimum goals in a given half, there could be no bonus payout
at all. For fiscal 2001 there were no payouts to members of the Executive
Council; however, there were minimal payouts to employees of some business
units.
41
[GRAPHIC REPRESENTING THRESHOLD, TARGET AND ASPIRATIONAL LEVELS OF
PERFORMANCE, CORRELATING GREATER PERFORMANCE WITH GREATER REWARD]
WE ARE SETTING OUR METRICS BASED ON THREE LEVELS OF PERFORMANCE:
- THRESHOLD (A LEVEL OF PERFORMANCE THAT MEETS THE EXPECTATIONS OF OUR
CUSTOMERS AND OUR SHAREOWNERS)
- TARGET (A HIGHER LEVEL OF PERFORMANCE THAN THRESHOLD PERFORMANCE)
- ASPIRATIONAL (PERFORMANCE THAT SETS THE STANDARD AND LEADS THE
MARKET)
THE INTENT IS TO ENCOURAGE US TO ASPIRE TO GREATER PERFORMANCE.
PAY-FOR-RESULTS
During fiscal 2001, our named executive officers participated in the
Executive Pay-for-Results Plan. This is a variable pay plan that links
individual, business organization, and Company performance directly to
compensation and encourages employees to make significant contributions toward
the Company's top-line revenue and bottom-line net profit. The plan
also ensures that there is a clear and consistent framework in which achievement
is measured. The performance metrics for the Executive Council Members for
fiscal 2001 were HP revenue, net profit and total customer experience; some
other Pay-for-Results participants' metrics also included business unit revenue
and net profit.
In fiscal 2001, 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" for the named executive officers was the greater of:
(a) approximately 50% of base salary or (b) 100% of every dollar above base
salary that exceeded $1 million. Depending upon the achievement of
42
pre-determined performance metrics, we awarded executives between 0 and 300% of
the targeted short-term bonus. This plan pays out semi-annually when performance
targets are achieved.
COMPANY PERFORMANCE BONUS
In fiscal 2001, HP's cash profit sharing program was replaced with the
Company Performance Bonus. The plan is available to all employees with the
exception of those who participate in the Pay-for-Results Short-term Bonus Plan
or Executive Pay-for-Results Plan. This plan extends variable pay to all levels
of HP and links individual compensation to the Company's overall results.
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 2001, we
made stock option grants to executive officers under HP's 1995 Incentive Stock
Plan and the 2000 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 fair market value
on the grant date) over a ten-year period. Individual and business unit
performance determine an executive's grant amount.
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 Chairman, 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.
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.
CORPORATE TAX DEDUCTION ON COMPENSATION IN EXCESS OF $1 MILLION A YEAR
Section 162(m) of the Internal Revenue 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 officers. Certain performance-based compensation is specifically
exempt from the deduction limit. Payments made pursuant to the Executive
Pay-for-Results Plan are considered performance-based and exempt from the
deduction limit.
COMPENSATION FOR THE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Ms. Fiorina has been President and CEO of HP since joining the Company on
July 17, 1999, and Chairman of the Board since September 22, 2000. All aspects
of Ms. Fiorina's fiscal 2001 compensation were governed by the general
principles of the Company's Executive Total Rewards program described above. At
our November 2000 meeting we reviewed Ms. Fiorina's Total Rewards package and
made an overall assessment of her performance and competitive forces.
COMPETITIVE FORCES
We analyzed the total direct compensation for chief executive officers from
the survey data we gathered on companies in our industry and/or of our size and
complexity. As part of our review, we determined that Ms. Fiorina was entitled
to a pay increase in alignment with the Company's philosophy to pay for
performance and to pay amongst our competitors. In determining Ms. Fiorina's new
Total Cash Compensation we wanted it to be better aligned with our Total Rewards
philosophy and decided to have more of her cash compensation "at risk" by making
it dependent on the Company's performance.
43
BASE PAY
For fiscal 2001, Ms. Fiorina received a base pay of $1,000,000.
SHORT-TERM BONUS
For fiscal 2001, we determined to increase Ms. Fiorina's targeted bonus
opportunity to 300% of her base pay, with an aspirational opportunity of 900% of
her base pay. The increase in the bonus opportunity was tied directly to
Ms. Fiorina's performance and competitive practices. In light of the Company
falling short of meeting its net profit and revenue objectives for the first and
second half of fiscal 2001, there was no payout to Ms. Fiorina and the other
named executive officers and Executive Council members.
As we indicated in last year's report, Ms. Fiorina was entitled to receive a
minimum guaranteed short-term bonus of $1,250,000 for fiscal 2000, pursuant to
the terms of her employment contract. In light of the Company falling shorting
of meeting its net profit and revenue objectives for the second half of fiscal
2000, resulting in no payout to the other named executive officers and Executive
Council members, Ms. Fiorina initiated a dialogue with the Committee and
recommended her guaranteed bonus for the second half of fiscal 2000 be zero. The
Committee agreed with Ms. Fiorina's recommendation and modified Ms. Fiorina's
fiscal 2001 bonus opportunity by reducing it by $625,000. After it was
determined there would be no bonus payout to Ms. Fiorina for fiscal 2001,
Ms. Fiorina decided to, and did, repay the Company her second half fiscal 2000
guaranteed bonus of $625,000 net of taxes.
LONG-TERM INCENTIVES--STOCK OPTIONS
In the November 2000 meeting, the Committee reviewed the progress
Ms. Fiorina had made against the goals to reinvent the Company. They reviewed
her objectives of setting a clear vision and strategy, and her ability to
provide the leadership to deliver results. Based on this review, the Committee
determined that Ms. Fiorina had made significant progress and contributions in
all of these areas. The Committee granted Ms. Fiorina a long-term incentive
award of 1,000,000 fair market value non-qualified stock options with a vesting
schedule of 25% per year.
OTHER COMPENSATION MATTERS IN CONNECTION WITH THE COMPAQ MERGER
RETENTION BONUS
The compensation committee adopted a retention program that includes the
payment of retention bonuses to specified key employees. Payment of the
retention bonuses are contingent upon the completion of the proposed merger
transaction involving Compaq Computer Corporation. Ms. Fiorina would have been
entitled to receive retention bonuses under this program totaling two times the
sum of her current salary and target annual bonus (a total of $8.0 million);
however, she declined to accept the right to participate in this program.
The other named executive officers of HP may receive retention payments of
three times current salary plus target bonus payable in two equal installments,
with the first installment payable on September 4, 2002 and the second
installment payable on September 4, 2003 under this program.
NEW EMPLOYMENT AGREEMENTS*
At the time of the execution of the merger agreement for the Compaq merger,
HP expressed the intention to negotiate with certain HP and Compaq executives,
including Ms. Fiorina, employment agreements to take effect following the
closing of the Compaq merger, based on terms for such agreements that were then
under discussion but upon which agreement was not then, or at any later time,
reached. Following execution of the merger agreement, HP and Compaq determined
that it would be more appropriate for the compensation committee of the newly
constituted board following completion of the merger to analyze, review and
determine the appropriate structure and size of compensation packages for
executives of the combined company, including Ms. Fiorina. HP and Compaq agreed
that this process would involve obtaining market information and other input
from outside compensation experts and HP has determined that the employment
terms previously discussed would not serve as a benchmark for any future terms.
Accordingly, HP plans to
44
negotiate promptly following the completion of the Compaq merger new employment
agreements with Ms. Fiorina, as well as certain executive officers of HP and
Compaq. It is currently expected that the employment agreements will include
increases to the executives' current salaries to reflect their expanded
responsibilities within the combined company, as well as the potential for a
bonus that may be equal to or greater than the executives' base salaries. HP
also currently expects the employment agreements to provide for the grant of
stock options. It is contemplated that the options will vest based upon
continued service with HP and, in significant part, upon the attainment of
certain performance goals. Such goals may include operational milestones and
increases in HP stock prices following the merger. In addition, HP currently
expects that the employment agreements will contain severance terms that will
provide the officers with payments of severance if, during the term of the
agreement, the executive is terminated without cause, resigns for certain
reasons or terminates employment due to death or disability. These severance
payments may include cash payments, continued employee benefits, additional
payments in connection with any golden parachute excise taxes and the
acceleration of vesting of stock options and other equity awards, but are
expected to be offset by any payments under the applicable retention or
severance plan.
COMPENSATION COMMITTEE
Phillip M. Condit, Chair
Sam Ginn
Walter B. Hewlett*
------------------------
* Mr. Hewlett did not approve the portion of the Compensation Committee Report
set forth under "New Employment Agreements."
45
STOCK PERFORMANCE GRAPHS
The graphs below show the cumulative total shareowner return assuming the
investment of $100 on the date specified for each graph (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)
FIVE-YEAR CUMULATIVE RETURN
(INVESTMENT OF $100 ON OCTOBER 31, 1996)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
HEWLETT-PACKARD S & P TECHNOLOGY
COMPANY S & P 500 SECTOR PEER GROUP
10/96 $100.00 $100.00 $100.00 $100.00
10/97 $141.29 $132.11 $145.81 $163.46
10/98 $139.98 $161.16 $193.55 $261.57
10/99 $174.13 $202.54 $322.22 $364.18
10/00 $281.39 $214.87 $358.65 $463.56
10/01 $103.19 $161.36 $170.09 $239.67
ONE-YEAR CUMULATIVE RETURN
(INVESTMENT OF $100 ON OCTOBER 31, 2000)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
HEWLETT-PACKARD S & P TECHNOLOGY
COMPANY S & P 500 SECTOR PEER GROUP
10/00 $100.00 $100.00 $100.00 $100.00
1/01 $79.45 $95.85 $83.73 $85.55
4/01 $61.46 $87.93 $62.34 $68.81
7/01 $53.47 $85.52 $57.03 $58.65
10/01 $36.67 $75.10 $47.42 $51.48
------------------------
(1) The peer group is composed of large companies that we compete with on a
worldwide basis in the computing and imaging industries. They are: Apple
Computer, Inc., Compaq Computer 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. Data General Corporation has been removed from the peer group
because it was acquired by EMC Corporation in October 1999.
46
EXECUTIVE OFFICERS
In addition to the executive officers reported on the Form 10-K/A filed on
January 30, 2002, the individuals listed below have been chosen to become
executive officers upon the close of the Compaq merger. All officers are elected
to serve at the pleasure of the Board.
PETER BLACKMORE Mr. Blackmore is expected to be elected an executive officer
Age 54 upon the close of the Compaq merger. Mr. Blackmore was
elected Executive Vice President, Worldwide Sales and
Services of Compaq Computer Corporation in 2000. Prior to
that time, Mr. Blackmore served as Senior Vice President,
Sales and Services earlier in 2000, and Senior Vice
President, Sales and Marketing from 1999. Mr. Blackmore
joined Compaq in 1991 as Manager, Major Accounts Marketing,
Europe, and served in a number of senior sales and marketing
positions.
ALLISON JOHNSON Ms. Johnson is expected to be elected an executive officer
Age 41 upon the close of the Compaq merger. Ms. Johnson has been
Vice President, Brand & Communications at HP since
January 2001. From January 2000 to January 2001,
Ms. Johnson was Director, Brand & Communications at HP
Enterprise Systems Division. From January 1999 to
January 2000, she was Director, Corporate Communications at
Netscape Communications Corp. From September 1997 to
January 1999, Ms. Johnson was Director, Communications at
IBM Corporation and from 1993 to September 1997 she was
Director, Communications, Internet Division at IBM
Corporation.
ROBERT V. NAPIER Mr. Napier is expected to be elected an executive officer
Age 55 upon the close of the Compaq merger. Mr. Napier was elected
Senior Vice President, Global Business Solutions and Chief
Information Officer of Compaq Computer Corporation in 2000.
Mr. Napier joined Compaq in August 1999 as Senior Vice
President, Information Management and Chief Information
Officer. Prior to joining Compaq, he was Senior Vice
President and Chief Information Officer of Mariner
Post-Acute Network, a position he had held since 1998, and
Chief Information Officer of Delphi Automotive Systems from
1997 to 1998.
SHANE V. ROBISON Mr. Robison is expected to be elected an executive officer
Age 48 upon the close of the Compaq merger. Mr. Robison joined
Compaq Computer Corporation in 2000 as Senior Vice
President, Technology and Chief Technology Officer. Prior to
joining Compaq, Mr. Robison was President of Internet
Technology and Development at AT&T Labs, a position he had
held since 1999. Prior to AT&T Labs, he was Executive Vice
President, Research and Development and then President,
Design Productivity Group, of Cadence Design Systems, Inc.,
from 1995 to 1999.
47
MICHAEL J. WINKLER Mr. Winkler is expected to be elected an executive officer
Age 56 upon the close of the Compaq merger. Mr. Winkler was elected
Executive Vice President, Global Business Units of Compaq
Computer Corporation in 2000. Prior to that time,
Mr. Winkler was Senior Vice President and Group General
Manager, Commercial Personal Computing Group, a position to
which he was elected in 1996. Mr. Winkler joined Compaq in
1995 as Senior Vice President, Portable PC Division. Prior
to joining Compaq, Mr. Winkler was Vice President and
General Manager of Toshiba Computer Systems.
------------------------
CERTAIN LEGAL PROCEEDINGS
On March 28, 2002, Walter B. Hewlett, individually and as Trustee of the
William R. Hewlett Revocable Trust, and Edwin E. van Bronkhorst, as co-Trustee
of the William R. Hewlett Revocable Trust, filed suit against HP in the Delaware
Court of Chancery, New Castle County. Mr. Hewlett is a director of HP. The
complaint, which was brought pursuant to Section 225 of the Delaware General
Corporation Law, alleges that HP management engaged in improper conduct in the
solicitation of proxies in connection with HP's proposal to issue shares in
connection with the contemplated Compaq merger. In particular, the complaint
alleges that HP used corporate assets to entice and coerce financial
institutions to vote in favor of the Compaq merger and made materially
misleading public statements regarding the planned integration of the two
companies. The complaint seeks, among other things, a declaration that certain
proxies are invalid, a decree that the proposal to issue shares in connection
with the proposed Compaq merger was defeated (or, in the alternative, requiring
a new vote after the re-solicitation of proxies), and a preliminary and
permanent injunction against HP completing the issuance of HP shares in
connection with the Compaq merger. HP believes that the complaint is without
merit and intends to defend itself vigorously.
48
INDEPENDENT AUDITORS
On September 21, 2000, the Audit Committee of HP's Board of Directors
terminated PricewaterhouseCoopers LLP ("PwC") as HP's independent public
accountants with respect to the audit of HP's consolidated financial statements
for the fiscal year ended October 31, 2000 (the "2000 Audit"). The decision was
made because of concerns by both HP and PwC regarding the timing of the
completion of the 2000 Audit in light of the potential loss of PwC's
independence since HP was in discussions with PwC over a possible acquisition of
its global management and information consulting practice (the "Potential
Acquisition"). PwC had already ceased all audit work for HP on September 12,
2000. HP subsequently terminated discussions with PwC with respect to the
Potential Acquisition because HP and PwC could not reach a mutually acceptable
agreement.
On September 21, 2000, the Audit Committee also selected and appointed
Ernst & Young LLP ("E&Y") to serve as HP's independent auditor with respect to
the 2000 Audit. At that time, HP committed to undertake a more formal evaluation
process in selecting independent auditors with respect to the audit of HP's
consolidated financial statements for the fiscal year ending October 31, 2001
(the "2001 Audit"). On February 5, 2001, the Audit Committee unanimously
approved the appointment of E&Y as the Company's independent auditor to complete
the 2001 Audit, and on November 16, 2001, the Audit Committee unanimously
approved the appointment of E&Y as the Company's independent auditor to complete
the audit of HP's consolidated financial statements for the fiscal year ending
October 31, 2002 (the "2002 Audit").
Neither the report of E&Y with respect to the 2001 or 2000 Audit nor the
report of PwC with respect to the audit of HP's consolidated financial
statements for the fiscal years ended October 31, 1999 or October 31, 1998
contained an adverse opinion or a disclaimer of opinion, or were qualified or
modified as to uncertainty, audit scope, or accounting principles. In addition,
during HP's fiscal year ended October 31, 1999 and through September 21, 2000
there were no disagreements with PwC on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure with
respect to HP's consolidated financial statements, which disagreements, if not
resolved to the satisfaction of PwC, would have caused it to make reference to
the subject matter of the disagreements in connection with its reports.
Prior to retaining E&Y with respect to the 2000 Audit, HP consulted with E&Y
on various aspects of the Potential Acquisition, including tax and accounting
matters related to a variety of preliminary structures for the Potential
Acquisition. HP did not consult with PwC on such issues.
Representatives of E&Y are expected to be present at the annual meeting and
will have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
FEES INCURRED BY HP FOR ERNST & YOUNG LLP
The following table shows the fees paid or accrued by the Company for the
audit and other services provided by Ernst & Young LLP for fiscal 2001.
Audit Fees (1) $3.7 million
Financial Information Systems Design and $0
Implementation Fees
All Other Fees (2) $19.3 million
Total $23 million
------------------------
(1) Audit services of Ernst & Young LLP for 2001 consisted of the examination of
the consolidated financial statements of the Company and quarterly review of
financial statements.
(2) Approximately $5.6 million of "All Other Fees" is for audit-related fees
that consisted primarily of statutory audits, services related to business
acquisitions/diversitures, accounting consultations, filings made with the
Securities and Exchange Commissions and other audit-related services. The
remaining $13.7 million of "All Other Fees" consisted primarily of tax
services.
49
REPORT OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors of HP serves as the
representative of the Board for general oversight of HP's financial accounting
and reporting process, system of internal control, audit process, and process
for monitoring compliance with laws and regulations and HP's Standards of
Business Conduct. HP's management has primary responsibility for preparing HP's
financial statements and HP's financial reporting process. HP's independent
auditors, Ernst & Young LLP, are responsible for expressing an opinion on the
conformity of HP's audited financial statements with accounting principles
generally accepted in the United States.
In this context, the Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the audited financial
statements with HP's management.
2. The Audit Committee has discussed with the independent auditors the
matters required to be discussed by SAS 61 (Codification of Statements
on Auditing Standard, AU 380).
3. The Audit Committee has received the written disclosures and the letter
from the independent auditors required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees") and has discussed with
the independent auditors the independent auditors' independence.
4. The Audit Committee has considered whether the provision of services
covered by Audit Fees and All Other Fees is compatible with maintaining
Ernst & Young LLP's independence.
5. Based on the review and discussion referred to in paragraphs
(1) through (4) above, the Audit Committee recommended to the Board, and
the Board has approved, that the audited financial statements be
included in HP's Annual Report on Form 10-K for the fiscal year ended
October 31, 2001, for filing with the Securities and Exchange
Commission.
Each of the members of the Audit Committee is independent as defined under
the listing standards of the New York Stock Exchange.
The undersigned members of the Audit Committee have submitted this Report to
the Board of Directors.
George A. Keyworth II, Chair
Patricia C. Dunn
Richard A. Hackborn
Robert E. Knowling, Jr.
50
By Order of the Board of Directors,
/s/ Ann O. Baskins
Ann O. Baskins
Vice President, General
Counsel and Secretary
Dated: April 4, 2002
51
IMPORTANT INFORMATION CONCERNING THE HP ANNUAL MEETING
CHECK-IN BEGINS: 12:30 P.M. MEETING BEGINS: 2:00 P.M.
- HP SHAREOWNERS, INCLUDING JOINT HOLDERS, AS OF THE CLOSE OF BUSINESS ON
MARCH 18, 2002 ARE ENTITLED TO ATTEND THE ANNUAL MEETING
- ALL SHAREOWNERS AND THEIR PROXIES SHOULD BE PREPARED TO PRESENT PHOTO
IDENTIFICATION FOR ADMISSION TO THE MEETING
- IF YOU ARE A RECORD HOLDER OR A PARTICIPANT IN HP'S TAXCAP OR SHARE OWNERSHIP
PLAN, YOUR SHARE OWNERSHIP WILL BE VERIFIED AGAINST A LIST OF RECORD HOLDERS
OR PLAN PARTICIPANTS AS OF THE RECORD DATE, PRIOR TO BEING ADMITTED TO THE
ANNUAL MEETING
- IF YOU ARE A STREET NAME HOLDER (I.E., YOU HOLD YOUR SHARES THROUGH BROKERS OR
NOMINEES) YOU WILL BE ASKED TO PRESENT PROOF OF OWNERSHIP OF HP SHARES AS OF
THE RECORD DATE, SUCH AS YOUR MOST RECENT BROKERAGE STATEMENT PRIOR TO
MARCH 18, 2002, OR OTHER SIMILAR EVIDENCE OF OWNERSHIP
- PERSONS ACTING AS PROXIES MUST BRING A VALID PROXY FROM A RECORD HOLDER AS OF
THE CLOSE OF BUSINESS ON MARCH 18, 2002
- FAILURE TO PRESENT IDENTIFICATION OR OTHERWISE COMPLY WITH THE ABOVE
PROCEDURES UPON REQUEST WILL RESULT IN EXCLUSION FROM THE ANNUAL MEETING
- PLEASE ALLOW AMPLE TIME FOR CHECK-IN
THANK YOU FOR YOUR INTEREST AND SUPPORT--YOUR VOTE IS IMPORTANT!
PLEASE RETURN YOUR PROXY CARD OR VOTING INSTRUCTION
CARD FOR THE ANNUAL MEETING TODAY
DIRECTIONS TO THE FLINT CENTER
FROM SAN FRANCISCO: [MAP]
- Take 280 South to 85 South towards
Gilroy.
- Exit at Stevens Creek Blvd. (1st
off-ramp).
- Turn East (left) onto Stevens Creek Blvd.
(over freeway), then turn right onto Mary
Ave. (2nd light).
- 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.
[5980-8778EE]
[HP LOGO] PROXY
HEWLETT-PACKARD COMPANY
ANNUAL MEETING OF SHAREOWNERS - April 26, 2002
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 at the close of business on March 18, 2002,
at the annual meeting of shareowners to be held at 2:00 p.m., local time, on
Friday, April 26, 2002, or any postponement or adjournment thereof.
In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any postponement or
adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREOWNER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL OF THE NOMINEES FOR DIRECTOR IN ITEMS 1A AND 1B, AS
APPLICABLE, FOR ITEM 2 AND AGAINST ITEMS 3 AND 4. WHETHER OR NOT DIRECTION IS
MADE, THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE DISCRETION OF
THE PROXY HOLDERS UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF. THE PROXY HOLDERS
RESERVE THE RIGHT TO CUMULATE VOTES AND CAST SUCH VOTES IN FAVOR OF THE
ELECTION OF SOME OR ALL OF THE APPLICABLE DIRECTOR NOMINEES IN THEIR SOLE
DISCRETION. THE UNDERSIGNED HEREBY REVOKES ALL PROXIES PREVIOUSLY GIVEN BY
THE UNDERSIGNED TO VOTE AT THE ANNUAL MEETING OR ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
IMPORTANT--THIS PROXY MUST BE SIGNED AND DATED BELOW.
--------------------------------------------------------------------------------
ANNUAL MEETING PROXY CARD
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
OR PLEASE REFER TO THE REVERSE SIDE FOR TELEPHONE AND INTERNET VOTING
INSTRUCTIONS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES FOR DIRECTOR
IN 1A AND 1B, FOR 2 AND AGAINST 3 AND 4.
1A. Election of Directors in the event that the proposed merger transaction with
Compaq Computer Corporation is completed prior to the 2002 Annual Meeting --
For Withhold
01- L.T.Babbio, Jr. / / / /
02- M.D. Capellas / / / /
03- P.M. Condit / / / /
04- P.C. Dunn / / / /
05- C.S. Fiorina / / / /
06- S. Ginn / / / /
07- R.A. Hackborn / / / /
08- G.A. Keyworth II / / / /
09- R.E. Knowling Jr. / / / /
10- S.M. Litvack / / / /
11- T.J. Perkins / / / /
12- L.S. Salhany / / / /
1B. Election of Directors in the event that the proposed merger transaction with
Compaq Computer Corporation is not completed prior to the 2002 Annual Meeting --
For Withhold
13- P.M. Condit / / / /
14- P.C. Dunn / / / /
15- C.S. Fiorina / / / /
16- S. Ginn / / / /
17- R.A. Hackborn / / / /
18- G.A. Keyworth II / / / /
19- R.E. Knowling, Jr. / / / /
20- R.P. Wayman / / / /
2. Proposal to ratify Ernst & Young LLP as the Company's independent auditors
for the fiscal year ending October 31, 2002.
For Against Abstain
/ / / / / /
3. Shareowner proposal to request the Board of Directors to make all possible
lawful efforts to implement and/or increase activity on each of the described
principles in the People's Republic of China.
For Against Abstain
/ / / / / /
4. Shareowner proposal to request the Board of Directors to prepare a report, at
reasonable cost, on the feasibility of adopting a policy, implementing programs
and auditing the progress of producer responsibility for product take-back and
recycling.
For Against Abstain
/ / / / / /
PLEASE REFER TO THE REVERSE SIDE FOR INTERNET AND TELEPHONE VOTING
INSTRUCTIONS.
AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
NOTE: Please sign exactly as your name or names appear hereon. For joint
accounts each owner should sign. When signing as executor, administrator,
attorney, trustee or guardian, etc. please print your full title.
Signature 1 Signature 2 Date (dd/mm/yyyy)
----------------------- ---------------------- ----/----/-------
6240--HEWLETT-PACKARD COMPANY (BLUE STOCK) COMMON
--------------------------------------------------------------------------------
/ / Mark this box with an x if you have made changes to your name or address
details below.
Dear Shareowner:
Please see below 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
INTERNET AND TELEPHONE INSTRUCTIONS
THE METHODS BELOW ARE QUICK, EASY, AND AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK
If you vote by phone or Internet, have this proxy card in hand when you vote.
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 2002
proxy statement and accompanying materials and then follow these easy steps:
TO VOTE USING THE TELEPHONE(WITHIN THE U.S. AND CANADA)
- 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 below.
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 USING THE INTERNET
- Go to the following Website:
www.computershare.com/us/proxy
- Enter the information requested on your computer screen, including your
six-digit CONTROL NUMBER located below.
- 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!
CONTROL NUMBER
6240--HEWLETT-PACKARD COMPANY (BLUE STOCK) COMMON
[HP LOGO] PROXY
HEWLETT-PACKARD COMPANY
ANNUAL MEETING OF SHAREOWNERS - April 26, 2002
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 at the close of business on March 18, 2002,
at the annual meeting of shareowners to be held at 2:00 p.m., local time, on
Friday, April 26, 2002, or any postponement or adjournment thereof.
In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any postponement or
adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREOWNER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL OF THE NOMINEES FOR DIRECTOR IN ITEMS 1A AND 1B, AS
APPLICABLE, FOR ITEM 2 AND AGAINST ITEMS 3 AND 4. WHETHER OR NOT DIRECTION IS
MADE, THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE DISCRETION OF
THE PROXY HOLDERS UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF. THE PROXY HOLDERS
RESERVE THE RIGHT TO CUMULATE VOTES AND CAST SUCH VOTES IN FAVOR OF THE
ELECTION OF SOME OR ALL OF THE APPLICABLE DIRECTOR NOMINEES IN THEIR SOLE
DISCRETION. THE UNDERSIGNED HEREBY REVOKES ALL PROXIES PREVIOUSLY GIVEN BY
THE UNDERSIGNED TO VOTE AT THE ANNUAL MEETING OR ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
IMPORTANT--THIS PROXY MUST BE SIGNED AND DATED BELOW.
--------------------------------------------------------------------------------
ANNUAL MEETING PROXY CARD
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
OR PLEASE REFER TO THE REVERSE SIDE FOR TELEPHONE AND INTERNET VOTING
INSTRUCTIONS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES FOR DIRECTOR
IN 1A AND 1B, FOR 2 AND AGAINST 3 AND 4.
1A. Election of Directors in the event that the proposed merger transaction with
Compaq Computer Corporation is completed prior to the 2002 Annual Meeting --
For Withhold
01- L.T.Babbio, Jr. / / / /
02- M.D. Capellas / / / /
03- P.M. Condit / / / /
04- P.C. Dunn / / / /
05- C.S. Fiorina / / / /
06- S. Ginn / / / /
07- R.A. Hackborn / / / /
08- G.A. Keyworth II / / / /
09- R.E. Knowling, Jr. / / / /
10- S.M. Litvack / / / /
11- T.J. Perkins / / / /
12- L.S. Salhany / / / /
1B. Election of Directors in the event that the proposed merger transaction with
Compaq Computer Corporation is not completed prior to the 2002 Annual Meeting --
For Withhold
13- P.M. Condit / / / /
14- P.C. Dunn / / / /
15- C.S. Fiorina / / / /
16- S. Ginn / / / /
17- R.A. Hackborn / / / /
18- G.A. Keyworth II / / / /
19- R.E. Knowling, Jr. / / / /
20- R.P. Wayman / / / /
2. Proposal to ratify Ernst & Young LLP as the Company's independent auditors
for the fiscal year ending October 31, 2002.
For Against Abstain
/ / / / / /
3. Shareowner proposal to request the Board of Directors to make all possible
lawful efforts to implement and/or increase activity on each of the described
principles in the People's Republic of China.
For Against Abstain
/ / / / / /
4. Shareowner proposal to request the Board of Directors to prepare a report, at
reasonable cost, on the feasibility of adopting a policy, implementing programs
and auditing the progress of producer responsibility for product take-back and
recycling.
For Against Abstain
/ / / / / /
PLEASE REFER TO THE REVERSE SIDE FOR INTERNET AND TELEPHONE VOTING
INSTRUCTIONS.
AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
NOTE: Please sign exactly as your name or names appear hereon. For joint
accounts each owner should sign. When signing as executor, administrator,
attorney, trustee or guardian, etc. please print your full title.
Signature 1 Signature 2 Date (dd/mm/yyyy)
----------------------- ---------------------- ----/----/-------
6242--HEWLETT-PACKARD COMPANY (BLUE STOCK) EMPLOYEE
--------------------------------------------------------------------------------
/ / Mark this box with an x if you have made changes to your name or address
details below.
Dear Shareowner:
Please see below 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
INTERNET AND TELEPHONE INSTRUCTIONS
THE METHODS BELOW ARE QUICK, EASY, AND AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK
If you vote by phone or Internet, have this proxy card in hand when you vote.
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 2002
proxy statement and accompanying materials and then follow these easy steps:
TO VOTE USING THE TELEPHONE(WITHIN THE U.S. AND CANADA)
- Call toll free 1-800-404-7679 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 below.
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 USING THE INTERNET
- Go to the following Website:
www.computershare.com/us/proxy
- Enter the information requested on your computer screen, including your
six-digit CONTROL NUMBER located below.
- 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!
CONTROL NUMBER
6242--HEWLETT-PACKARD COMPANY (BLUE STOCK) EMPLOYEE
The following notice will be mailed to all shareowners.
To cumulate your votes in the election for directors, you must return your
proxy card or voting instruction card, rather than using telephone or
internet voting. Please use the postage-paid return envelope provided with
your proxy card or voting instruction card.
The following notice will be mailed only to current HP employees.
NOTIFICATION OF 2002 ANNUAL MEETING OF SHAREOWNERS AND INTERNET ACCESS TO THE
HEWLETT-PACKARD COMPANY 2002 PROXY STATEMENT AND 2001 ANNUAL REPORT, WHICH
INCLUDES THE 2001 FORM 10-K/A
Dear HP Employee Shareowner:
For the 2002 annual meeting of shareowners, which will be held at 2:00 p.m. on
Friday, April 26, 2002, at the Flint Center, located at 21250 Stevens Creek
Boulevard, Cupertino, California, you will be able to access the Hewlett-Packard
proxy statement and 2001 annual report to shareowners, which includes the 2001
Form 10-K/A (collectively, the "Proxy Materials"), in electronic form on the
Internet starting on Thursday, April 4, 2002, at the following Internet address
on the World Wide Web:
http://www.hp.com/hpinfo/investor/main.htm
Your proxy card is enclosed with this notice. There are three ways to vote your
proxy without attending the 2002 annual meeting of shareowners: by phone (from
the U.S. or Canada only), Internet, or return mail. To vote by telephone or the
Internet, follow the instructions given on the proxy card. Alternatively, you
may complete, sign and return the proxy card in the enclosed, postage-paid
return envelope.
BECAUSE THE TOLL-FREE TELEPHONE NUMBER FOR TELEPHONE VOTING IS NOT AVAILABLE
OUTSIDE OF THE U.S. AND CANADA, SHAREOWNERS OUTSIDE OF THE U.S. AND CANADA ARE
ENCOURAGED TO USE THE CONVENIENCE AND IMMEDIACY OF THE INTERNET TO VOTE ONLINE.
You may also vote shares held directly in your name in person at the 2002 annual
meeting. You should be prepared to present photo identification for admittance.
In addition, your name will be verified against the list of record holders or
participants in HP's TAXCAP or Share Ownership Plan on the record date prior to
being admitted to the annual meeting. If you do not provide photo identification
or comply with the other procedures outlined above upon request, you will not be
admitted to the annual meeting. Check-in will begin at 12:30 p.m., local time,
and you should allow ample time for the check-in.
The proposals to be voted on and the procedures for voting in person at the 2002
annual meeting of shareowners are described in the proxy statement.
HOWEVER YOU CHOOSE TO VOTE, PLEASE DO SO AS SOON AS POSSIBLE.
There may be costs associated with electronic access, such as usage charges from
Internet service providers and telephone companies. Shareowners are responsible
for bearing these costs. HP does not charge fees for electronic access.
You may request paper copies of the Proxy Materials at any time by calling HP's
shareowner information line at 800-825-5497 or online at:
http://www.hp.com/hpinfo/investor/main.htm.
The following notice will be mailed only to former HP employees who are still
participating in HP's TAXCAP Plan.
NOTIFICATION OF 2002 ANNUAL MEETING OF SHAREOWNERS AND RELATED PROXY MATERIALS
Dear HP Shareowner in the TAXCAP Plan:
Enclosed please find the Hewlett-Packard proxy statement and 2001 annual report
to shareowners, which includes the 2001 Form 10-K/A (collectively, the "Proxy
Materials"), for the 2002 annual meeting of shareowners that will be held at
2:00 p.m. on Friday, April 26, 2002, at the Flint Center, located at 21250
Stevens Creek Boulevard, Cupertino, California. You can also access the Proxy
Materials in electronic form on the Internet starting on Thursday, April 4,
2002, at the following Internet address on the World Wide Web:
http://www.hp.com/hpinfo/investor/main.htm
You are receiving a paper copy of the Proxy Materials in addition to
notification that these materials are available in electronic form because HP
must obtain advance consent for the electronic delivery of proxy materials for
shareowners who are not current employees.
Your proxy card is being sent in a separate package. There are three ways to
vote your proxy without attending the 2002 annual meeting of shareowners: by
phone (from the U.S. or Canada only), Internet, or return mail. To vote by
telephone or the Internet, follow the instructions given on the proxy card.
Alternatively, you may complete, sign and return the proxy card in the
postage-paid return envelope.
BECAUSE THE TOLL-FREE TELEPHONE NUMBER FOR TELEPHONE VOTING IS NOT AVAILABLE
OUTSIDE OF THE U.S. AND CANADA, SHAREOWNERS OUTSIDE OF THE U.S. AND CANADA ARE
ENCOURAGED TO USE THE CONVENIENCE AND IMMEDIACY OF THE INTERNET TO VOTE ONLINE.
You may also vote shares held directly in your name in person at the 2002 annual
meeting. You should be prepared to present photo identification for admittance.
In addition, your name will be verified against the list of HP's TAXCAP
participants on the record date. If you do not provide photo identification, you
will not be admitted to the annual meeting. Check-in will begin at 12:30 p.m.,
local time, and you should allow ample time for the check-in.
The proposals to be voted on and the procedures for voting in person at the 2002
annual meeting of shareowners are described in the proxy statement.
HOWEVER YOU CHOOSE TO VOTE, PLEASE DO SO AS SOON AS POSSIBLE.
There may be costs associated with electronic access, such as usage charges from
Internet service providers and telephone companies. Shareowners are responsible
for bearing these costs. HP does not charge fees for electronic access.
You may request paper copies of the Proxy Materials at any time by calling HP's
shareowner information line at 800-825-5497 or online at:
http://www.hp.com/hpinfo/investor/main.htm.
The following notice will be sent electronically to all HP employees.
To: All HP Employees
From: HP Corporate Communications
HP 2001 Annual Report and 2002 Proxy Statement
This notice is to let you know that the 2001 HP annual report and 2002 proxy
statement are available online. These materials are accessible to all HP
employees and non-HP employees internally at the @hp portal or
http://hpnow.hp.com. They are also accessible to anyone externally at
http://www.hp.com/hpinfo/investor/main.htm. Your local IT or tech-support
people are your first points of contact regarding any performance or
technical issues that may arise with the online annual report and proxy
statement.
If you are an HP sales rep and are interested in ordering bulk hardcopies of
the annual report, please see the information below labeled "HP Sales Reps
Orders." If you are interested in ordering a hardcopy of the annual report or
proxy statement for yourself, please see the information below labeled
"Individual Orders."
HP SALES REPS ORDERS
Here is the URL for information regarding orders for bulk copies of the HP
annual report: http://www.webfulfillment.com/kpcorp/lit/.
The publication number for the 2001 HP annual report is #5980-8488EN. If you
have any questions regarding placing an order, please consult the contact
information on the Web page.
INDIVIDUAL ORDERS
The URL for ordering a hardcopy of the 2001 HP annual report and/or the 2002
HP proxy statement is:
http://investor.hp.com/document-request.cfm?companyid=hwp&header=w&footer=w.
Check "2001 Annual Report" and/or "2002 Proxy Statement", then enter your
mailing address information and submit the form.
Thank you for your attention.