-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JYV5dwwN5ke5L11G1eJHqoa+TbtradH/0mA54ZK35IRjmJQih5WPhKg47+ebBZ4D We7irVHJaA5IFbDhgCEhBw== 0000891618-97-000198.txt : 19970130 0000891618-97-000198.hdr.sgml : 19970130 ACCESSION NUMBER: 0000891618-97-000198 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19970129 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEWLETT PACKARD CO CENTRAL INDEX KEY: 0000047217 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER & OFFICE EQUIPMENT [3570] IRS NUMBER: 941081436 STATE OF INCORPORATION: CA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04423 FILM NUMBER: 97512687 BUSINESS ADDRESS: STREET 1: 3000 HANOVER ST CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4158571501 MAIL ADDRESS: STREET 1: 3000 HANOVER ST STREET 2: MS 20BQ CITY: PALO ALTO STATE: CA ZIP: 94304 10-K 1 FORM 10-K FISCAL YEAR ENDED OCTOBER 31, 1996 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended October 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ________________ to _______________ Commission File Number: 1-4423 Exact name of registrant as specified in its charter: HEWLETT-PACKARD COMPANY STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION: California I.R.S. EMPLOYER IDENTIFICATION NO.: 94-1081436 ADDRESS OF PRINCIPAL EXECUTIVE OFFICES: 3000 Hanover Street, Palo Alto, California 94304 REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 857-1501 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - --------------------------------------- ------------------------------------------------------- Common Stock New York Stock Exchange, Inc. par value $1 Pacific Stock Exchange, Inc. per share
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the registrant's common stock held by nonaffiliates as of December 27, 1996 was $40,735,599,574. Indicate the number of shares outstanding of each of the issuer's classes of common stock as of December 27, 1996: 1,017,105,000 shares of $1 par value common stock. DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT DESCRIPTION 10-K PART - ---------------------------------------------------------------- ---------------- Pages 29-54 (excluding order data and "Statement of Management Responsibility") and the inside back cover of the registrant's 1996 Annual Report to Shareholders I, II, IV Pages 2-19 and 26 of the registrant's Notice of Annual Meeting of Shareholders and Proxy Statement dated January 13, 1997 III
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS. PRODUCTS AND SERVICES Hewlett-Packard Company was incorporated in 1947 under the laws of the State of California as the successor to a partnership founded in 1939 by William R. Hewlett and David Packard. On a worldwide basis, Hewlett-Packard Company, together with its consolidated subsidiaries (the "Company"), designs, manufactures and services equipment and systems for measurement, computation and communications. The Company offers a wide variety of systems and standalone products, including computer systems, personal computers ("PCs"), printers and other peripheral products, calculators and other personal information products, electronic test equipment and systems, medical electronic equipment, solid state components and instrumentation for chemical analysis. Services such as systems integration, selective-outsourcing management, consulting, education, product financing and rentals, as well as customer support and maintenance, are also an integral part of the Company's offerings. These products and services are used in industry, business, engineering, science, medicine and education. A summary of the Company's net revenue as contributed by its major groupings of similar products and services is found on page 53 of the Company's 1996 Annual Report to Shareholders, which page (excluding order data) is incorporated herein by reference. The Company's computers, computer systems, personal information products, personal peripheral products and other peripherals are used in a variety of applications, including scientific and engineering computation and analysis, instrument control and business information management. The Company's core computing products and technologies include its PA-RISC architecture for systems and workstations, and software infrastructure for open systems. The Company's general-purpose computers and computer systems include scalable families of PCs, servers and systems for use in homes, small workgroups, larger departments and entire enterprises. Key products include the HP 9000 series, which runs HP-UX, the Company's implementation of the UNIX(R)(1) operating system, and comprises both workstations with powerful computational and graphics capabilities as well as multiuser computers for both technical and commercial applications; the HP NetServer series of PC servers; the HP Pavilion multimedia home PC; and the HP Vectra series of IBM-compatible PCs for use in business, engineering, manufacturing and chemical analysis. The Company offers software programming services, network services, distributed system services and data management services. Customers of the Company's computers, computer systems and software infrastructure products include original equipment manufacturers, dealers, value-added resellers and retailers, as well as end users for a variety of applications. In the field of computing during fiscal 1996, the Company introduced new HP 9000 K-Class enterprise servers, which are used primarily as application, Internet, database, LAN and Network File System and compute-intensive servers; and new HP 9000 D-Class enterprise servers, which are used primarily as large- capacity Web servers and in small to medium-sized workgroups or businesses. The Company also announced its next-generation PA-RISC microprocessor, the PA-8200. This year the Company introduced new models of the HP Pavilion multimedia home PC, which has become one of the leading consumer PCs in the United States. Other key introductions included the HP Vectra 500 series PC for small businesses, the HP NetServer LX Pro system, which is the first HP NetServer system based on the Intel Pentium(R) Pro processor, and the HP OmniBook 800 notebook PC line. In the information-storage business, the Company extended its HP SureStore family of network-backup solutions by offering tape-based storage that uses digital linear tape and Travan-based tape developed by Imation Corporation. During fiscal 1996, the Company also announced that it was exiting the disk-mechanism manufacturing business. - --------------- (1) UNIX is a registered trademark in the United States and other countries, licensed exclusively through X/OPEN(TM) Company Limited. X/OPEN is a trademark of X/OPEN Company Limited in the U.K. and other countries. 3 Key software introductions in fiscal 1996 included a distributed version of the Company's network-management platform, HP OpenView Network Node Manager; new HP OpenView solutions designed to enable customers to manage LAN environments that include Windows NT(R) and Novell NetWare; and HP Software Depot, a Web site that allows users to access public-domain software and HP beta software for the Internet. The Company's peripheral products include a variety of system and desktop printers, such as the HP LaserJet family; the HP DeskJet family, which is based on the Company's thermal inkjet technology; large-format printers and page scanners; video display terminals; and tape drives and related autochangers. During fiscal 1996, the Company introduced the HP LaserJet 5N printer, which is a low-cost, network-optimized printer for workgroups, and the HP LaserJet 5Si printer, which combines printing and copying capabilities enabling users to create multiple original prints. Other key new products were the HP DeskJet 682C printer, which enables home users to print cards and banners cost effectively, and the HP DeskJet 690C, which is the Company's first photo-quality printer. The Company also brought out the HP ScanJet 4Si network scanner during fiscal 1996. In addition, the Company introduced the HP DeskJet 820C and 870C printers, which are designed for use by small businesses. The HP DeskJet 820C is the first printer to incorporate a new HP printing architecture that allows users of Microsoft Windows(R) to print at higher speeds with reduced costs. This year the Company also worked with several partners to develop FlashPix, an industry-standard photo imaging file format. The Company also produces measurement systems for use in electronics, medicine and chemical analysis. Test-and-measurement instruments include voltmeters and multimeters that measure voltage, current and resistance; counters that measure the frequency of an electrical signal; oscilloscopes and logic analyzers that measure electrical changes in relation to time; signal generators that provide the electrical stimulus for the testing of systems and components; specialized communications and semiconductor test equipment; and atomic frequency standards, which are used in accurate time-interval and timekeeping applications. Instruments for medical applications include continuous monitoring systems for critical-care patients, fetal monitors, electrocardiographs, cardiac catheterization laboratory systems, blood gas measuring instruments and cardiac defibrillators. Instruments for chemical-analysis applications include gas and liquid chromatographs, mass spectrometers, laboratory data systems and spectrophotometers. Key introductions for measurement systems in fiscal 1996 included a new version of the HP Internet Advisor, which automates network trouble-shooting; the HP NetMetrix system, which helps users manage networks by extracting LAN data for use in capacity planning and to improve security; instruments to test communications devices based on Code Division Multiple Access technology; a mixed-signal oscilloscope that combines timing analysis with oscilloscope capabilities; and new software capabilities that help clinicians predict heart attack probability, display 3-D cardiac images and manage multimedia cardiology data on a PC. In the Company's chemical-analysis business, the new LC 1100 series liquid chromatograph enables customers to integrate different modules with their customized systems to perform specialized tasks, from routine analyses by less-skilled technicians to sophisticated R&D applications by highly trained chemists. The Company also manufactures electronic component products consisting principally of microwave semiconductor, fiber-optic and optoelectronic devices, including light-emitting diodes (LEDs). The products are sold primarily to other manufacturers for incorporation into their electronic products but also are used in many of the Company's products. In fiscal 1996, the Company introduced a fiber-optic transceiver with gigabit-per-second speed for transmitting full-motion video and multimedia. The Company also introduced a SnapLED assembly, which makes thin, automotive-rear-lighting assemblies. In addition to services such as systems integration, selective-outsourcing management, consulting, education, product financing and rentals, the Company provides service for its equipment, systems and peripherals, including support and maintenance services, parts and supplies for design and manufacturing systems, office and information systems, general-purpose instruments, computers and computer systems, peripherals and network products. In fiscal 1996, the Company derived 14 percent of its net revenue from such services. 2 4 In all its businesses, the Company strives to promote industry standards that recognize customer preferences for open systems in which different vendors' products can work together. The Company often bases its product innovations on such standards and seeks to make its technology innovations into industry standards through licensing to other companies and standards-setting groups. For example, during fiscal 1996 the Company helped lead the development of the International Cryptography Framework, an industrywide effort to address the issue of security on the Internet. MARKETING Customers. The Company has approximately 600 sales and support offices and distributorships in more than 120 countries. Sales are made to industrial and commercial customers, educational and scientific institutions, healthcare providers (including individual doctors, hospitals, clinics and research laboratories), and, in the case of its calculators and other personal information products, computer peripherals and PCs, to individuals for personal use. Sales Organization. More than half of the Company's orders are derived through reseller channels, including retailers, dealers and original equipment manufacturers. The remaining product orders result from the efforts of its own sales organization selling to end users. The Company's direct sales operations are supported by field service engineers, sales representatives, service personnel and administrative support staff. In fiscal 1996, a higher proportion of the Company's net revenue than in fiscal 1995 was generated from products such as personal peripherals, which are primarily sold through resellers. As more of the Company's products are distributed through resellers, the financial health of these resellers, and the Company's continuing relationships with them, become more important to the Company's success. Some of these companies are thinly capitalized and may be unable to withstand changes in business conditions. The Company's financial results could be adversely affected if the financial condition of these resellers substantially weakens or if the Company's relationships with such resellers deteriorate. Resellers constantly adjust their ordering patterns in response to the Company's, and its competitors', supply into the channel and the timing of their new product introductions and relative feature sets, as well as seasonal fluctuations in end-user demand such as the back-to-school and holiday selling periods. Resellers may increase orders during times of shortages, cancel orders if the channel is filled with currently available products, or delay orders in anticipation of new products. International. The Company's total orders originating outside the United States, as a percentage of total company orders, were approximately 56 percent in fiscal 1996, 55 percent in fiscal 1995 and 54 percent in fiscal 1994. The majority of these international orders were from customers other than foreign governments. Approximately two-thirds of the Company's international orders in each of the last three fiscal years were derived from Europe, with most of the balance coming from Japan, other countries in Asia Pacific, Latin America and Canada. Most of the Company's sales in international markets are made by foreign sales subsidiaries. In countries with low sales volume, sales are made through various representative and distributorship arrangements. Certain sales in international markets, however, are made directly by the Company from the United States. The Company's international business is subject to risks customarily encountered in foreign operations, including fluctuations in monetary exchange rates, import and export controls and the economic, political, tax and regulatory policies of foreign governments. The Company believes that its international diversification provides stability to its worldwide operations and reduces the impact on the Company of adverse economic changes in any single country. A summary of the Company's net revenue, earnings from operations and identifiable assets by geographic area is found on page 51 of the Company's 1996 Annual Report to Shareholders, which page is incorporated herein by reference. COMPETITION The Company encounters aggressive competition in all areas of its business activity. Its competitors are numerous, ranging from some of the world's largest corporations to many relatively small and highly 3 5 specialized firms. The Company competes primarily on the basis of technology, performance, price, quality, reliability, distribution, and customer service and support. The Company's reputation, the ease of use of its products and the ready availability of multiple software applications and customer training are also important competitive factors. The computer market is characterized by vigorous competition among major corporations with long-established positions and a large number of new and rapidly growing firms. Product life cycles are short, and, to remain competitive, the Company will be required to develop new products, periodically enhance its existing products and compete effectively in the manner described above. In particular, the Company anticipates that it will have to continue to adjust prices to stay competitive and effectively manage growth with correspondingly reduced gross margins. While the absence of reliable statistics makes it difficult to state the Company's relative position, the Company believes that it is the second-largest U.S.-based manufacturer of general-purpose computers, personal peripherals such as desktop printers, and calculators and other personal information products, all for industrial, scientific and business applications. The markets for test-and-measurement instruments are influenced by special manufacturers that often have great strength in narrow market segments. In general, however, the Company believes that it is one of the principal suppliers in these markets. BACKLOG The Company believes that backlog is not a meaningful indicator of future business prospects due to the volume of products delivered from shelf inventories, the shortening of product delivery schedules and the portion of revenue related to its service and support business. Therefore, the Company believes that backlog information is not material to an understanding of its business. PATENTS The Company's general policy has been to seek patent protection for those inventions and improvements likely to be incorporated into its products or to give the Company a competitive advantage. While the Company believes that its patents and applications have value, in general no single patent is in itself essential. The Company believes that its technological position depends primarily on the technical competence and creative ability of its research and development personnel. MATERIALS The Company's manufacturing operations employ a wide variety of semiconductors, electromechanical components and assemblies, and raw materials such as plastic resins and sheet metal. The Company believes that the materials and supplies necessary for its manufacturing operations are presently available in the quantities required. The Company purchases materials, supplies and product subassemblies from a substantial number of vendors. For many of its products, the Company has existing alternate sources of supply, or such sources are readily available. In certain instances, however, the Company enters into non-cancelable purchase commitments with, or makes advance payments to, certain suppliers to ensure supply. Portions of the Company's manufacturing operations are dependent on the ability of suppliers to deliver components, subassemblies and completed products in time to meet critical manufacturing and distribution schedules. The failure of suppliers to deliver these components, subassemblies and products in a timely manner may adversely affect the Company's operating results until alternate sourcing could be developed. In addition, the Company periodically experiences constrained supply of certain component parts in some product lines as a result of strong demand in the industry for those parts. Such constraints, if persistent, may adversely affect the Company's operating results. However, the Company believes that alternate suppliers or design solutions could be arranged within a reasonable time so that material long-term adverse impacts would be minimized. RESEARCH AND DEVELOPMENT The process of developing new high-technology products is inherently complex and uncertain and requires innovative designs that anticipate customer needs and technological trends. Without the introduction 4 6 of new products and product enhancements, the Company's products are likely to become technologically obsolete, in which case revenues would be materially and adversely affected. There can be no assurance that such new products, if and when introduced, will achieve market acceptance. After the products are developed, the Company must quickly manufacture products in sufficient volumes at acceptable costs to meet demand. Expenditures for research and development increased 18 percent in fiscal 1996 to $2.7 billion, compared with $2.3 billion and 14 percent growth in fiscal 1995, and $2.0 billion and 15 percent growth in fiscal 1994. In fiscal 1996, research and development expenditures were 7.1 percent of net revenue, compared with 7.3 percent in fiscal 1995 and 8.1 percent in fiscal 1994. The Company anticipates that it will continue to have significant research and development expenditures in order to maintain its competitive position with a continuing flow of innovative, high-quality products. ENVIRONMENT The operations of the Company involve the use of substances regulated under various federal, state and international laws governing the environment. It is the Company's policy to apply strict standards for environmental protection to sites inside and outside the U.S., even if not subject to regulations imposed by local governments. The liability for environmental remediation and related costs is accrued when it is considered probable and the costs can be reasonably estimated. Environmental costs are presently not material to the Company's operations or financial position. EMPLOYEES The Company had approximately 112,000 employees worldwide at October 31, 1996. EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding the executive officers of the Company is set forth in Part III below. ITEM 2. PROPERTIES. The principal executive offices of the Company are located at 3000 Hanover Street, Palo Alto, California 94304. As of October 31, 1996, the Company owned or leased a total of approximately 47.2 million square feet of space worldwide. The Company believes that its existing properties are in good condition and suitable for the conduct of its business. The Company's plants are equipped with machinery, most of which is owned by the Company and is in part developed by it to meet the special requirements for manufacturing computers, peripherals, precision electronic instruments and systems. At the end of fiscal year 1996, the Company was productively utilizing the vast majority of the space in its facilities, while actively disposing of space determined to be excess. The Company anticipates that most of the capital necessary for expansion will continue to be obtained from internally generated funds. Investment in new property, plant and equipment amounted to $2.2 billion in fiscal 1996, $1.6 billion in fiscal 1995 and $1.3 billion in fiscal 1994. As of October 31, 1996, the Company's marketing operations occupied approximately 12.5 million square feet, of which 3.9 million square feet were located within the United States. The Company owns 53% of the space used for marketing activities and leases the remaining 47%. The Company's manufacturing plants, research and development facilities and warehouse and administrative facilities occupied 34.7 million square feet, of which 25.6 million square feet were located within the United States. The Company owns 80% of its manufacturing, research and development, warehouse and administrative space and leases the remaining 20%. None of the property owned by the Company is held subject to any major encumbrances. 5 7 The locations of the Company's geographic operations are listed on the inside back cover of the Company's 1996 Annual Report to Shareholders, which page is incorporated herein by reference. The locations of the Company's major product development and manufacturing facilities and the Hewlett-Packard Laboratories are listed below: PRODUCT DEVELOPMENT AND MANUFACTURING Americas Cupertino, Folsom, Mountain View, Newark, Palo Alto, Rohnert Park, Roseville, San Diego, San Jose, Santa Clara, Santa Rosa, Sunnyvale and Westlake Village, California Colorado Springs, Fort Collins, Greeley and Loveland, Colorado Wilmington, Delaware Boise, Idaho Andover and Chelmsford, Massachusetts Exeter, New Hampshire Rockaway, New Jersey Corvallis and McMinnville, Oregon Aquadilla, Puerto Rico Richardson, Texas Lake Stevens, Spokane and Vancouver, Washington Brasilia, Brazil Edmonton, Calgary, and Waterloo, Canada Guadalajara, Mexico Europe Grenoble and L'Isle d'Abeau, France Boblingen and Waldbonn, Germany Dublin, Ireland Bergamo, Italy Amersfoort, The Netherlands Barcelona, Spain Bristol, Ipswich and South Queensferry, United Kingdom Asia Pacific Melbourne, Australia Beijing, Qingdao and Shanghai, China Bangalore, India Hachioji and Kobe, Japan Seoul, Korea Penang, Malaysia Singapore HEWLETT-PACKARD LABORATORIES Palo Alto, California Tokyo, Japan Bristol, United Kingdom ITEM 3. LEGAL PROCEEDINGS. There are presently pending no legal proceedings, other than routine litigation incidental to the Company's business, to which the Company is a party or to which any of its property is subject. The Company is a party to, or otherwise involved in, proceedings brought by federal or state environmental agencies under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), known as "superfund," or state laws similar to CERCLA. The Company is also conducting environmental investigations or remediations at several of its current or former operating sites pursuant to administrative orders or consent agreements with state environmental agencies. Any liability from such proceedings, in the aggregate, is not expected to be material to the operations or financial position of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. Information regarding the market prices of the Company's Common Stock and the markets for that stock may be found on page 54 and the inside back cover, respectively, of the Company's 1996 Annual Report to 6 8 Shareholders. The number of shareholders and information concerning the Company's current dividend rate are set forth in the section entitled "Common Stock and Dividends" found on the inside back cover of that report. Additional information concerning dividends may be found on pages 29, 38, 39 and 54 of the Company's 1996 Annual Report to Shareholders. Such pages (excluding order data) are incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. Selected financial data for the Company is set forth on page 29 of the Company's 1996 Annual Report to Shareholders, which page (excluding order data) is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. A discussion of the Company's financial condition, changes in financial condition and results of operations appears in the "Financial Review" found on pages 31-33 and 35-37 of the Company's 1996 Annual Report to Shareholders. Such pages (excluding order data) are incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of the Company, together with the report thereon of Price Waterhouse LLP, independent accountants, and the unaudited "Quarterly Summary" are set forth on pages 30, 34, 38-52 and 54 of the Company's 1996 Annual Report to Shareholders, which pages (excluding order data and "Statement of Management Responsibility") are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information regarding directors of the Company who are standing for reelection is set forth under "Election of Directors" on pages 4-8 of the Company's Notice of Annual Meeting of Shareholders and Proxy Statement, dated January 13, 1997 (the "Notice and Proxy Statement"), which pages are incorporated herein by reference. Information regarding a director of the Company who is retiring on February 25, 1997 is set forth below: DIRECTOR WHO IS RETIRING: DONALD E. PETERSEN; AGE 70; RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, FORD MOTOR COMPANY Mr. Petersen has served as a director of the Company since 1987. He was Chairman of the Board of Directors and Chief Executive Officer of Ford Motor Company from 1985 until his retirement in 1990. Mr. Petersen is also a member of the Board of Directors of Dow Jones & Company, Inc., The Boeing Company and four mutual fund boards of the Capital Research & Management Corp. He is a member of the National Academy of Engineering, the National Research Council Industry Advisory Board and the Science, Technology and Economic Policy Board. He is also active in education programs at Stanford University and the University of Washington in engineering and manufacturing management. The names of the executive officers of the Company, and their ages, titles and biographies as of December 27, 1996, are set forth below. All officers are elected for one-year terms. 7 9 EXECUTIVE OFFICERS: EDWARD W. BARNHOLT; AGE 53; EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER, TEST AND MEASUREMENT ORGANIZATION. Mr. Barnholt was elected an Executive Vice President in 1996 and a Senior Vice President in 1993. He became Vice President and General Manager, Test and Measurement Organization, with responsibility for the Company's Electronic Instrument, Automatic Test, Microwave and Communications and Communications Test Solutions Groups in 1990. Mr. Barnholt was elected a Vice President of the Company in 1988. He is a director of KLA Instruments Corporation. RICHARD E. BELLUZZO; AGE 43; EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER, COMPUTER ORGANIZATION. Mr. Belluzzo assumed management responsibility for the newly formed Computer Organization and was elected an Executive Vice President in 1995. He was General Manager of the Computer Products Organization from 1993 to August 1995, and he served as General Manager of the InkJet Products Group from 1991 to 1993. He was elected a Vice President in 1992 and a Senior Vice President in January 1995. He is a director of Specialty Laboratories and Proxima Corporation. JOEL S. BIRNBAUM; AGE 59; SENIOR VICE PRESIDENT, RESEARCH AND DEVELOPMENT DIRECTOR, HP LABORATORIES. Dr. Birnbaum was elected a Senior Vice President in 1993. He became Vice President, Research and Development and Director, HP Laboratories in September 1991. Additionally, he served as General Manager, Information Architecture Group from 1988 until 1991. He was elected a Vice President in 1984. He is a director of the Corporation for National Research Initiatives. S.T. JACK BRIGHAM III; AGE 57; SENIOR VICE PRESIDENT, CORPORATE AFFAIRS AND GENERAL COUNSEL. Mr. Brigham was elected a Senior Vice President in 1995 and a Vice President in 1982. He became Vice President, Corporate Affairs in 1992. He has served as General Counsel since 1976. DOUGLAS K. CARNAHAN; AGE 55; SENIOR VICE PRESIDENT AND GENERAL MANAGER, MEASUREMENT SYSTEMS ORGANIZATION. Mr. Carnahan was elected a Senior Vice President in 1995 and has been in his current position since 1993. He was General Manager of the Printing Systems Group from 1991 to 1993, and he was elected a Vice President in 1992. RAYMOND W. COOKINGHAM; AGE 53; VICE PRESIDENT AND CONTROLLER. Mr. Cookingham was elected a Vice President in 1993. He has served as Controller since 1986. F.E. (PETE) PETERSON; AGE 55; SENIOR VICE PRESIDENT, CORPORATE PERSONNEL. Mr. Peterson has served as Director of Corporate Personnel since 1990. He was elected a Vice President in 1992 and a Senior Vice President in 1995. LEWIS E. PLATT; AGE 55; CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AND CHAIRMAN OF THE EXECUTIVE COMMITTEE. Mr. Platt has served as a director of the Company, President and Chief Executive Officer since November 1992 and has served as Chairman since 1993. He was an Executive Vice President from 1987 to 1992. Mr. Platt held a number of management positions in the Company prior to becoming its President, including managing the Computer Systems Organization from 1990 to 1992. He is a director of Pacific Telesis. He also serves on the Wharton School Board of Overseers. 8 10 LEE S. TING; AGE 54; VICE PRESIDENT AND MANAGING DIRECTOR, GEOGRAPHIC OPERATIONS. Mr. Ting assumed his current position as Vice President and Managing Director, Geographic Operations on November 1, 1996. He had been Managing Director of the Company's Asia Pacific region since 1993 and a Vice President since 1995. He was Managing Director of Northeast Asia Operations from 1991 to 1993. ROBERT P. WAYMAN; AGE 51; EXECUTIVE VICE PRESIDENT, FINANCE AND ADMINISTRATION AND CHIEF FINANCIAL OFFICER. Mr. Wayman has served as a director of the Company since December 1993. He has been an Executive Vice President responsible for finance and administration since 1992. He has held a number of financial management positions in the Company and was elected a Vice President and Chief Financial Officer in 1984. He is a director of CNF Transportation, Inc. and Sybase Inc. He also serves as a member of the Kellogg Advisory Board, Northwestern University School of Business, and is Chairman of the Private Sector Council. Information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 is set forth on page 12 of the Notice and Proxy Statement, which page is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. Information regarding the Company's compensation of its named executive officers is set forth on pages 13-19 of the Notice and Proxy Statement, which pages are incorporated herein by reference. Information regarding the Company's compensation of its directors is set forth on pages 2-4 and 26 of the Notice and Proxy Statement, which pages are incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information regarding security ownership of certain beneficial owners and management is set forth on pages 8-12 of the Notice and Proxy Statement, which pages are incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Not applicable. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this report: 1. Financial Statements:
PAGE IN ANNUAL REPORT TO SHAREHOLDERS(*) ------------------ Report of Independent Accountants........................... 52 Consolidated Statement of Earnings for the three years ended October 31, 1996.......................................... 30 Consolidated Balance Sheet at October 31, 1996 and 1995..... 34 Consolidated Statement of Cash Flows for the three years ended October 31, 1996.................................... 38 Consolidated Statement of Shareholders' Equity for the three years ended October 31, 1996.............................. 39 Notes to Consolidated Financial Statements.................. 40-51
- --------------- * Incorporated by reference from the indicated pages of the Company's 1996 Annual Report to Shareholders. 2. Financial Statement Schedules: None. 9 11 3. Exhibits: 1. Not applicable. 2. None. 3(a). Registrant's Amended and Restated Articles of Incorporation. 3(b). Registrant's Amended By-Laws. 4. None. 5-8. Not applicable. 9. None. 10(a). Registrant's 1979 Incentive Stock Option Plan, which appears as Exhibit 10(a) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1983, which Exhibit is incorporated herein by reference.* 10(b). Registrant's 1979 Incentive Stock Option Plan Agreements, which appear as Exhibit 10(b) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1983, which Exhibit is incorporated herein by reference.* 10(c). Letter dated September 24, 1984 to optionees advising them of amendment to 1979 Incentive Stock Option Plan Agreements (Exhibit 10(b) above), which appears as Exhibit 10(c) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1984, which Exhibit is incorporated herein by reference.* 10(d). Registrant's Officers Early Retirement Plan, amended and restated as of January 1, 1996, and First Amendment effective December 1, 1996 to the Officers Early Retirement Plan.* 10(e). Registrant's 1985 Incentive Compensation Plan, which appears as Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1984, which Exhibit is incorporated herein by reference.* 10(f). Registrant's 1985 Incentive Compensation Plan Stock Option Agreements, which appear as Exhibit 10(f) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1984, which Exhibit is incorporated herein by reference.* 10(g). Registrant's Excess Benefit Retirement Plan, amended and restated as of November 1, 1994.* 10(h). Registrant's 1985 Incentive Compensation Plan restricted stock agreements, which appear as Exhibit 10(h) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1985, which Exhibit is incorporated herein by reference.* 10(i). Registrant's 1987 Director Option Plan, which appears as Appendix A to Registrant's Proxy Statement dated January 16, 1987, which Appendix is incorporated herein by reference.* 10(j). Registrant's 1989 Independent Director Deferred Compensation Program, which appears as Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1989, which Exhibit is incorporated herein by reference.* 10(k). Registrant's 1990 Incentive Stock Plan, which appears as Appendix A to Registrant's Proxy Statement dated January 11, 1990, which Appendix is incorporated herein by reference.* 10(l). Registrant's 1990 Incentive Stock Plan stock option and restricted stock agreements, which appear as Exhibit 10(l) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1990, which Exhibit is incorporated herein by reference.* 10(m). Resolution dated July 17, 1991 adopting amendment to Registrant's 1979 Incentive Stock Option Plan, which appears as Exhibit 10(m) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference.*
10 12 10(n). Resolution dated July 17, 1991 adopting amendment to Registrant's 1985 Incentive Compensation Plan, which appears as Exhibit 10(n) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference.* 10(o). Resolution dated July 17, 1991 adopting amendment to Registrant's 1987 Director Option Plan, which appears as Exhibit 10(o) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference.* 10(p). Resolution dated July 17, 1991 adopting amendment to Registrant's 1990 Incentive Stock Plan, which appears as Exhibit 10(p) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference.* 10(q). Registrant's 1995 Incentive Stock Plan, which appears as Appendix A to Registrant's Proxy Statement dated January 13, 1995, which Appendix is incorporated herein by reference.* 10(r). Executive Severance Package dated January 10, 1996 between the Registrant and Willem P. Roelandts, which appears as Exhibit 10(r) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1995, which exhibit is incorporated herein by reference.* 10(s). Registrant's 1995 Incentive Stock Plan stock option and restricted stock agreements.* 10(t). Amendment dated November 21, 1996 adopting amendment to Registrant's 1995 Incentive Stock Plan, 1990 Incentive Stock Option Plan, 1987 Director Option Plan, 1985 Incentive Compensation Plan, 1979 Incentive Stock Option Plan.* 10(u). Registrant's Executive Deferred Compensation Plan, Amended and Restated as of November 21, 1996.* 11-12. None. 13. Pages 29-54 (excluding order data and "Statement of Management Responsibility") and the inside back cover of Registrant's 1996 Annual Report to Shareholders. 14-17. Not applicable. 18. None. 19-20. Not applicable. 21. Subsidiaries of Registrant as of January 17, 1997. 22. None. 23. Consent of Independent Accountants. 24. Powers of Attorney. Contained in page 12 of this Annual Report on Form 10-K and incorporated herein by reference. 25-26. Not applicable. 27. Financial Data Schedule. 28. None. 99. 1996 Employee Stock Purchase Plan Annual Report on Form 11-K.
- --------------- * Indicates management contract or compensatory plan, contract or arrangement. Exhibit numbers may not correspond in all cases to those numbers in Item 601 of Regulation S-K because of special requirements applicable to EDGAR filers. (b) Reports on Form 8-K None. 11 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HEWLETT-PACKARD COMPANY Date: January 28, 1997 By: /s/ D. CRAIG NORDLUND ----------------------------------- D. Craig Nordlund Associate General Counsel and Secretary POWER OF ATTORNEY Know All Persons By These Presents, that each person whose signature appears below constitutes and appoints D. Craig Nordlund and Ann O. Baskins, or either of them, his or her attorneys-in-fact, for such person in any and all capacities, to sign any amendments to this report and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that either of said attorneys-in-fact, or substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------------------------------------------- ---------------------------- ------------------ /s/ RAYMOND W. COOKINGHAM Vice President and January 28, 1997 - --------------------------------------------- Controller Raymond W. Cookingham (Principal Accounting Officer) /s/ THOMAS E. EVERHART Director January 28, 1997 - --------------------------------------------- Thomas E. Everhart /s/ JOHN B. FERY Director January 28, 1997 - --------------------------------------------- John B. Fery Director January , 1997 - --------------------------------------------- Jean-Paul G. Gimon /s/ SAM GINN Director January 28, 1997 - --------------------------------------------- Sam Ginn /s/ RICHARD A. HACKBORN Director January 28, 1997 - --------------------------------------------- Richard A. Hackborn /s/ WALTER B. HEWLETT Director January 28, 1997 - --------------------------------------------- Walter B. Hewlett Director January , 1997 - --------------------------------------------- George A. Keyworth II /s/ DAVID M. LAWRENCE, M.D. Director January 28, 1997 - --------------------------------------------- David M. Lawrence, M.D.
12 14
SIGNATURE TITLE DATE - --------------------------------------------- ---------------------------- ------------------ Director January , 1997 - --------------------------------------------- Paul F. Miller, Jr. /s/ SUSAN P. ORR Director January 28, 1997 - --------------------------------------------- Susan P. Orr Director January , 1997 - --------------------------------------------- David W. Packard /s/ DONALD E. PETERSEN Director January 28, 1997 - --------------------------------------------- Donald E. Petersen /s/ LEWIS E. PLATT Chairman, President and January 28, 1997 - --------------------------------------------- Chief Executive Officer Lewis E. Platt (Principal Executive Officer) /s/ ROBERT P. WAYMAN Executive Vice President, January 28, 1997 - --------------------------------------------- Finance and Administration, Robert P. Wayman Chief Financial Officer and Director (Principal Financial Officer)
13 15
EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION ------ ----------- 1. Not applicable. 2. None. 3(a). Registrant's Amended and Restated Articles of Incorporation. 3(b). Registrant's Amended By-Laws. 4. None. 5-8. Not applicable. 9. None. 10(a). Registrant's 1979 Incentive Stock Option Plan, which appears as Exhibit 10(a) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1983, which Exhibit is incorporated herein by reference.(*) 10(b). Registrant's 1979 Incentive Stock Option Plan Agreements, which appear as Exhibit 10(b) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1983, which Exhibit is incorporated herein by reference.(*) 10(c). Letter dated September 24, 1984 to optionees advising them of amendment to 1979 Incentive Stock Option Plan Agreements (Exhibit 10(b) above), which appears as Exhibit 10(c) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1984, which Exhibit is incorporated herein by reference.(*) 10(d). Registrant's Officers Early Retirement Plan, amended and restated as of January 1, 1996, and First Amendment effective December 1, 1996 to the Officers Early Retirement Plan.(*) 10(e). Registrant's 1985 Incentive Compensation Plan, which appears as Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1984, which Exhibit is incorporated herein by reference.(*) 10(f). Registrant's 1985 Incentive Compensation Plan Stock Option Agreements, which appear as Exhibit 10(f) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1984, which Exhibit is incorporated herein by reference.(*) 10(g). Registrant's Excess Benefit Retirement Plan, amended and restated as of November 1, 1994.(*) 10(h). Registrant's 1985 Incentive Compensation Plan restricted stock agreements, which appear as Exhibit 10(h) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1985, which Exhibit is incorporated herein by reference.(*) 10(i). Registrant's 1987 Director Option Plan, which appears as Appendix A to Registrant's Proxy Statement dated January 16, 1987, which Appendix is incorporated herein by reference.(*) 10(j). Registrant's 1989 Independent Director Deferred Compensation Program, which appears as Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1989, which Exhibit is incorporated herein by reference.(*) 10(k). Registrant's 1990 Incentive Stock Plan, which appears as Appendix A to Registrant's Proxy Statement dated January 11, 1990, which Appendix is incorporated herein by reference.(*)
16
EXHIBIT NUMBER DESCRIPTION ------ ----------- 10(l). Registrant's 1990 Incentive Stock Plan stock option and restricted stock agreements, which appear as Exhibit 10(l) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1990, which Exhibit is incorporated herein by reference.(*) 10(m). Resolution dated July 17, 1991 adopting amendment to Registrant's 1979 Incentive Stock Option Plan, which appears as Exhibit 10(m) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference.(*) 10(n). Resolution dated July 17, 1991 adopting amendment to Registrant's 1985 Incentive Compensation Plan, which appears as Exhibit 10(n) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference.(*) 10(o). Resolution dated July 17, 1991 adopting amendment to Registrant's 1987 Director Option Plan, which appears as Exhibit 10(o) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference.(*) 10(p). Resolution dated July 17, 1991 adopting amendment to Registrant's 1990 Incentive Stock Plan, which appears as Exhibit 10(p) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, which Exhibit is incorporated herein by reference.(*) 10(q). Registrant's 1995 Incentive Stock Plan, which appears as Appendix A to Registrant's Proxy Statement dated January 13, 1995, which Appendix is incorporated herein by reference.(*) 10(r). Executive Severance Package dated January 10, 1996 between the Registrant and Willem P. Roelandts, which appears as Exhibit 10(r) to Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1995, which exhibit is incorporated herein by reference.(*) 10(s). Registrant's 1995 Incentive Stock Plan stock option and restricted stock agreements.(*) 10(t). Amendment dated November 21, 1996 adopting amendment to Registrant's 1995 Incentive Stock Plan, 1990 Incentive Stock Option Plan, 1987 Director Option Plan, 1985 Incentive Compensation Plan, 1979 Incentive Stock Option Plan.(*) 10(u). Registrant's Executive Deferred Compensation Plan, Amended and Restated as of November 21, 1996.(*) 11-12. None. 13. Pages 29-54 (excluding order data and "Statement of Management Responsibility") and the inside back cover of Registrant's 1996 Annual Report to Shareholders. 14-17. Not applicable. 18. None. 19-20. Not applicable. 21. Subsidiaries of Registrant as of January 17, 1997. 22. None. 23. Consent of Independent Accountants. 24. Powers of Attorney. Contained in page 12 of this Annual Report on Form 10-K and incorporated herein by reference. 25-26. Not applicable. 27. Financial Data Schedule. 28. None. 99. 1996 Employee Stock Purchase Plan Annual Report on Form 11-K.
- ------------ * Indicates management contract or compensatory plan, contract or arrangement. EX-3.(A) 2 AMENDED AND RESTATED ARTICLES OF INCORPORATION. 1 EXHIBIT 3(a) HEWLETT-PACKARD COMPANY AMENDED AND RESTATED ARTICLES OF INCORPORATION FIRST: The name of this corporation is HEWLETT-PACKARD COMPANY. SECOND: The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code. THIRD: This corporation elects to be governed by all of the provisions of the General Corporation Law of 1977 not otherwise applicable to it under Chapter 23 thereof. FOURTH: The number of directors of this corporation shall be not less than eleven (11) nor more than twenty-one (21). The exact number of directors shall be fixed and may be changed from time to time, within the limits specified above, by a by-law or amendment thereof duly adopted by the shareholders or by the Board of Directors. FIFTH: The total number of shares of all classes which the corporation shall have authority to issue shall be 2,700,000,000 which shall be divided into two classes, one to be designated "Common Stock" and to be constituted of 2,400,000,000 shares, each of a par value of $1.00, and a second class to be designated "Preferred Stock", and to be constituted of 300,000,000 shares, each of a par value of $1.00. Shares of Preferred Stock may be issued by the corporation from time to time in one or more series, with such designations, powers, privileges, preferences and relative, participating, optional or other rights, if any, and such qualifications, limitations or restrictions thereon, as are permitted by law and as the Board of Directors shall from time to time provide for and fix by resolution or resolutions duly adopted, including, without limitation, voting powers, if any (including multiple or fractional votes per share), dividend rights (including dividend preferences or limited or unlimited dividend participation), conversion rights, mandatory or optional redemption rights or restrictions and preferences, or limited or unlimited participation, in the amount to be paid on liquidation, and the Board of Directors is hereby authorized to fix and determine the powers, privileges, preferences and rights of any series of Preferred Shares (including, but not limited to, applicable conversion or redemption rates or prices or dividend rates), and to fix the number of shares constituting any such series and to increase or decrease the number of shares of any such series (but not below the number of shares thereof then outstanding). No holders of shares of the corporation of any class, now or hereafter authorized, shall have any preferential or preemptive rights to subscribe for, purchase or receive any shares of the corporation of any class, now or hereafter authorized, or any options or warrants for such shares, or any rights to subscribe for, purchase or receive any securities convertible to or exchangeable for such shares, which may at any time be issued, sold or offered for sale by the corporation, except in the case of any shares of Preferred Stock to which such rights are specifically granted by any resolution or resolutions of the Board of Directors adopted pursuant to this Article FIFTH. Upon the filing in the Office of the Secretary of State of the State of California of the Certificate of Amendment of Articles of Incorporation of this corporation whereby this Article FIFTH is amended to read as herein set forth, each issued and outstanding share of Common Stock of the corporation of the par value of $1.00 per share shall be thereby and thereupon split up and divided into two shares of the par value of $1.00 per share and each person at that time holding of record any issued and outstanding shares of Common Stock shall be entitled to receive a stock certificate or certificates to evidence and represent the additional shares of Common Stock to which he becomes entitled by reason of such stock split on the basis of one additional share for each share so held of record. 2 SIXTH: Notwithstanding that no vote may be permitted by law or by any other Article hereof or by any resolution or resolutions of the Board of Directors providing for any series of Preferred Stock adopted pursuant to the provisions of Article FIFTH hereof or by any agreement between the corporation and any national securities exchange or otherwise, the vote of the shareholders of the corporation which shall be required to approve any Business Combination (as hereinafter defined) shall be as set forth in this Article SIXTH. (a) In addition to any affirmative vote required by law or any other provision hereof or any resolution or resolutions of the Board of Directors providing for any series of Preferred Stock adopted pursuant to the provisions of Article FIFTH hereof, and except as otherwise expressly provided in paragraph (b) of this Article SIXTH, none of the following transactions shall be consummated unless and until such transaction shall have been approved by the affirmative vote of the holders of at least 80 percent of the combined voting power of the outstanding shares of stock of all classes and series of the corporation entitled to vote generally in the election of directors ("Voting Stock"): (1) any merger or consolidation of the corporation with (i) any corporation which is an Interested Shareholder (as hereinafter defined) or (ii) any other corporation which after such merger or consolidation would be an Interested Shareholder or an Affiliate (as hereinafter defined) of an Interested Shareholder; or (2) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of related transactions) to or with any Interested Shareholder of (i) all or substantially all the assets of the corporation or (ii) assets of the corporation or any Subsidiary (as hereinafter defined) or Subsidiaries having in the aggregate a Fair Market Value (as hereinafter defined) in an amount which is more than 10 percent of the total value of the assets of the corporation and its consolidated subsidiaries as reflected on the most recent Balance Sheet (as hereinafter defined) of the corporation; or (3) any merger or consolidation of any Subsidiary or Subsidiaries having in the aggregate assets with a Fair Market Value as of the Announcement Date (as hereinafter defined) in an amount which is more than 10 percent of the total value of the assets of the corporation and its consolidated subsidiaries as reflected on the most recent Balance Sheet of the corporation with (i) any corporation which is an Interested Shareholder or an 2 3 Affiliate thereof or (ii) any other corporation which after such merger or consolidation would be an Interested Shareholder or an Affiliate of an Interested Shareholder; or (4) the issuance or transfer by the corporation or any Subsidiary (in one transaction or a series of related transactions) to an Interested Shareholder of any securities of the corporation or any Subsidiary in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value as of the Announcement Date of $500,000,000 or more, other than the issuance of securities upon the conversion or exchange of securities of the corporation or in exchange for securities of any Subsidiary which were acquired by an Interested Shareholder from the corporation or a Subsidiary in a Business Combination (as hereinafter defined) which was approved by a vote of the shareholders pursuant to this Article SIXTH; or (5) the adoption of any plan or proposal for the liquidation of any substantial part of the corporation proposed by or on behalf of any Interested Shareholder; or (6) any reclassification of any securities of the corporation (including any reverse stock split), any recapitalization of the capital stock of the corporation, any merger or consolidation of the corporation with or into any of its Subsidiaries, or any other transaction (whether or not with or involving any Interested Shareholder), which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of stock or series thereof of the corporation or of any Subsidiary directly or indirectly Beneficially Owned (as hereinafter defined) by any Interested Shareholder or as a result of which the shareholders of the corporation would cease to be shareholders of a corporation incorporated under the laws of the State of California having, as part of its articles of incorporation, provisions to the same effect as this Article SIXTH and the provisions of Article EIGHTH of these Amended Articles of Incorporation relating to amendments or changes to this Article SIXTH. The term "Business Combination" as used in this Article SIXTH shall mean any transaction or proposed transaction which is referred to in any one or more of the foregoing subparagraphs (1) through (6) of this paragraph (a) of this Article SIXTH. (b) The provisions of paragraph (a) of this Article SIXTH shall not be applicable to any particular Business Combination, and such Business Combination shall require only such vote of shareholders, if any, as is required by law and any other Article hereof or by the terms of any resolution or resolutions of the Board of Directors providing for any series of preferred Stock adopted pursuant to the provisions of Article FIFTH hereof or any agreement between the corporation and any national securities exchanges or otherwise, if such Business Combination shall have been approved by a majority of the Disinterested Directors (as hereinafter defined) at the time or if all the conditions specified in each of the following subparagraphs (1), (2), (3), (4) and (5) are satisfied: (1) the transaction constituting the Business Combination shall provide for a consideration per share to be received by all holders of shares of Common Stock in exchange for all of their shares of Common Stock, and the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of any consideration other than cash to be received per share by holders of Common Stock in such Business Combination, shall be at least equal to the higher of the following: 3 4 (i) if the Announcement Date of such Business Combination is within five years of the Determination Date (as hereinafter defined) in respect of the Interested Shareholder involved in such Business Combination, the higher, if applicable, of (A) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by such Interested Shareholder for any shares of Common Stock which are or were at any time within such five-year period Beneficially Owned by such Interested Shareholder and were acquired by it at any time within such five-year period or (B) the price per share equal to the Fair Market Value per share of Common Stock on the Announcement Date of such Business Combination multiplied by the ratio of (x) the price determined pursuant to the foregoing clause (A) to (y) the average of the Fair Market Values of a share of Common Stock over each trading day in the period of 90 days prior to such Determination Date, or (ii) the average of the Fair Market Values of a share of Common Stock over each trading day in the period of 90 days prior to the Announcement Date of such Business Combination; provided, however, that the price referred to in the foregoing clauses (i)(A), (i)(B) and (ii) of this subparagraph (1) shall be adjusted to reflect fairly any stock dividend, stock split, reverse stock split, combination of shares, recapitalization, reorganization or similar event affecting the number of shares of Common Stock outstanding and the market price per share of outstanding shares of Common Stock which has occurred after the date as of which such price is determined; and (2) the holders of shares of Common Stock and of any other class or series of Voting Stock shall have the right, at their option, to receive payment in cash of the consideration to be received by holders of shares of Common Stock or of any other class or series of Voting Stock in the Business Combination, if cash were previously paid by the Interested Shareholder involved in such Business Combination in order to acquire any shares of Common Stock within the five-year period immediately prior to the Announcement Date; and (3) after the Determination Date in respect of the Interested Shareholder involved in such Business Combination and prior to the consummation of such Business Combination: (i) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and have available for payment at the regular dates therefor the full amount of any dividends (whether or not cumulative) accrued on any series of Preferred Stock or any other class of stock or series thereof having a preference over the Common Stock as to dividends; and (ii) there shall have been (A) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any split or subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors, and (B) an increase in such annual rate of dividends (as necessary to prevent any such reduction) in the event of any reclassification (including any reverse stock split or combination of shares), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors; and (4) after the Determination Date in respect of the Interested Shareholder involved in such Business Combination, such Interested 4 5 Shareholder shall not have received the benefit, directly or indirectly (except as a stockholder of the corporation, in proportion to its stockholding), of any loans, advances, guarantees or similar financial assistance (collectively, "Financial Assistance") provided by the corporation, whether in anticipation of or in connection with such Business Combination or otherwise, unless the transaction constituting the Business Combination shall provide for a consideration to be received by the holders of shares of Common Stock in exchange for all of their shares of Common Stock in an amount equal to the amount required under the foregoing subparagraph (1) plus the total amount of the Fair Market Value of all such Financial Assistance; and (5) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any such subsequent provisions replacing such Act, rules or regulations) shall, at the corporation's expense, be mailed to stockholders of the corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act, rules or regulations or subsequent provisions), and the Disinterested Directors, if there are any at the time, shall have been provided a reasonable opportunity to state their views therein with respect to such proposed Business Combination and to include therewith an opinion of an independent investment banker selected by the Disinterested Directors with respect to such Business Combination. (c) For purposes of this Article SIXTH: (1) An "Affiliate" of a person shall mean any person who, directly or indirectly, controls, is controlled by or is under common control with such person. (2) "Announcement Date" with respect to any Business Combination means the date on which the proposal of such Business Combination is first publicly announced. (3) An "Associate" means (i) with respect to a corporation or association, any officer or director thereof or of a subsidiary thereof, (ii) with respect to a partnership, any general partner thereof or any limited partner thereof having a 10 percent ownership interest in such partnership, (iii) with respect to a business trust, any officer or trustee thereof or of any subsidiary thereof, (iv) with respect to any other trust or an estate, any trustee, executor or similar fiduciary and any person who has a substantial interest as a beneficiary of such trust or estate, (v) with respect to a natural person, the spouses and children thereof and any other relative thereof or of the spouse thereof who has the same home, and (vi) any Affiliate of any such person. (4) "Balance Sheet" as of any particular time means the most recent, publicly available consolidated balance sheet of the corporation and its consolidated subsidiaries audited by the corporation's independent public accountants. (5) A person shall be "Beneficial Owner" of, or have "Beneficial Ownership" of or "Beneficially Own", any Voting Stock over which such person or any of its Affiliates or Associates, directly or indirectly, through any contract, arrangement, understanding or relationship, has or shares or, upon the exercise of any conversion right, exchange right, warrant, option or similar interest (whether or not then exercisable) would have or share, either (i) voting power (including the power to vote or to direct the voting) of such security or (ii) investment power (including the power to dispose or direct the disposition) of such 5 6 security. For the purposes of determining whether a person is an Interested Shareholder, the number of shares of Voting Stock deemed to be outstanding shall include any share Beneficially Owned by such person even though not actually outstanding, but shall not include any other shares of Voting Stock which are not outstanding but which may be issuable to other persons pursuant to any agreement, arrangement or understanding, or upon exercise of any conversion right, exchange right, warrant, option or similar interest. (6) "Consolidated Transaction Reporting System" means the system of reporting securities information operated under the authority of Rule 11Aa3-1 under the Securities and Exchange Act of 1934, as amended, as such rule may from time to time be amended, and any successor rule or rules. (7) "Determination Date" in respect of an Interested Shareholder means the date on which such Interested Shareholder first became an Interested Shareholder. (8) "Disinterested Director" with respect to a Business Combination means any member of the Board of Directors of the corporation who is not an Affiliate or Associate of, and was not directly or indirectly a nominee of, any Interested Shareholder involved in such Business Combination or any Affiliate or Associate of such Interested Shareholder and who either (i) was a member of the Board of Directors prior to the time that such Interested Shareholder became an Interested Shareholder or (ii) is a successor of a Disinterested Director and was nominated to succeed a Disinterested Director by a majority of the Disinterested Directors on the Board of Directors at the time of his nomination. Any reference to "Disinterested Directors" shall refer to a singly Disinterested Director if there be but one. Any matter referred to in this Article SIXTH as requiring action of, or approval by, a majority of the Disinterested Directors shall mean an action taken or approval given by the Board of Directors without giving effect to the vote of any Director who is not a Disinterested Director and with the affirmative vote of a majority of the Disinterested Directors. (9) "Fair Market Value" as of any particular date means: (i) in the case of stock (including Voting Stock of the corporation) which is traded on any securities exchange or in the over-the-counter market, the average for the trading days during the thirty-day period immediately preceding the date in question of the closing sale price of such stock on the New York Stock Exchange Composite Tape, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended, on which such stock is listed, or, if such stock is not listed on any such exchange, of the last sales price at 4:00 p.m. reported in the Consolidated Transaction Reporting System (as heretofore defined) or, if such stock is not so reported, the average of the highest reported bid and the lowest reported asked quotation for a share of such stock furnished by the National Association of Securities Dealers Automated Quotation System or any successor quotation reporting system or, if quotations are not available in such system, as furnished by the National Quotation Bureau Incorporated or any similar organization furnishing quotations and, if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Disinterested Directors in good faith and (ii) in the case of stock of any class or series which is not traded on any securities exchange or in the over-the-counter market or in the case of property other than cash or stock or in the case 6 7 of Financial Assistance, the fair market value of such stock, property or Financial Assistance, as the case may be, on the date in question as determined by a majority of the Disinterested Directors in good faith. (10) "Interested Shareholder" shall mean any person, other than the corporation, any Subsidiary or any employee benefit plan of the corporation or any Subsidiary, who or which: (i) is the Beneficial Owner, directly or indirectly of shares of Voting Stock which are entitled to cast 20 percent or more of the total votes which all of the then outstanding shares of Voting Stock are entitled to cast in the election of directors or is an Affiliate or Associate of any such person or (ii) acts with any other person as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding or disposing of securities of the corporation, and such group is the Beneficial Owner, directly or indirectly, of shares of Voting Stock which are entitled to cast 20 percent or more of the total votes which all of the then outstanding shares of Voting Stock are entitled to cast in the election of directors, and any reference to a particular Interested Shareholder involved in a Business Combination shall also refer to any Affiliate or Associate thereof, any predecessor thereto and any other person acting as a member of a partnership, limited partnership, syndicate or group with such particular Interested Shareholder within the meaning of the foregoing clause (ii) of this subparagraph (10). (11) a "person" shall mean any individual, firm, corporation (which shall include a business trust), partnership, joint venture, trust or estate, association or other entity. (12) "Subsidiary" in respect of the corporation means any corporation or partnership of which a majority of any class of its equity securities is owned, directly or indirectly, by the corporation. (d) A majority of the Disinterested Directors shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article SIXTH, including, without limitation: (i) whether a person is an Interested Shareholder, (ii) the number of shares of Voting Stock Beneficially Owned by any person, (iii) whether a person is an Affiliate or Associate of another person, (iv) whether the requirements of paragraph (b) of this Article SIXTH have been met with respect to any Business Combination, (v) whether two or more transactions constitute a "series of related transactions" for purposes of paragraph (a) of this Article SIXTH, and (vi) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the corporation or any Subsidiary in any Business Combination has, (A) an aggregate Fair Market Value of $500,000,000 or more or (B) represent in the aggregate more than 10 percent of the total value of the assets of the corporation and its consolidated subsidiaries. The good faith determination of a majority of the Disinterested Directors on such matters shall be conclusive and binding for all purposes of this Article SIXTH. (e) Noting contained in this Article SIXTH shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. 7 8 SEVENTH: Any action required or permitted to be taken by the shareholders of the corporation must be effected at a duly called annual or special meeting of shareholders of the corporation and may not be effected by any consent in writing by the shareholders. EIGHTH: (a) The corporation reserves the right at any time and from time to time to amend, alter, change, or repeal any provisions contained herein, and other provisions authorized by the laws of the State of California at the time in force may be added or inserted, in the manner now or hereafter prescribed by law, and all rights, preferences, and privileges of whatsoever nature conferred upon stockholders, directors, or any other persons whomsoever by or pursuant to these Articles of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article. (b) In addition to any requirements of law and any other provisions hereof or any resolution or resolutions of the Board of Directors providing for any series of Preferred Stock adopted pursuant to Article FIFTH hereof (and notwithstanding the fact that approval by a lesser vote may be permitted by law, any other provision hereof or any such resolution or resolutions), the affirmative vote of the holders of 80 percent or more of the combined voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to amend, alter or repeal, or adopt any provision inconsistent with, this Article EIGHTH or Article SIXTH or SEVENTH hereof. NINTH: (a) The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. (b) To the fullest extent expressly permitted by Section 317 of the Corporations Code, the corporation shall indemnify any Agent who is a natural person and who was or is a party or is threatened to be made a party to any Proceeding. In addition, the corporation shall have authority to adopt a resolution or by-law, enter into an agreement, or take other corporate action pursuant to which the corporation may be permitted or required to indemnify an Agent for breach of duty to the corporation or its shareholders in excess of the indemnification expressly permitted by Section 317 of the Corporation Code, provided however that no Agent may be indemnified for acts or omissions or transactions from which a director may not be relieved of liability pursuant to paragraph (a) of this Article NINTH, or as to circumstances in which indemnity is expressly prohibited by Section 317 of the Corporations Code. (c) In serving or continuing to serve the corporation, an Agent is entitled to rely and shall be presumed to have relied on any rights granted pursuant to the foregoing provisions of this Article NINTH, which shall be enforceable as contract rights and continue when the Agent has ceased to be an Agent and inure to the benefit of the heirs, executors and administrators of the Agent. (d) The Board of Directors is authorized, to the fullest extent permissible under California law, to cause the corporation to pay expenses incurred by Agents in defending Proceedings and to purchase and maintain insurance on their behalf whether or not the corporation would have the power to indemnify them under the provisions of this Article NINTH or otherwise. (e) Any right or privilege conferred by or pursuant to this Article NINTH shall not be exclusive of any other rights to which any Agent may otherwise be entitled. (f) As used in this Article NINTH: (1) "Agent" has the meaning given to such term by 8 9 Section 317 of the Corporation Code. (2) "Indemnify" means to hold harmless against expenses (including without limitation attorneys' fees and any expenses of establishing a right to indemnification), judgments, fines, settlements and other amounts actually and reasonably incurred by an Agent in connection with a Proceeding; (3) "Proceeding" means any threatened, pending or completed action, whether civil, criminal, administrative or investigative; and (4) "Section 317 of the Corporations Code" refers to Section 317 of the Corporations Code of the State of California, as from time to time amended, and includes any successor provisions of such code or successor law. We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge. 9 EX-3.(B) 3 AMEMDED BY LAWS 1 EXHIBIT 3(b) BY-LAWS of HEWLETT-PACKARD COMPANY (a California Corporation) ---------------- 1 2 ARTICLE I OFFICES Section 1.1 PRINCIPAL OFFICE. The principal office for the transaction of the business of the corporation is hereby fixed and located at 3000 Hanover Street, in the city of Palo Alto, State of California. The Board of Directors is hereby granted full power and authority to change said principal office to another location within or without the State of California. Section 1.2 OTHER OFFICES. One or more branch or other subordinate offices may at any time be fixed and located by the Board of Directors at such place or places within or without the State of California as it deems appropriate. ARTICLE II DIRECTORS Section 2.1 EXERCISE OF CORPORATE POWERS. Except as otherwise provided by the Articles of Incorporation of the corporation or by the laws of the State of California now or hereafter in force, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors. The Board may delegate the management of the day-to-day operation of the business of the corporation as permitted by law provided that the business and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the Board. Section 2.2 NUMBER. The number of the Corporation's directors shall be not less than eleven (11) nor more than twenty-one (21) until changed by an amendment of this Section 2.2 adopted by the Shareholders or Board of Directors. Within such limits the exact number of directors shall be fourteen (14) until changed by an amendment to this Section 2.2 adopted by the shareholders or by the Board of Directors. Section 2.3 NEED NOT BE SHAREHOLDERS. The directors of the corporation need not be shareholders of the corporation. Section 2.4 COMPENSATION. Directors shall receive for their services as directors such stated fees or other compensation and allowances for expenses of attendance as may from time to time be fixed by the Board of Directors. The directors may also serve the corporation in other capacities and receive compensation therefor. 2 3 Section 2.5 ELECTION AND TERM OF OFFICE. At each annual meeting of shareholders, directors shall be elected to hold office until the next annual meeting, provided, that if for any reason, said annual meeting or an adjournment thereof is not held or the directors are not elected thereat, then the directors may be elected at any special meeting of the shareholders called and held for that purpose. The term of office of the directors shall begin immediately after their election and shall continue until the expiration of the term for which elected and until their respective successors have been elected and qualified. Section 2.6 VACANCIES. A vacancy or vacancies in the Board of Directors shall exist when any authorized position of director is not then filled by a duly elected director, whether caused by death, resignation, removal, change in the authorized number of directors (by the Board or the shareholders) or otherwise. The Board of Directors may declare vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony. Except for a vacancy created by the removal of a director, vacancies on the Board may be filled by a majority of the directors then in office, whether or not less than a quorum, or by a sole remaining director. A vacancy created by the removal of a director may be filled only by the approval of the shareholders. The shareholders may elect a director at any time to fill any vacancy not filled by the directors, but any such election requires the affirmative vote of a majority of the outstanding shares entitled to vote and must be made at a meeting duly called and held in accordance with Article X. Any director may resign effective upon giving written notice to the Chairman of the Board, the President, the Secretary or the Board of Directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective. Section 2.7 REMOVAL. (a) Any and all of the directors may be removed without cause if such removal is approved by the affirmative vote of a majority of the outstanding shares entitled to vote at an election of directors, subject to the following: (1) No director may be removed (unless the entire Board is removed) when the votes cast against removal, or not consenting in writing to such removal, would be sufficient to elect such director if voted cumulatively at an election at which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the 3 4 entire number of directors authorized at the time of the director's most recent election were then being elected; and (2) When by the provisions of the Articles the holders of the shares of any class or series, voting as a class or series, are entitled to elect one or more directors, any director so elected may be removed only by the applicable vote of the holders of the shares of that class of series. (b) Any reduction of the authorized number of directors does not remove any director prior to the expiration of such director's term of office. Section 2.8 NOTIFICATION OF NOMINATIONS. Nominations for the election of directors may be made by the Board of Directors or by any shareholder entitled to vote for the election of directors. Any shareholder entitled to vote for the election of directors at a meeting may nominate persons for election as directors only if written notice of such shareholder's intent to make such nomination is given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Company not later than (i) with respect to an election to be held at an annual meeting of shareholders, 90 days in advance of such meeting, and (ii) with respect to an election to be held at a special meeting of shareholders for the election of directors, the close of business on the seventh day following the date on which notice of such meeting is first given to shareholders. Each such notice shall set forth: (a) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated, (b) a representation that such shareholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (c) a description of all arrangements or understandings between such shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such shareholder, (d) such other information regarding each nominee proposed by such shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated by the Board of Directors, and (e) the consent of each nominee to serve as a director of the Company if so elected. The chairman of a shareholder meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. 4 5 ARTICLE III OFFICERS Section 3.1 ELECTION AND QUALIFICATIONS OF CORPORATE OFFICERS. The Corporate officers of this corporation shall consist of a President, one or more Vice Presidents, a Secretary and a Chief Financial Officer who shall be including but not limited to a Chairman of the Board, a Vice Chairman of the Board, a Chairman of the Executive Committee and a Treasurer as the Board of Directors shall deem expedient, who shall be chosen in such manner and hold their offices for such terms as the Board of Directors may prescribe. Any two or more of such offices may be held by the same person. The Board of Directors may designate one or more Vice Presidents as Executive Vice Presidents or Senior Vice Presidents. Either the Chairman of the Board, the Vice Chairman of the Board, the Chairman of the Executive Committee, or the President, as the Board of Directors may designate from time to time, shall be the Chief Executive Officer of the corporation. The Board of Directors may from time to time designate the President or any Executive Vice President as the Chief Operating Officer of the corporation. Any Vice President, Treasurer or Assistant Treasurer, or Assistant Secretary respectively may exercise any of the powers of the President, the Chief Financial Officer, or the Secretary, respectively, as directed by the Board of Directors and shall perform such other duties as are imposed upon such officer by the By-Laws or the Board of Directors. Section 3.2 TERMS OF OFFICE AND COMPENSATION. The term of office and salary of each of said officers and the manner and time of the payment of such salaries shall be fixed and determined by the Board of Directors and may be altered by said Board from time to time at its pleasure, subject to the rights, if any, of said officers under any contract of employment. Section 3.3 REMOVAL AND VACANCIES. Any officer of the corporation may be removed at the pleasure of the Board of Directors at any meeting or by vote of shareholders entitled to exercise the majority of voting power of the corporation at any meeting or at the pleasure of any officer who may be granted such power by resolution of the Board of Directors. Any officer may resign at any time upon written notice to the corporation without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. If any vacancy occurs in any office of the corporation, the Board of Directors may elect a successor to fill such vacancy for the remainder of the unexpired term and until a successor is duly chosen and qualified. 5 6 Section 3.4 APPOINTED OFFICERS. In addition to officers elected by the Board of Directors in accordance with Sections 3.1 and 3.2 the corporation may have one or more appointed vice presidents. Such vice presidents may be appointed by the Chairman of the Board or the President and shall have such duties as may be established by the Chairman or President. Vice presidents appointed pursuant to this Section 3.4 may be removed in accordance with Section 3.3. ARTICLE IVa VICE CHAIRMAN OF THE BOARD Section 4.1a POWERS AND DUTIES. The Vice Chairman of the Board of Directors, if there shall be one, shall, in the case of the absence, disability or death of the Chairman, exercise all the powers and perform all the duties of the Chairman of the Board. The Vice Chairman shall have such other powers and perform such other duties as may be granted or prescribed by the Board of Directors. ARTICLE IVb CHAIRMAN OF THE EXECUTIVE COMMITTEE Section 4.1b POWERS AND DUTIES. The Chairman of the Executive Committee, if there be one, shall have the power to call meetings of the shareholders and also of the Board of Directors to be held subject to the limitations prescribed by law or by these By-Laws, at such times and at such places as the Chairman of the Executive Committee shall deem proper. The Chairman of the Executive Committee shall have such other powers and be subject to such other duties as the Board of Directors may from time to time prescribe. ARTICLE V PRESIDENT Section 5.1 POWERS AND DUTIES. The powers and duties of the President are: (a) To call meetings of the shareholders and also of the Board of Directors to be held, subject to the limitations prescribed by law or by these By-Laws, at such times and at such places as the President shall deem proper. (b) To affix the signature of the corporation to all deeds, conveyances, mortgages, leases, obligations, bonds, certificates and other papers and instruments in writing which have been 6 7 authorized by the Board of Directors or which, in the judgment of the President, should be executed on behalf of the corporation, and to sign certificates for shares of stock of the corporation. (c) To have such other powers and be subject to such other duties as the Board of Directors may from time to time prescribe. ARTICLE VI VICE PRESIDENT Section 6.1 POWERS AND DUTIES OF ELECTED VICE PRESIDENTS. In case of the absence, disability of the President, the Vice President, or one of the Vice Presidents, shall exercise all the powers and perform all the duties of the President. If there is more than one Vice President, the order in which the Vice Presidents shall succeed to the powers and duties of the President shall be as fixed by the Board of Directors. The Vice President or Vice Presidents shall have such other powers and perform such other duties as may be granted or prescribed by the Board of Directors. Section 6.2 POWERS AND DUTIES OF APPOINTED VICE PRESIDENTS. Vice Presidents appointed pursuant to Section 3.4 shall have such powers and duties as may be fixed by the Chairman or President, except that such appointed vice presidents may not exercise the powers and duties of the President. ARTICLE VII SECRETARY Section 7.1 POWERS AND DUTIES. The powers and duties of the Secretary are: (a) To keep a book of minutes at the principal office of the corporation, or such other place as the Board of Directors may order, of all meetings of its directors and shareholders with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at directors' meetings, the number of shares present or represented at shareholders' meetings and the proceedings thereof. (b) To keep the Seal of the Corporation and to affix the same to all instruments which may require it. 7 8 (c) To keep or cause to be kept at the principal office of the corporation, or at the office of the transfer agent or agents, a share register, or duplicate share registers, showing the names of the shareholders and their addresses, the number and classes of shares, and the number and date of cancellation of every certificate surrendered for cancellation. (d) To keep a supply of certificates for shares of the corporation, to fill in all certificates issued, and to make a proper record of each such issuance; provided, that so long as the corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents. (e) To transfer upon the share books of the corporation any and all shares of the corporation; provided, that so long as the corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents, and the method of transfer of each certificate shall be subject to the reasonable regulations of the transfer agent to which the certificate is presented for transfer, and also, if the corporation then has one or more duly appointed and acting registrars, to the reasonable regulations of the registrar to which the new certificate is presented for registration; and provided, further that no certificate for shares of stock shall be issued or delivered or, if issued or delivered, shall have any validity whatsoever until and unless it has been signed or authenticated in the manner provided in Section 12.4 hereof. (f) To make service and publication of all notices that may be necessary or proper, and without command or direction from anyone. In case of the absence, disability, refusal, or neglect of the Secretary to make service or publication of any notices, then such notices may be served and/or published by the President or a Vice President, or by any person thereunto authorized by either of them or by the Board of Directors or by the holders of a majority of the outstanding shares of the corporation. (g) Generally to do and perform all such duties as pertain to the office of Secretary and as may be required by the Board of Directors. ARTICLE VIII CHIEF FINANCIAL OFFICER 8 9 Section 8.1 POWERS AND DUTIES. The powers and duties of the Chief Financial Officer are: (a) To supervise the corporate-wide treasury functions and financial reporting to external bodies. (b) To have the custody of all funds, securities, evidence of indebtedness and other valuable documents of the corporation and, at the Chief Financial Officer's discretion, to cause any or all thereof to be deposited for the account of the corporation at such depositary as may be designated from time to time by the Board of Directors. (c) To receive or cause to be received, and to give or cause to be given, receipts and acquittances for monies paid in for the account of the corporation. (d) To disburse, or cause to be disbursed, all funds of the corporation as may be directed by the Board of Directors, taking proper vouchers for such disbursements. (e) To render to the President and to the Board of Directors, whenever they may require, accounts of all transactions and of the financial condition of the corporation. (f) Generally to do and perform all such duties as pertain to the office of Chief Financial Officer and as may be required by the Board of Directors. ARTICLE IX COMMITTEES OF THE BOARD Section 9.1 APPOINTMENT AND PROCEDURE. The Board of Directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two (2) or more directors, to serve at the pleasure of the Board. The Board may designate one (1) or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. Section 9.2 POWERS. Any committee appointed by the Board of Directors, to the extent provided in the resolution of the Board or in these By-Laws, shall have all the authority of the Board except with respect to: (a) the approval of any action which requires the approval or vote of the shareholders; 9 10 (b) the filling of vacancies on the Board or on any committee; (c) the fixing of compensation of the director for serving on the Board or on any committee; (d) the amendment or repeal of By-Laws or the adoption of new By-Laws; (e) the amendment or repeal of any resolution of the Board which by its express terms is not so amendable or repealable; (f) a distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the Board; (g) the appointment of other committees of the Board or the members thereof. Section 9.3 EXECUTIVE COMMITTEE. In the event that the Board of Directors appoints an Executive Committee, such Executive Committee, in all cases in which specific directions to the contrary shall not have been given by the Board of Directors, shall have and may exercise, during the intervals between the meetings of the Board of Directors, all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation (except as provided in Section 9.2 hereof) in such manner as the Executive Committee may deem in the best interests of the corporation. ARTICLE X MEETINGS OF SHAREHOLDERS Section 10.1 PLACE OF MEETINGS. Meetings (whether regular, special or adjourned) of the shareholders of the corporation shall be held at the principal office for the transaction of business as specified in accordance with Section 1.1 hereof, or any place within or without the State which may be designated by written consent of all the shareholders entitled to vote thereat, or which may be designated by the Board of Directors. Section 10.2 TIME OF ANNUAL MEETINGS. The annual meeting of the shareholders shall be held at the hour of 2:00 o'clock in the afternoon on the fourth Tuesday in February of each year, if not a legal holiday, and if a legal holiday, then on the next succeeding business day not a legal holiday. 10 11 Section 10.3 SPECIAL MEETINGS. Special meetings of the shareholders may be called by the Board of Directors, the Chairman of the Board, the Vice Chairman of the Board, the Chairman of the Executive Committee, the President or the holders of shares entitled to cast not less than 10% of the vote at the meeting. Section 10.4 NOTICE OF MEETINGS. (a) Whenever shareholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given not less than 10 nor more than 60 days before the day of the meeting to each shareholder entitled to vote thereat. Such notice shall state the place, date and hour of the meeting and (1) in the case of a special meeting, the general nature of the business to be transacted, and that no other business may be transacted, or (2) in the case of the annual meeting, those matters which the Board, at the time of the mailing of the notice, intends to present for action by the shareholders, but subject to the provisions of subdivision (b) any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the names of nominees intended at the time of the notice to be presented by management for election. (b) Any shareholder approval at a meeting, other than unanimous approval by those entitled to vote, on any of the matters listed below shall be valid only if the general nature of the proposal so approved was stated in the notice of meeting or in any written waiver of notice; (1) a proposal to approve a contract or other transaction between the corporation and one or more of its directors, or between the corporation and any corporation, firm or association in which one or more directors has a material financial interest; (2) a proposal to amend the Articles of Incorporation; (3) a proposal regarding a reorganization, merger or consolidation involving the corporation; (4) a proposal to wind up and dissolve the corporation; (5) a proposal to adopt a plan of distribution of the shares, obligations or securities of any other corporation, domestic or foreign, or assets other than money which is not in accordance with the liquidation rights of any preferred shares as specified in the Articles of Incorporation. 11 12 Section 10.5 DELIVERY OF NOTICE. Notice of a shareholders' meeting or any report shall be given either personally or by mail or other means of written communication, addressed to the shareholder at the address of such shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice; or if no such address appears or is given, at the place where the principal executive office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal executive office is located. The notice or report shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by other means of written communication. An affidavit of mailing of any notice or report in accordance with the provisions of this section, executed by the Secretary, Assistant Secretary or any transfer agent, shall be prima facie evidence of the giving of the notice or report. If any notice or report addressed to the shareholders at the address of such shareholder appearing on the books of the corporation is returned to the corporation by United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice or report to the shareholder at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the shareholder upon written demand of the shareholder at the principal executive office of the corporation for a period of one (1) year from the date of the giving of the notice to all other shareholders. Section 10.6 ADJOURNED MEETINGS. When a shareholders' meeting is adjourned to another time or place, unless the By-Laws otherwise require and except as provided in this section, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than forty-five (45) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. Section 10.7 CONSENT TO SHAREHOLDERS' MEETING. The transactions of any meeting of shareholders, however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy signs a written waiver of notice or a consent to 12 13 the holding of the meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person objects at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by the California General Corporation Law to be included in the notice but not so included in the notice if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of shareholders need be specified in any written waiver of notice, unless otherwise provided in the Articles of Incorporation or By-Laws, except as provided in subdivision (b) of Section 10.4. Section 10.8 QUORUM. (a) The presence in person or by proxy of the person entitled to vote the majority of the voting shares at any meeting shall constitute a quorum for the transaction of business. If a quorum is present, the affirmative vote of the majority of shares represented at the meeting and entitled to vote on any matter shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by law or the Articles of Incorporation of these By-laws and except as provided in subdivision (b). (b) The shareholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of the number of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. (c) In the absence of a quorum, any meeting of shareholders may be adjourned from time to time by the vote of a majority of the shares represented either in person or by proxy, but no other business may be transacted, except as provided in subdivision (b). Section 10.9 ACTION BY CONSENT. Subject to the rights of the holders of shares of any series of Preferred Stock or any other class of stock or series thereof having a preference over the Common Stock as to dividend or upon liquidation, any action required or permitted to be taken by the stockholders of the Company must be effected at a duly called annual or special meeting of stockholders of the Company and may not be effected by any 13 14 consent in writing by such stockholders. Section 10.10 VOTING RIGHTS. Except as provided in Section 10.12 or in the Articles of Incorporation or in any statute relating to the election of directors or to other particular matters, each outstanding share, regardless of class, shall be entitled to one vote on any matter submitted to a vote of shareholders. Any holder of shares entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, other than elections to office, but, if the shareholder fails to specify the number of shares such shareholder is voting affirmatively, it will be conclusively presumed that the shareholders' approving vote is with respect to all shares such shareholder is entitled to vote. Section 10.11 DETERMINATION OF HOLDERS OF RECORD. (a) In order that the corporation may determine the shareholders entitled to notice of any meeting or to vote, or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days prior to the date of such meeting nor more than sixty (60) days prior to any other action. (b) In the absence of any record date set by the Board of Directors pursuant to subdivision (a) above then: (1) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. (2) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto, or the sixtieth (60th) day prior to the date of such other action, whichever is later. (c) A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board fixes a new record date for the adjourned meeting, but the Board shall fix a new 14 15 record date if the meeting is adjourned for more than forty-five (45) days from the date set for the original meeting. (d) Shareholders on the record date are entitled to notice and to vote or to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Articles of Incorporation or these By-Laws or by agreement or applicable law. Section 10.12 ELECTION FOR DIRECTORS. (a) Every shareholder complying with subdivision (b) and entitled to vote at any election of directors may cumulate such shareholder's votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which the shareholder's shares are entitled, or distribute the shareholder's votes on the same principle among as many candidates as the shareholder thinks fit. (b) No shareholder shall be entitled to cumulate votes (i.e., cast for any one or more candidates a number of votes greater than the number of the shareholder's shares) unless such candidates or candidates' names have been placed in nomination prior to the voting and the shareholder has given written notice to the chairman of the meeting at the meeting prior to the voting of the shareholder's intention to cumulate the shareholder's votes. If any one shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination. (c) In any election of directors, the candidates receiving the highest number of votes of the shares entitled to be voted for them up to the number of directors to be elected by such shares are elected. (d) Elections for directors need not be by ballot unless a shareholder demands election by ballot at the meeting and before the voting begins or unless the By-Laws so require. Section 10.13 PROXIES. (a) Every person entitled to vote shares may authorize another person or persons to act by proxy with respect to such shares. Any proxy purporting to be executed in accordance with the provisions of the General Corporation Law of the State of California shall be presumptively valid. (b) No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy continues in full force and effect until 15 16 revoked by the person executing it prior to the vote pursuant thereto, except as otherwise provided in this section. Such revocation may be effected by a writing delivered to the corporation stating that the proxy is revoked or by a subsequent proxy executed by, or by attendance at the meeting and voting in person by, the person executing the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which they are mailed. (c) A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted, written notice of such death or incapacity is received by the corporation. Section 10.14 INSPECTORS OF ELECTION. (a) In advance of any meeting of shareholders the Board may appoint inspectors of election to act at the meeting and any adjournment thereof. If inspectors of election are not so appointed, or if any persons so appointed fail to appear or refuse to act, the chairman of any meeting of shareholders may, and on the request of any shareholder or a shareholder's proxy shall, appoint inspectors of election (or persons to replace those who so fail or refuse) at the meeting. The number of inspectors shall be either one (1) or three (3). If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares represented in person or by proxy shall determine whether one (1) or three (3) inspectors are to be appointed. (b) The inspectors of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies, receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. (c) The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein. Section 10.15 ORGANIZATION. The Chairman of the Board of Directors shall preside at each meeting of shareholders. In the 16 17 absence of the Chairman, the meeting shall be chaired by an officer of the corporation in accordance with the following order: Vice Chairman, Chairman of the Executive Committee, President, Executive Vice President, Senior Vice President and Vice President. In the absence of all such officers, the meeting shall be chaired by a person chosen by the vote of a majority in interest of the shareholders present in person or represented by proxy and entitled to vote thereat, shall act as chairman. The Secretary or in his or her absence an Assistant Secretary or in the absence of the Secretary and all Assistant Secretaries a person whom the chairman of the meeting shall appoint shall act as secretary of the meeting and keep a record of the proceedings thereof. The Board of Directors of the Company shall be entitled to make such rules or regulations for the conduct of meetings of shareholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to shareholders of record of the Company and their duly authorized and constituted proxies, and such other persons as the Chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot, unless, and to the extent, determined by the Board of Directors or the chairman of the meeting, meetings of shareholders shall not be required to be held in accordance with rules of parliamentary procedure. ARTICLE XI MEETING OF DIRECTORS. Section 11.1 PLACE OF MEETINGS. Unless otherwise specified in the notice thereof, meetings (whether regular, special, of adjourned) of the Board of Directors of this corporation shall be held at the principal office of the corporation for the transaction of business, as specified in accordance with Section 1.1 hereof, which is hereby designed as an office for such purpose in accordance with the laws of the State of California, or in any other place within or without the State which has been designated 17 18 from time to time by resolution of the Board of by written consent of all members of the Board. Section 11.2 REGULAR MEETINGS. Regular meetings of the Board of Directors, of which no notice need be given except as required by the laws of the State of California, may be called at such times as may be designated from time to time by the Board of Directors. Section 11.3 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board, the Vice Chairman of the Board, the President, the Chairman of the Executive Committee, any Vice President or the Secretary or by any two (2) or more of the directors. (As amended January 20, 1978.) Section 11.4 NOTICE OF MEETINGS. Except in the case of regular meetings, notice of which has been dispensed with, the meetings of the Board of Directors shall be held upon four (4) days' notice by mail or forty-eight (48) hours' notice delivered personally or by telephone, telegraph or other electronic or wireless means. If the address of a director is not shown on the records and is not readily ascertainable, notice shall be addressed to him at the city or place in which the meetings of the directors are regularly held. Except as set forth in Section 11.6, notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place be fixed at the meeting adjourned. Section 11.5 QUORUM. A majority of the authorized number of directors constitutes a quorum of the Board for the transaction of business. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors, except as otherwise provided by law. A meeting of which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting. Section 11.6 ADJOURNED MEETING. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. If the meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment. 18 19 Section 11.7 WAIVER OF NOTICE AND CONSENT. (a) Notice of a meeting need not be given to any director who signs a waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director. (b) The transactions of any meeting of the Board, however called and noticed or wherever held, are as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before of after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Section 11.8 ACTION WITHOUT A MEETING. Any action required or permitted to be taken by the Board may be taken without a meeting, if all members of the Board shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as an unanimous vote of such directors. Section 11.9 CONFERENCE TELEPHONE MEETINGS. Members of the Board may participate in a meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one another. Participation in a meeting pursuant to this section constitutes presence in person at such meeting. Section 11.10 ORGANIZATION. The Chairman of the Board shall preside at all meetings of the Board of Directors. In the absence of the Chairman, the meeting shall be chaired by one of the following directors in the order stated: Vice Chairman, Chairman of the Executive Committee, President and Executive Vice President. In the absence of all such directors, a President Pro Tem chosen by a majority of the directors present shall preside at the meeting. Section 11.11 MEETINGS OF COMMITTEES. The provisions of this Article, except for Section 11.10, apply also to committees of the Board and action by such committees. ARTICLE XII SUNDRY PROVISIONS Section 12.1 INSTRUMENTS IN WRITING. All checks, drafts, demands for money and notes of the corporation, as all written 19 20 contracts of the corporation, shall be signed by such officer or officers, agent or agents, as the Board of Directors may from time to time by resolution designate. No officer, agent, or employee of the corporation shall have power to bind the corporation by contract or otherwise unless authorized to do so by these By-Laws or by the Board of Directors. Section 12.2 FISCAL YEAR. The fiscal year of this corporation shall begin on the first day of November of each year and end on the last day of October of the following year. Section 12.3 SHARES HELD BY THE CORPORATION. Shares in other corporations standing in the name of this corporation may be voted or represented and all rights incident thereto may be exercised on behalf of this corporation by the President or by any other officer of this corporation authorized so to do by resolution of the Board of Directors. Section 12.4 CERTIFICATES OF STOCK. There shall be issued to each holder of fully paid shares of the capital stock of the corporation a certificate or certificates for such shares. Every holder of shares in the corporation shall be entitled to have a certificate signed in the name of the corporation by the Chairman or Vice Chairman of the Board or the President or a Vice President and by the Chief Financial Officer or the Treasurer or an Assistant Treasurer or the Secretary or any Assistant Secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue. Section 12.5 LOST CERTIFICATES. The corporation may issue a new share certificate or a new certificate for any other security in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate or the owner's legal representative to give the corporation a bond (or other adequate security) sufficient to indemnify it against any claim that may be made against it (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. The Board of Directors may adopt such other provisions and restrictions with reference to lost certificates, not inconsistent with applicable law, as it shall in its discretion deem appropriate. 20 21 Section 12.6 CERTIFICATION AND INSPECTION OF BY-LAWS. The corporation shall keep at its principal executive office in this state, or if its principal executive office is not in this state at its principal business office in this state, the original or a copy of these By-Laws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside this state and the corporation has no principal business office in this state, it shall upon the written request of any shareholder furnish to such shareholder a copy of the By-Laws as amended to date. Section 12.7 NOTICES. Any reference in these By-Laws to the time a notice is given or sent means, unless otherwise expressly provided, the time a written notice by mail is deposited in the United States mails, postage prepaid; or the time any other written notice is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means, to the recipient; or the time any oral notice is communicated, in person or by telephone or wireless, to the recipient or to a person at the office of the recipient who the person giving the notice has reason to believe will promptly communicate it to the recipient. Section 12.8 REPORTS TO SHAREHOLDERS. Except as may otherwise be required by law, the rendition of an annual report to the shareholders is waived so long as there are less than one hundred (100) holders of record of the shares of the corporation (determined as provided in Section 605 of the California General Corporation Law). At such time or times, if any, that the corporation has one hundred (100) or more holders of record of its shares, the Board of Directors shall cause an annual report to be sent to the shareholders not later than one hundred twenty (120) days after the close of the fiscal year or within such shorter time period as may be required by applicable law, and such annual report shall contain such information and be accompanied by such other documents as may be required by applicable law. ARTICLE XIII CONSTRUCTION OF BY-LAWS WITH REFERENCE TO PROVISIONS OF LAW Section 13.1 DEFINITIONS. Unless defined otherwise in these By-Laws or, unless the context otherwise requires, terms used herein shall have the same meaning, if any, ascribed thereto in the California General Corporation Law, as amended from time to time. 21 22 Section 13.2 BY-LAW PROVISIONS ADDITIONAL AND SUPPLEMENTAL TO PROVISIONS OF LAW. All restrictions, limitations, requirements and other provisions of these By-Laws shall be construed, insofar as possible, as supplemental and additional to all provisions of law applicable to the subject matter thereof and shall be fully complied with in addition to the said provisions of law unless such compliance shall be illegal. Section 13.3 BY-LAW PROVISIONS CONTRARY TO OR INCONSISTENT WITH PROVISIONS OF LAW. Any article, section, subsection, subdivision, sentence, clause or phrase of these By-Laws which upon being construed in the manner provided in Section 13.2 hereof, shall be contrary to or inconsistent with any applicable provision of law, shall not apply so long as said provisions of law shall remain in effect, but such result shall not affect the validity or applicability of any other portions of these By-Laws, it being hereby declared that these By-Laws would have been adopted and each article, section, subsection, subdivision, sentence, clause or phrase thereof, irrespective of the fact that any one or more articles, sections, subsections, subdivisions, sentences, clauses or phrases is or are illegal. ARTICLE XIV AMENDMENTS All by-laws of the company shall be subject to alteration, amendment, or repeal, in whole or in part, and new By-Laws not inconsistent with the laws of the State of California or any provision of the Articles of Incorporation may be made, either by the affirmative vote of a majority of the whole Board of Directors at any regular or special meeting of the Board, or by the affirmative vote of the holders of a majority of the issued and outstanding stock of the Company entitled to vote in respect thereof, given at an annual meeting or at any special meeting at which a quorum shall be present, provided that, in each case of a proposed alteration, amendment, or repeal of the By-Laws of or the proposal of new By-Laws to be voted on at a meeting of stockholders notices thereof shall be included in the notice of the meeting of the stockholders. As amended November 22, 1996 22 EX-10.(D) 4 OFFICER'S EARLY RETIREMENT PLAN 1 EXHIBIT 10(d) HEWLETT-PACKARD COMPANY OFFICERS EARLY RETIREMENT PLAN SECTION 1. ESTABLISHMENT AND PURPOSE OF PLAN The Hewlett-Packard Company Officers Early Retirement Plan was adopted and established effective April 1, 1983 (the "Effective Date"). The Plan was last amended and restated as of January 1, 1996 to read as set forth herein. The Plan is intended to provide benefits for a select group of management and highly compensated employees referred to as "Officers" herein. The purpose of the program is to provide an opportunity for Officers to retire early with the benefits provided in Section 4. SECTION 2. DEFINITIONS The following words and phrases when capitalized and used in this Plan shall have the following meaning unless from the context it clearly appears otherwise: 2 (a) "Anniversary Year" means, with respect to any Officer, a period of twelve (12) consecutive months commencing on his or her Election Date and each annual anniversary of such date at which the individual continues to be an Officer. (b) "Company" means Hewlett-Packard Company, a California corporation. (c) "Early Retirement Benefit" means the benefit provided under Section 4. A Participant's Early Retirement Benefit shall commence the month following his or her termination of employment. (d) "Election Date" means the date as of which an individual becomes an Officer by action of the Board of Directors of the Company. (e) "Eligible Employee" means an Employee who at termination of employment either is an Officer or has been an Officer during his or her career. (f) "Employee" means an individual employed by the Company or any foreign or domestic subsidiary of the Company. (g) "ERISA" means the Employee Retirement Income Security Act of 1974, as it may be amended from time to time. 2 3 (h) "Final Base Rate of Pay" means the greater of (i) the Rate of Pay on the last day of an Employee's active employment, or (2) the Rate of Pay on the last day an Employee is an Officer. (i) "Normal Retirement Date" means the last day of the month in which an individual attains age sixty five (65). (j) "Officer" means any Employee who, with respect to the Company, holds the title of president or vice president, and is on the U.S. dollar payroll of the Company. (k) "Participant" means any individual who is receiving or entitled to receive benefits under the Plan. (l) "Plan" means the Hewlett-Packard Company Officers Early Retirement Plan, as amended from time to time. (m) "Rate of Pay" means, with respect to an Employee, the average of his or her monthly rates of pay in effect at the beginning of a fiscal quarter for the four (4) consecutive fiscal quarters ending with the fiscal quarter in which the determination is made. (n) "Vested Fraction" means with respect to an Officer who has an Election Date prior to November 1, 1993, one (1.0); and with respect to an Officer who has an Election Date on 3 4 and after November 1, 1993 a fraction determined by the service of the individual as an Officer after his or her Election Date pursuant to the following Vesting Schedule: Vesting Schedule
Number of Anniversary Years Vested Following Election Date Fraction Less than 1 0 1 but less than 2 .2 2 but less than 3 .4 3 but less than 4 .6 4 but less than 5 .8 5 or more 1.0
(o) "Years of Full-Time Equivalent Service" means twelve (12) month periods of service or, in the case of an individual employed in other than full-time status, such longer periods of service required to aggregate two thousand eighty-eight (2088) standard hours, and during which an individual is in active pay status on the U.S. Dollar payroll of the Company. Such periods shall include, without limitation, flexible time off, vacation, sick leave, jury duty, holidays, and bereavement leave. Such periods shall not include personal or medical leaves of absence. Years of Full-Time Equivalent Service shall include all "Years of Service" as defined in the Plan and accrued as of December 31, 1988. Years of Full-Time Equivalent Service shall include service with a foreign subsidiary of the Company. 4 5 The determination of an individual's Years of Full-Time Equivalent Service shall be made by the Company consistent with the determination of foreign and United States service for service-based welfare benefit programs sponsored by the Company. For all purposes under the Plan, the total Years of Full-Time Equivalent Service of an Eligible Employee shall be determined as of the last day an Employee is an Officer. The determination of an individual's Years of Full-Time Equivalent Service shall be made by the Company, and such determination shall be conclusive and binding on all persons. SECTION 3. ELIGIBILITY AND PARTICIPATION (a) Eligibility. Any Eligible Employee whose employment terminates upon or after attainment of age sixty (60) while this Plan is in effect shall be eligible to participate in this Plan. By action of the Board of Directors of the Company, in its sole and absolute discretion, the age requirement may be reduced, but not below age fifty-five (55), and the Vested Fraction may be accelerated. (b) Participation. Termination of employment and participation in this Plan are voluntary at the Eligible Employee's election subject to any action required by the Board of Directors 5 6 of the Company pursuant to Section 3(a). A request to participate in this Plan is made by notifying a member of the Executive Committee of the Board of Directors. SECTION 4. BENEFITS (a) Termination of Employment At or After Age Sixty. Upon receipt by the Company of an Eligible Employee's election to participate in this Plan upon termination of employment on or after age sixty (60), the Company shall pay the Early Retirement Benefit. A Participant's monthly Early Retirement Benefit shall be determined as follows: (i) The Final Base Rate of Pay shall be multiplied by a fraction, the numerator of which is the age at termination of employment, plus the Years of Full-Time Equivalent Service minus forty-five (45), and the denominator of which is one hundred (100); and (ii) The amount determined in Section 4(a)(i) above shall be multiplied by the Vested Fraction at termination of employment. The amount determined under Section 4(a)(ii) above shall be the Participant's monthly Early Retirement Benefit. The percentage of Final Base Rate of Pay as determined by Section 4(a)(i) above is shown in Table 1 attached hereto. (b) Termination of Employment At or After Age Fifty-Five and Prior to Age Sixty. Upon receipt by the Company of an Eligible Employee's request to participate in this Plan on 6 7 termination of employment at or after age fifty-five (55) and prior to age sixty (60), the Company shall seek approval of the Board of Directors as required by Section 3(a). Upon approval by the Board of Directors of early commencement and/or acceleration of the Vested Fraction, the Company shall pay the Early Retirement Benefit actuarially reduced for commencement prior to age sixty (60). The monthly Early Retirement Benefit payable under this Section 4(b) shall equal the present value of the monthly Early Retirement Benefit determined under Section 4(a) assuming payments, as determined under Section 4(a), would have commenced when the Participant attained age sixty (60). For purposes of the immediately preceding sentence, all benefits are deemed paid through the Participant's Normal Retirement Date and all discounting shall be based on the average 7-year U.S. Treasury note interest rate for the month prior to the commencement of benefits. (c) Disability Plan Offset. Early Retirement Benefits payable hereunder shall be reduced by payments under the Hewlett-Packard Company Employee Benefits Organization Income Protection Plan and the Hewlett-Packard Company Supplemental Income Protection Plan to the extent benefits from this Plan and disability benefits are paid with respect to the same periods of time. (d) Form and Payment of Benefits. The Early Retirement Benefit will be paid monthly effective as of the beginning of the month following termination of employment. (e) Duration of Early Retirement Benefit. An individual who is receiving Early Retirement Benefits shall continue to do so through the earlier of 7 8 (i) the month in which the Participant attains age sixty-five (65), (ii) the month in which the Participant dies, or (iii) the month during which the date described in subsection 4(f) occurs. (f) Activity in Conflict with Company's Interests. Participants may not engage in any activity, whether or not compensated, which is in conflict with the interests of the Company (referred to herein as "conflicting activity"). Conflicting activities shall include, but not be limited to, employment, consulting, or directorship assignments with firms, partnerships, etc. that compete or are likely to compete directly or indirectly with HP. Such activities shall also include activities which enhance or support a competitor's products or services. Participants must provide prior written notice to the Company before engaging in any activity which potentially is, or might become, a conflicting activity. The Company, through its Board of Directors, shall make a determination as to whether the proposed activity is a conflicting activity. A written notice of such determination shall be provided to the Participant. Should the Participant elect to engage in a conflicting activity after receiving notice, benefits shall end at the conclusion of the month in which the conflicting activity begins. Should the Participant engage in potentially conflicting activity without providing prior written notice to the Company and the Company becomes aware of such activity, the Company through its Board of Directors, shall make a determination as to whether the activity is a conflicting 8 9 activity. A written notice of such determination shall be provided to the Participant. If the activity is determined to be a conflicting activity then all benefits under the plan shall immediately terminate. Financial investment, so long as it is totally passive with respect to the Participant's activity, shall not be considered a conflicting activity. SECTION 5. FUNDING POLICY AND METHOD Benefits and any administrative expenses shall be paid as needed solely from the general assets of the Company. No contributions are required from any Officer or Participant. This Plan shall not be construed to require the Company to fund any of the benefits provided hereunder nor to establish a trust for such purpose. The Company may make such arrangements as it desires to provide for the payment of benefits, including, but not limited to, the establishment of a rabbi trust or such other equivalent arrangements as the Company may decide. No such arrangement shall cause the Plan to be a funded plan within the meaning of Title I of ERISA, nor shall any such arrangement change the nature of the obligation of the Company nor the rights of the Participants under the Plan as provided in this document. Neither the Participant nor his or her estate shall have any rights against the Company with respect to the Early Retirement Benefit except as a general unsecured creditor. No Participant has an interest in his or her Early Retirement Benefit until the Participant actually receives the payment. 9 10 SECTION 6. CLAIMS PROCEDURE (a) Initiation of Benefits. Plan benefits will be paid to or on behalf of a Participant under the Plan, subject to any action required by the Board of Directors of the Company pursuant to Section 3(a), after the Eligible Employee has notified a member of the Executive Committee of the Board of Directors of his or her intention to terminate employment and participate in this Plan. (b) Denial of Claims. In the event any claim for benefits is denied, in whole or in part, the Company shall notify the claimant of such denial in writing and shall advise the claimant of his or her right to appeal the denial. Such written notice shall set forth specific reasons for the denial and shall be given to the claimant within ninety (90) days after the Company receives his or her claim. SECTION 7. REVIEW PROCEDURE (a) Review Panel. The Review Panel appointed for the Hewlett-Packard Company Deferred Profit Sharing and Retirement Plans shall be the named fiduciary which shall have discretionary authority to act with respect to appeals from denials of claims for benefits under the Plan. 10 11 (b) Right to Appeal. Any person whose claim for benefits is denied in whole or in part, may appeal from the denial by submitting a written request for review of the claim to the Review Panel within 60 days after receiving written notice of the denial from the Company. (c) Form of Request for Review. A request for review must be made in writing and shall be addressed as follows: "Review Panel under the Hewlett-Packard Company Officers Early Retirement Plan; 3000 Hanover Street, Palo Alto, California 94304." A request for review shall set forth all of the grounds upon which it is based, all facts in support thereof and any other matters which the claimant deems pertinent. (d) Review Panel Decision. Within sixty (60) days after receipt of a request for review, the Review Panel shall give written notice of its decision to the claimant and the Company. In the event the Review Panel confirms the denial of the claim for benefits, in whole or in part, such notice shall set forth, in a manner calculated to be understood by the claimant, specific reasons for such denial and specific references to the Plan provisions on which the decision was based. In the event that the Review Panel determines that the claim for benefits should not have been denied, in whole or in part, the Company shall take appropriate remedial action as soon as reasonably practicable after receiving notice of the Review Panel's decision. 11 12 SECTION 8. AMENDMENT AND TERMINATION OF THE PLAN The Company reserves the right to amend or terminate the Plan at any time. Any amendment or termination of the Plan will not affect the entitlement of any Eligible Employee who terminates employment before the amendment or termination. All benefits to which any Participant may be entitled shall be determined under the Plan as in effect at the time the Participant terminates employment and shall not be affected by any subsequent change in the provisions of the Plan. Officers will be given notice prior to the discontinuance of the Plan or reduction of any benefits provided by the Plan. SECTION 9. GENERAL PROVISIONS (a) Choice of Law. This Plan, and all rights under this Plan, shall be interpreted and construed in accordance with ERISA and, to the extent that state laws are not preempted by ERISA, the law of the State of California. (b) Assignment. The interest and property rights of any person in the Plan or in any payment to be made under the Plan shall not be subject to option nor be assignable either by voluntary or involuntary assignment or operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any act in violation of this Section 9(b) shall be void. 12 13 (c) Number. Except as otherwise clearly indicated, the singular shall include the plural, and vice versa. (d) Headings and Captions. The headings and captions herein are provided for reference and convenience only and shall not be considered part of the Plan nor shall they be employed in the construction of the Plan. (e) Competency to Handle Benefits. If, in the opinion of the Company, any person becomes unable to properly handle any property distributable to such person under the Plan, the Company may make any reasonable arrangement for the distribution of Plan benefits on such person's behalf as it deems appropriate. Payment to anyone described in this Section 9(e) will release the Company from all further liability to the extent of the payment made. (f) Severability of Provisions. If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and the Plan shall be construed and enforced as if such provision had not been included. 13 14 SECTION 10. EXECUTION To record the adoption of the Plan, the Company has caused its Chair of the Compensation Committee of the Board of Directors to affix the Company's name and seal hereto this 16th day of November, 1995 HEWLETT-PACKARD COMPANY By: /s/ John B. Fery ----------------------------------- John B. Fery Chair of the Compensation Committee of the Board of Directors 14 15 EARLY RETIREMENT BENEFIT PERCENTAGE SCHEDULE
YEARS OF SERVICE 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ----------------------------------------------------------------------------------------------------------- 55 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 56 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 57 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 A 58 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 G 59 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 E 60 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 61 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 62 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 63 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 64 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59
TABLE 1 16 FIRST AMENDMENT TO THE HEWLETT-PACKARD COMPANY OFFICERS EARLY RETIREMENT PLAN (As Last Amended and Restated Effective January 1, 1996) The Hewlett-Packard Company Officers Early Retirement Plan (the "Plan") is hereby amended to change the definition of "Officer" so that only those individuals elected by a majority vote of the Board of Directors of the Company pursuant to section 3.1 of the Company's amended By-Laws are eligible to participate in the Plan. Section 2(j)(definition of "Officer") of the Plan is amended in its entirety to read as follows: "Officer" means any Employee on the U.S. dollar payroll of the Company who, with respect to the Company, is the president or a vice president by election of a majority vote of the Board of Directors of the Company pursuant to section 3.1 of the Company's amended By-Laws. An Employee who holds any title established by any other authority, including but not limited to, a committee of the Board of Directors or any person or group operating as or on behalf of Company management, shall not be an Officer for any purpose under this Plan. This First Amendment is effective December 1, 1996. To record the adoption of this First Amendment, the undersigned has executed this First Amendment this 12th day of December, 1996. HEWLETT-PACKARD COMPANY BY: /s/ Susan P. Orr ----------------------------------- Susan P. Orr Chair of the Compensation Committee of the Board of Directors EX-10.(G) 5 EXCESS BENEFIT RETIREMENT PLAN 1 EXHIBIT 10(g) HEWLETT-PACKARD COMPANY EXCESS BENEFIT RETIREMENT PLAN SECTION 1. ESTABLISHMENT AND PURPOSE OF PLAN The Hewlett-Packard Company Excess Benefit Retirement Plan was adopted and established effective November 1, 1983. The Plan is intended to provide supplemental retirement benefits to certain management and highly compensated employees equal to those benefits that are limited under the Deferred Profit Sharing Plan and/or Retirement Plan because of the limitations on contributions and benefits imposed by Section 415 of the Internal Revenue Code of 1986 (the "Code") and the limitation on compensation imposed by Section 401(a)(17) of the Code. This Plan is intended to be an unfunded excess benefit plan under Sections 3(36) and 4(b)(5) of the Employee Retirement Income Security Act of 1974 ("ERISA"). The Plan is also intended to be a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees under Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. The Plan was last amended and restated as of November 1, 1994, to read as set forth herein. The Company retains the right, as provided in Section 8, to amend or terminate the Plan at any time. The Plan is administered by the 2 Compensation Committee of the Board of Directors of the Company, as provided in Section 7. SECTION 2. DEFINITIONS Certain capitalized words and phrases used in the text of the Plan shall have the meaning attributed to them in the DPSP or RP or the following meaning unless the text further specifies the meaning or from the context it clearly appears otherwise: (a) "Actual DPSP Contribution" means the amount of Company Contributions, Separation Contributions and Forfeitures in fact made to a Participant's Account under the DPSP for any Plan Year ending on or prior to October 31, 1993. (b) "Actual DPSP Account" means the amount in the separate account established for each Participant under the DPSP to which is allocated his or her share of Company Contributions, Separation Contributions and Forfeitures as provided in the DPSP. (c) "Actual RP Benefit" means the benefit in fact determined under the RP at the following times: 2 3 (i) In the case of a Participant who at termination of employment has an Actual DPSP Account, as of the date when benefits are to be paid under the DPSP, or (ii) In the case of a Participant who at termination of employment does not have an Actual DPSP Account, as of the date of termination of employment. (d) "Committee" means the Compensation Committee of the Board of Directors of the Company; provided, that for purposes of Sections 5(b) and 9, with respect to any Participant other than a Participant who is an officer as defined in the Hewlett-Packard Company Officers Early Retirement Plan, Committee means the Executive Committee of the Board of Directors of the Company. (e) "DPSP" or "Deferred Profit-Sharing Plan" means the Hewlett-Packard Company Deferred Profit-Sharing Plan Amended and Restated as of November 1, 1993, and as it may be amended from time to time. (f) "Participant" means any individual entitled to a Virtual DPSP Contribution under Section 4(a) or a Virtual Retirement Benefit under Section 5. 3 4 (g) "Plan" means the Hewlett-Packard Company Excess Benefit Retirement Plan, as described herein and as it may be amended from time to time. (h) "RP" or "Retirement Plan" means the Hewlett-Packard Company Retirement Plan Amended and Restated as of October 29, 1993, and as it may be amended from time to time. (i) "Virtual DPSP Account" means a bookkeeping account established under Section 4 to which is credited all Virtual DPSP Contributions and investment earnings as provided in Section 4. (j) "Virtual DPSP Contribution" means an amount established under Section 4 with respect to a Plan Year ending on or prior to October 31, 1993 which equals the excess amount that would have been contributed on behalf of a Participant to the Participant's Account under the DPSP but was not so contributed by reason of the limitations imposed by Section 415 of the Code or Section 401(a)(17) of the Code. (k) "Virtual Retirement Benefit" means the benefit payable to a Participant or Beneficiary determined under Section 5. 4 5 (l) "Virtual RP Benefit" means the benefit determined under the RP based on the Annuity Value of the Actual DPSP Account, if applicable, but otherwise without regard to the limitations of Section 415 or Section 401(a)(17) of the Code. SECTION 3. ELIGIBILITY AND PARTICIPATION (a) General Rule. Any individual who is participating in the DPSP and/or the RP and who by reason of the limitations of Section 415 or Section 401(a)(17) of the Code is unable to receive the formula contributions or benefits otherwise provided under the DPSP and/or RP shall automatically be a Participant in this Plan. (b) Termination of Participation. An individual shall cease to be a Participant as of the date he or she ceases to be an Employee, unless the individual is entitled to benefits hereunder, in which event his or her status as a Participant shall terminate on the earlier of the date of his or her death or the date no further amount is payable to the individual hereunder. SECTION 4. VIRTUAL DPSP CONTRIBUTIONS AND ACCOUNTS (a) Virtual DPSP Contribution. As of the last day of each Plan Year ending on or prior to October 31, 1993, or in the case of an Employee whose employment by the Affiliated Group terminated during any such Plan Year, the Employee's Valuation 5 6 Date (if other than the last day of the Plan Year), the Committee has determined the amount of Company Contributions, Separation Contributions, and Forfeitures allocable to the Participant's Account under the DPSP with regard to both the limitations of Section 401(a)(17) of the Code and of Section 415 of the Code (but without regard to any other defined contribution plan of the Company). The amount determined to be the maximum permissible contribution pursuant to the Code under the immediately preceding sentence shall be the "Actual DPSP Contribution." As of the last day of each Plan Year ending on or prior to October 31, 1993, or in the case of an Employee whose employment by the Affiliated Group terminated during any such Plan Year, the Employee's Valuation Date (if other than the last day of the Plan Year), the Committee has determined the amount of Company Contributions, Separation Contributions, and Forfeitures that would have been allocable to the Participant's Account under the DPSP if contributions under the DPSP were determined without regard to the limitations of both Section 415 and Section 401(a)(17) of the Code. The amount determined under the immediately preceding sentence less the Actual DPSP Contribution is the "Virtual DPSP Contribution." (b) Virtual DPSP Account. A separate account, called a "Virtual DPSP Account," shall be maintained by the Committee for each Participant to which has been credited the Participant's Virtual DPSP Contribution for each Plan Year ending on or prior to October 31, 1993. As of the last day of each Plan Year, or in the case of an Employee whose employment by the Affiliated Group has terminated and who has made claim for benefits under the DPSP, as of the Employee's Valuation Date (if other than the last day 6 7 of the Plan Year), each Virtual DPSP Account shall be revalued. For purposes of valuation, the Virtual DPSP Account shall be deemed invested as the assets of the DPSP including the periodic transfer of assets from Fund A to Fund B as provided in the DPSP. SECTION 5. VIRTUAL RETIREMENT BENEFIT (a) Determination of Benefit. The benefits payable under this Plan shall be determined as of the date when benefits are to be paid under the DPSP, or, if no benefits are payable under the DPSP, as of the date of termination of employment. As of that date the Committee shall determine the Virtual RP Benefit and the Actual RP Benefit. As of the same date the Committee shall determine the Annuity Value of the Virtual DPSP Account, if any, in the same manner as the Annuity Value of the Actual DPSP Account, if any, is determined under the RP. The benefit payable under this Plan, if any, shall equal: (i) The greater of the Virtual RP Benefit or the Annuity Value of the Virtual DPSP Account; less (ii) The Actual RP Benefit. The benefit determined pursuant to the immediately preceding sentence shall be known as the Virtual Retirement Benefit. 7 8 (b) Form and Time of Payment. The Participant's Virtual Retirement Benefit shall be converted to a lump sum benefit as of the date the Participant's DPSP benefit is to be paid, or, if no benefits are payable under the DPSP, as of the date of termination of employment. The conversion shall be based on the same actuarial factors that would be used to convert an RP benefit from an annuity to a lump sum at the time of the conversion. Thereafter, the unpaid portion of such lump sum Virtual Retirement Benefit shall be credited with earnings as if it were a benefit invested in Fund B under the DPSP until it is paid out to the Participant under this Plan as set forth below in this Section 5(b). Benefits are payable under this Plan in the form of a lump sum or annual installments at such time or times as the Committee shall determine in its sole discretion, subject to the following limitations: (i) If benefits are payable under the DPSP, no benefits shall be payable under this Plan until benefits are to be paid under the DPSP; (ii) The Committee may change the date a payment is to be made at any time before the date of the scheduled payment; (iii) Any annual installments shall be payable in January of the particular year; 8 9 (iv) No lump sum may be payable later than January of the calendar year following the calendar year in which the Participant attains (or would have attained) age 70-1/2; provided, that the Committee may allow the unpaid balance to be paid in a lump sum after annual installment payments have commenced; (v) Annual installments must be 15 or fewer in number and commence no later than January of the calendar year following the calendar year in which the Participant attains (or would have attained) age 70-1/2; (vi) The amount of each annual installment shall be determined by dividing the unpaid balance as of the last day of the prior Plan Year by the sum of the annual payments remaining to be made; and (vii) If at the time the Virtual Retirement Benefit is first determined under this Section 5 the lump sum equivalent of such benefit does not exceed one hundred fifty thousand dollars ($150,000.00), benefits shall be payable under this Plan as soon as administratively practicable after the date the Virtual Retirement Benefit is first determined and only in the form of a lump sum. 9 10 If the Committee has not otherwise determined, benefits shall be payable in 15 annual installments commencing in January of the calendar year following the calendar year in which the Participant attains (or would have attained) age 70-1/2. In administering these payment provisions of the Plan, the Committee may allow Participants to elect the form and time of payment that they desire consistent with these rules, and the Committee may establish guidelines for its own use in determining what elections made pursuant to these rules shall be disapproved. However, such Participant elections and Committee guidelines shall not in any way limit the Committee's sole discretion to determine the form and time of payment of a Participant's Virtual Retirement Benefit consistent with the rules set forth in this Section 5(b) of the Plan. (c) Death of Participant. If a Participant dies, without regard to whether he or she is employed by any member of the Affiliated Group at the time of death, his or her Beneficiary shall be the individual (or individuals) designated on the form prescribed by the Committee (or, in the absence of such a designation, his or her Beneficiary under the DPSP). Such Beneficiary shall be entitled to the unpaid portion (if any) of the Virtual Retirement Benefit determined under Section 5(a). The Beneficiary shall be subject to the rules of form and time of payment established under Section 5(b). 10 11 SECTION 6. FUNDING POLICY AND METHOD Benefits and administrative expenses shall be paid as needed solely from the general assets of the Company. This Plan shall be unfunded within the meaning of Section 4(b)(5) of ERISA. No contributions are required or permitted from any Participant. SECTION 7. ADMINISTRATION The Plan shall be administered by the Committee. No member of the Committee shall become a Participant in the Plan. The Committee shall make such rules, interpretations and computations as it may deem appropriate, and any decision of the Committee with respect to the Plan, including (without limitation) any determination of eligibility to participate in the Plan and any calculation of benefits under the Plan shall be conclusive and binding on all persons. Those responsibilities of the Committee that do not involve the exercise of its discretion may be performed on behalf of the Committee by the Company through its employees. 11 12 SECTION 8. AMENDMENT AND TERMINATION OF THE PLAN The Company reserves the right to amend or terminate the Plan at any time by resolution of the Company's Board of Directors or by resolution by any proper delegatee of the Company's Board of Directors. Any amendment or termination of the Plan will not affect the entitlement of any Participant who terminates employment before the amendment or termination. All benefits to which any Participant may be entitled shall be determined under the Plan as in effect at the time the Participant terminates employment and shall not be affected by any subsequent changes in the provisions of the Plan. Participants will be given notice prior to the discontinuance of the Plan or reduction of any benefits provided by the Plan. SECTION 9. GENERAL PROVISIONS (a) Choice of Law. This Plan, and all rights under this Plan, shall be interpreted and construed in accordance with the law of the State of California. (b) Assignment. The interest and property rights of any person in the Plan or in any payment to be made under the Plan shall not be subject to option nor be assignable either by voluntary or involuntary assignment or operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any act in violation of this Section 9(b) shall be void. 12 13 (c) Number. Except as otherwise clearly indicated, the singular shall include the plural, and vice versa. (d) Headings and Captions. The headings and captions herein are provided for reference and convenience only and shall not be considered part of the Plan nor shall they be employed in the construction of the Plan. (e) Competency to Handle Benefits. If, in the opinion of the Committee, any person becomes unable to properly handle any property distributable to such person under the Plan, the Committee may make any reasonable arrangement for the distribution of Plan benefits on such person's behalf as it deems appropriate. Payment to anyone described in this Section 9(e) will release the Company from all further liability to the extent of the payment made. (f) Severability of Provisions. If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and the Plan shall be construed and enforced as if such provision had not been included. (g) Tax Withholding. If any Federal or state tax withholding or payroll tax is required with respect to a Participant's Virtual Retirement Benefit, the Committee shall make appropriate arrangements with the Participant for satisfaction of such obligation. 13 14 (h) No Employment Rights. Nothing in the Plan, nor any action of the Committee or the Company pursuant to the Plan, shall be deemed to give any person any right to remain in the employ of the Company or affect the right of the Company to terminate a person's employment at any time, with or without cause. SECTION 10. EXECUTION To record the amendment and restatement of the Plan as set forth herein, the Company has caused its Chair of the Compensation Committee of the Board of Directors to affix the Company's name and seal hereto this 21st day of July, 1994. HEWLETT-PACKARD COMPANY By: /s/John B. Fery --------------------- John B. Fery Chair of the Compensation Committee of the Board of Directors 14 EX-10.(S) 6 1995 INCENTIVE STOCK PLAN 1 EXHIBIT 10(s) [Hewlett-Packard Logo] HEWLETT-PACKARD COMPANY INCENTIVE STOCK PLAN STOCK OPTION AGREEMENT (NON-QUALIFIED) THIS AGREEMENT, dated ("Grant Date") between HEWLETT-PACKARD COMPANY, a California corporation ("Company"), and ("Employee"), an employee of is entered into as follows: WITNESSETH: WHEREAS, the Company has established the Hewlett-Packard Company 1995 Incentive Stock Plan ("Plan"), a copy of which is attached hereto as Exhibit "A" and made a part hereof; and WHEREAS, the Compensation Committee of the Company ("Committee") has determined that the Employee shall be granted an option under the Plan as hereinafter set forth; NOW THEREFORE, the parties hereby agree that in consideration of services rendered and to be rendered, the Company grants the Employee an option ("Option") to purchase shares of its $1 par value voting Common Stock upon the terms and conditions set forth herein. 1. This Option is granted under and pursuant to the Plan and is subject to each and all of the provisions thereof. 2. This Option price shall be per share. 3. This Option is not transferable by the Employee otherwise than by will or the laws of descent and distribution, and is exercisable only by the Employee during his lifetime. This Option may not be transferred, assigned, pledged or hypothecated by the Employee during his lifetime, whether by operation of law or otherwise, and is not subject to execution, attachment or similar process. 4. This Option may not be exercised before the first anniversary of the date hereof, nor may it be exercised as to more than one-fourth the number of shares covered herein before the second anniversary hereof, nor may it be exercised as to more than one-half of the number of shares covered herein before the third anniversary hereof, nor may it be exercised as to more than three-fourths the number of shares covered herein before the fourth anniversary hereof. Notwithstanding the foregoing, this Option shall be exercisable in full upon the retirement of the Employee because of age or permanent and total disability, or upon his death. 5. This Option will expire ten (10) years from the date hereof, unless sooner terminated or canceled in accordance with the provisions of the Plan. 6. This Option shall be exercised by delivering to the Secretary of the Company at its head office a written notice stating the number of shares as to which the Option is exercised; provided, however, that no such exercise shall be with respect to fewer than twenty-five (25) shares or the remaining shares covered by the Option if less than twenty-five. The written notice must be accompanied by the payment of the full Option price of such shares. Payment may be in cash or shares of the Company's Common Stock or a combination thereof; provided, however, that any payment in shares shall be in strict compliance with all procedural rules established by the Committee. 7. All rights of the Employee in this Option, to the extent that it has not been exercised, shall terminate upon the death of the Employee (except as hereinafter provided) or termination of his employment for any reason other than retirement because of age or permanent and total disability, and in case of such retirement three (3) years from the date thereof; provided, however, that in the event of the Employee's death his legal representative or designated beneficiary shall have the right to exercise all or a portion of the Employee's right under this Option. The representative or designee must exercise the Option within one (1) year after the death of the employee, and shall be bound by the provisions of the Plan. In all cases, however, the Option will expire no later than the expiration date set forth in Paragraph 5. 8. The Employee shall remit to the Company payment for all applicable U.S. withholding taxes at the time the Employee exercises any portion of this Option. 9. Whenever used in this Agreement, the masculine gender shall be deemed to include the feminine. 10. Neither the Plan nor this Agreement nor any provision under either shall be construed so as to grant Employee any right to remain in the employ of the Company, and it is expressly agreed and understood that employment is terminable at the will of either party. HEWLETT-PACKARD COMPANY By -------------------------------- Lewis E. Platt Chairman, CEO and President By -------------------------------- D. Craig Nordlund Associate General Counsel and Secretary 2 [Hewlett-Packard Logo] HEWLETT-PACKARD COMPANY RESTRICTED STOCK AGREEMENT This agreement is made as of the by and between Hewlett-Packard Company, a California Corporation ("Company"), and ("Employee"). WHEREAS the continued participation of the Employee is considered by the Company to be important for the Company's continued growth; and WHEREAS in order to give the Employee an incentive to continue in the employ of the Company and to participate in the affairs of the Company, the Company is willing to grant to the Employee shares of the Company's $1 par value Common Stock ("Stock") subject to the restrictions stated below and in accordance with the terms and conditions of the Company's 1995 Incentive Stock Plan ("Plan"). THEREFORE, the parties agree as follows: 1. Grant of Stock. Subject to the terms and conditions of this Agreement and of the Plan, the Company hereby grants to Employee shares of stock. 2. Vesting Schedule. The interest of Employee in the Stock shall vest in full 3 years from the date of this agreement. Provided the Employee remains in the employ of the Company on a continuous, full-time basis through the close of business on the interest of the Employee in the Stock shall become fully vested on that date. 3. Restrictions. (a) The Stock or rights granted hereunder may not be sold, pledged or otherwise transferred until the shares become vested in accordance with Section 2. The period of time between the date hereof and the date shares become vested is referred to herein as the "Restriction Period." (b) If Employee's employment with the Company is terminated at any time for any reason other than retirement after attaining 55 years of age with 15 years of service to the Company or 65 years of age without regard to service prior to the lapse of the Restriction Period, all Stock granted hereunder shall be forfeited by the Employee, and ownership transferred back to the Company. 4. Legend. All certificates representing any shares of Stock of the Company subject to the provisions of this Agreement shall have endorsed thereon the following legend: "The shares represented by this certificate are subject to an agreement between the Corporation and the registered holder, a copy of which is on file at the principal office of this Corporation." 5. Escrow. The certificate or certificates evidencing the Stock subject hereto shall be delivered to and deposited with the Secretary of the Company as Escrow Agent in this transaction. The Stock may also be held in a restricted book entry account in the name of the Employee. Such certificates or such book entry shares are to be held by the Escrow Agent until termination of the Restriction Period, when they shall be delivered by said Escrow Agent to Employee. 6. Employee Shareholder Rights. During the Restriction Period, the Employee shall have all the rights of a shareholder with respect to the Stock except for the right to transfer the Stock, as set forth in Section 3. Accordingly, the Employee shall have the right to vote the Stock and to receive any cash dividends paid to or made with respect to the Stock. 7. Retirement of Employee. If Employee retires after attaining 55 years of age with 15 years of service to the Company or 65 years of age without regard to service, the Company's obligation to deliver Stock out of escrow is subject to the condition that for the entire Restriction Period: (a) Employee shall render, as an independent contractor and not as an employee, such advisory or consultative services to the Company as shall reasonably be requested by the Company, consistent with Employee's health and any other employment or other activities in which such Employee may be engaged; (b) Employee shall not render services for any organization or engage directly or indirectly in any business which, in the opinion of the Company, competes with or is in conflict with the interests of the Company; (c) Employee shall not, without prior written authorization from the Company, disclose to anyone outside the Company, or use in other than the Company's business, any confidential information or material relating to the business of the Company, either during or after employment with the Company; and (d) Employee shall disclose promptly and assign to the Company all right, title and interest in any invention or idea, patentable or not, made or conceived by the Employee during employment by the Company, relating in any manner to the actual or anticipated business, anything reasonably necessary to enable the Company to secure a patent where appropriate in the United States and in foreign countries. 8. Total and Permanent Disability of Employee. In the event of total and permanent disability of Employee, any unpaid but vested award shall be paid to Employee if legally competent or to a legally designated guardian or representative if Employee is legally incompetent. 3 9. Death of Employee. In the event of the Employee's death prior to the end of the Restriction Period, the Employee's estate or designated beneficiary shall receive a pro rata number of shares determined by multiplying the total shares granted by a fraction equal to a.) the number of whole years elapsed between the date of this agreement and the Employee's death, divided by b.)3. In the event of the Employee's death after the vesting date but prior to the payment of shares, said shares shall be paid to the Employee's estate or designated beneficiary. 10. Taxes. Employee shall be liable for any and all taxes, including withholding taxes, arising out of this grant or the vesting of Stock hereunder. 11. Miscellaneous. (a) The Company shall not be required (i) to transfer on its books any shares of Stock of the Company which shall have been sold or transferred in violation of any of the provisions set forth in this agreement or (ii) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred. (b) The parties agree to execute such further instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement. (c) Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon delivery to Employee at his address then on file with the Company. (d) Neither the Plan nor this Agreement nor any provisions under either shall be construed so as to grant the Employee any right to remain in the employ of the Company. (e) This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof. HEWLETT-PACKARD COMPANY By: -------------------------------------- Lewis E. Platt Chairman, CEO, and President By: --------------------------------------- D. Craig Nordlund Associate General Counsel and Secretary 4 [Hewlett-Packard Logo] HEWLETT-PACKARD COMPANY RESTRICTED STOCK AGREEMENT This Agreement is made as of by and between Hewlett-Packard Company, a California Corporation ("Company"), and Employee Number . WHEREAS in order to give the Employee an incentive to continue in the employ of the Company, to participate in the affairs of the Company, and to help the Company attain certain performance objectives, the Company is willing to grant to the Employee shares of the Company's $1 par value Common Stock subject to the restrictions stated below and in accordance with the terms and conditions of the Company's 1995 Incentive Stock Plan ("Plan"). THEREFORE, the parties agree as follows: 1. Grant of Stock Subject to the terms and conditions of this Agreement and of the Plan, the Company hereby grants to Employee shares of the Company's $1 par value Common Stock ("Shares"). 2. Vesting Conditions and Schedule (a) The vesting of the Shares shall be based on the average of the annual growth rates in the Company's reported earnings per share ("EPS") and return on assets ("ROA") for the 1997, 1998 and 1999 fiscal years using fiscal 1996 EPS of $2.46 and fiscal 1995 and 1996 average ROA of 9.67% as baselines. The full number of shares shall vest only if the respective averages of EPS and ROA growth rates for fiscal 1997 through 1999 . If actual performance does not meet those objectives, the percentage of Shares that will vest, if any, shall be determined by the Committee in accordance with the attached matrix. (b) During the six-month period following the publication of the Company's consolidated financial results for the fiscal year ending October 31, 1999, the Compensation Committee of the Company's Board of Directors ("Committee") shall determine whether and to what extent the EPS and ROA goals described in the preceding paragraph have been attained, and shall authorize a.) the removal of restrictions and release from escrow of the percent of Shares indicated by the attached EPS/ROA matrix and b.) the cancellation of remaining Shares. (c) EPS goals for fiscal 1997-1999 shall be adjusted to reflect the impact of any required changes in accounting policies implemented in any of these years where such changes are required by an external financial accounting standards body such as the Financial Accounting Standards Board. (d) In the event the Employee dies prior to October 31, 1999 without having previously forfeited his Shares, his beneficiary shall be entitled to receive, in fiscal 2000, a portion of the Shares equal to a.) the number of Shares determined by the Committee to have vested, multiplied by b.) the number of whole years elapsed between November 1, 1996 and the date of the employee's death, divided by c.) 3. 3. Potential Unrestricted Stock Bonus If the average of the annual EPS growth rates for fiscal 1997-1999 exceed , the Committee will grant an unrestricted stock bonus in an amount determined in accordance with the matrix, which shall not exceed Shares (such maximum to be adjusted to reflect any stock split or similar occurrence). The grant shall not be made, if at all, until the six-month period following the publication of the Company's consolidated financial results for the fiscal year ending October 31, 1999, and will be made only if Employee remains an active employee of the Company through October 31, 1999. 4. Restrictions (a) The Shares granted hereunder may not be sold, pledged or otherwise transferred until the Shares become vested in accordance with Section 1. The period of time between the date hereof and the date Shares become vested is referred to herein as the "Restriction Period". (b) If Employee's employment with the Company is terminated prior to October 31, 1999 for any reason other than retirement after attaining 55 years of age with 15 years of service to the Company or 65 years without regard to service prior to the lapse of the Restriction Period, all Shares granted hereunder shall be forfeited by the Employee, and ownership transferred back to the Company. 5. Legend All certificates representing any Shares subject to the provisions of this Agreement shall have endorsed thereon the following legend: "The shares represented by this certificate are subject to an agreement between the Corporation and the registered holder, a copy of which is on file as the principal office of this Corporation." 5 6. Escrow The certificate or certificates evidencing the Shares subject hereto shall be delivered to and deposited with the Secretary of the Company as Escrow Agent in this transaction. The Shares may also be held in a restricted book entry account in the name of the Employee. Such certificates or such book entry shares are to be held by the Escrow Agent until termination of the Restriction Period, when they shall be delivered by said Escrow Agent to Employee. 7. Employee Shareholder Rights During the Restriction Period, the Employee shall have all the rights of a shareholder with respect to the Shares except for the right to transfer the Shares as set forth in Section 4. Accordingly, the Employee shall have the right to vote the Shares and to receive any cash dividends paid to or made with respect to the Shares. 8. Retirement or Total and Permanent Disability of Employee If Employee retires after attaining 55 years of age with 15 years of service to the company or 65 years of age without regard to service, or if Employee becomes totally and permanently disabled, the Company's obligation to deliver Shares is subject to the vesting requirements of Section 2 and to the condition that for the entire Restriction Period: (a) Employee shall render, as an independent contractor and not as an employee, such advisory or consultative services to the Company as shall be reasonable requested by the Company, consistent with Employee's health and any other employment or other activities in which such Employee may be engaged. (b) Employee shall not render services for any organization or engage directly or indirectly in any business which, in the opinion of the Company, competes with or is in conflict with the interests of the Company. (c) Employee shall not, without prior written authorization from the Company, disclose to anyone outside the Company, or use in other than the Company's business, any confidential information or material relating to the business of the Company, either during or after employment with the Company; and (d) Employee shall disclose promptly and assign to the Company all right, title and interest in any invention or idea, patentable or not, made or conceived by the Employee during employment by the Company, relating in any manner to the actual or anticipated business, anything reasonable necessary to enable the Company to secure a patent where appropriate in the United States and in foreign countries. 9. Taxes Employee shall be liable for any and all taxes, including withholding taxes, arising out of this grant or the vesting of Shares hereunder. 10. Miscellaneous (a) The Company shall not be required (i) to transfer on its books any Shares which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such Shares shall have been so transferred. (b) The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement. (c) Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon delivery to Employee at his address then on file with the Company. (d) Neither the Plan nor this Agreement nor any provision under either shall be construed so as to grant the Employee any right to remain in the employ of the Company. (e) This Agreement constitutes the entire agreement of parties with respect to the subject matter hereof. HEWLETT-PACKARD COMPANY By ------------------------------------- Lewis E. Platt Chairman, CEO and President EMPLOYEE By ------------------------------------- - ---------------------------------- D. Craig Nordland Associate General Counsel and Secretary 6 COMPANY CONFIDENTIAL FY97 Performance-Based Restricted Stock Payout Table [3-YEAR PERFORMANCE CYCLE]
EPS Delta % =================================================================== 0 25 50 75 100 ------------------------------------------------------------------- R O 25 50 75 100 125 A ------------------------------------------------------------------- D E 50 75 100 125 150 L T ------------------------------------------------------------------- A 75 100 125 150 200 % ===================================================================
Baseline: FY96 EPS = $2.46 ROA = 9.67 (Average of 10.0 (fy95) & 9.34 (fy96)) EX-10.(T) 7 AMENDMENT TO VARIOUS STOCK PLANS 1 Exhibit 10(t) Amendments dated November 21, 1996 to the Company's 1995 Incentive Stock Plan, 1990 Incentive Stock Plan, 1987 Director Option Plan, 1985 Incentive Compensation Plan, and 1979 Incentive Stock Option Plan, as set forth below, respectively: 1995 Incentive Stock Plan: Part I. Section II., Part 2, Section X. and Part 4, Section XXV, of the Company's 1995 Incentive Stock Plan are hereby amended to read, respectively, as follows: Section II. Administration The Board of Directors (the "Board") of the Company or any committee (the "Committee") of the Board that will satisfy Rule 16b-3 of the Exchange Act, and any regulations promulgated thereunder, as from time to time in effect, including any successor rule ("Rule 16b-3"), shall supervise and administer the Plan. The Committee shall consist solely of two or more non-employee directors of the Company, who shall be appointed by the Board. A member of the Board shall be deemed to be a "non-employee director" only if he satisfies such requirements as the Securities and Exchange Commission may establish for non-employee directors under Rule 16b-3. Members of the Board receive no additional compensation for their services in connection with the administration of the Plan. The Board or the Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. All questions of interpretation of the Plan or of any shares issued under it shall be determined by the Board or the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. Any or all powers and discretion vested in the Board or the Committee under this Plan may be exercised by any subcommittee so authorized by the Board or the Committee and satisfying the requirements of Rule 16b-3 for employees subject to Section 16 of the Exchange Act. In addition, the Board or the Committee may delegate to the Executive Committee of the Board of Directors the power to approve stock options and stock awards to employees not subject to Section 16 of the Exchange Act. 1 2 Section X. Stock Appreciation Rights Paragraphs 7, 8 and 9 of Section X. shall be replaced in their entirety with the following: The Board or the Committee shall have the sole discretion to consent to approve or disapprove, in whole or in part, any election to receive any portion of the Appreciation in cash. B. Additional Restrictions Applicable to Section 16 Employees. No stock appreciation right or related Option may be exercised during the first six months of its term, except in the event of death or total and permanent disability of the holder occurring prior to the expiration of this six-month period. Stock appreciation rights granted to individuals subject to Section 16 of the Exchange Act must comply with any applicable provisions of Rule 16b-3. These rights shall contain such additional conditions or restrictions as may be required under this rule (or any successor rule) to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. Section XXV. Amendment of the Plan The Board or the Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that the Company may seek shareholder approval of an amendment if determined to be required by or advisable by any law or regulation, including without limitation, any regulations of the Securities and Exchange Commission or the Internal Revenue Service, the rules of any stock exchange on which the Company's stock is listed or other applicable law or regulation. 1990 Incentive Stock Plan: Part I, Section II., Part 2, Section X. and Part 4, Section XXIII. of the Company's 1990 Incentive Stock Plan are hereby amended to read, respectively, as follows: Section II. Administration The Board of Directors (the "Board") of the Company or any committee (the "Committee") of the Board that will satisfy Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any regulations promulgated thereunder, as from time to time in effect, including any successor rule ("Rule 16b-3"), 2 3 shall supervise and administer the Plan. The Committee shall consist solely of two or more non-employee directors of the Company, who shall be appointed by the Board. A member of the Board shall be deemed to be a "non-employee director" only if he satisfies such requirements as the Securities and Exchange Commission may establish for non-employee directors under Rule 16b-3. Members of the Board receive no additional compensation for their services in connection with the administration of the Plan. The Committee or the Board shall from time to time designate the key employees of the Participating Companies who shall be granted stock options, stock or cash awards under the Plan and the amount and nature of the award granted to each such employee. The Board or the Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. All questions of interpretation of the Plan or of any shares issued under it shall be determined by the Board or the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. Any or all powers and discretion vested in the Board or the Committee under this Plan may be exercised by any subcommittee so authorized by the Board or the Committee and satisfying the requirements of Rule 16b-3 for employees subject to Section 16 of the Exchange Act. In addition, the Board or the Committee may delegate to the Executive Committee of the Board of Directors the power to approve stock options and stock awards to employees not subject to Section 16 of the Exchange Act. Section X. Stock Appreciation Rights Paragraphs 6 and 7 of Section X. shall be replaced in their entirety with the following: No stock appreciation right or related Option may be exercised during the first six months of its term, except in the event of death or total and permanent disability of the holder occurs prior to the expiration of this six-month period. The Board or the Committee shall have the sole discretion to consent to approve or disapprove, in whole or in part, any election to receive any portion of the Appreciation in cash. Section XXIII. Amendment of the Plan The Board or the Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that the Company may 3 4 seek shareholder approval of an amendment if determined to be required by or advisable by any law or regulation, including without limitation, any regulations of the Securities and Exchange Commission or the Internal Revenue Service, the rules of any stock exchange on which the Company's stock is listed or other applicable law or regulation. 1987 Director Option Plan: Part 2, Section VI.A. and Part 3, Section XV. of the Company's 1987 Director Option Plan are hereby amended to read, respectively, as follows: Section VI. Terms, Conditions and Form of Options Each option granted under this plan shall be evidenced by a written agreement in such form as the Committee shall from time to time approve, which Agreements shall comply with and be subject to the following terms and conditions: A. Option Grant Dates. Options shall be granted automatically on March 1, (or, if March 1 is not a business day, on the next succeeding business day) of any year to any eligible director who, on or prior to the immediately preceding February 1, files with the Secretary an election to receive a stock option in lieu of retainer fees to be earned in the following year beginning March 1 and ending February 28 (or February 29, as the case may be) ("Plan Year"). Section XV. Amendment of the Plan The Board or the Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that the option formula set forth in Section VI.B. of the Plan shall not be amended more than once every six months, except to the extent necessary to comply with changes in the Internal Revenue Code, as amended, or the Employee Retirement Income Security Act of 1974, as amended, or the rules of each thereunder. 1985 Incentive Compensation Plan: Part I, Section II., Part 2, Section X. and Part 4, Section XXII. of the Company's 1985 Incentive Compensation Plan are hereby amended to read, respectively, as follows: 4 5 Section II. Administration The Board of Directors (the "Board") of the Company or any committee (the "Committee") of the Board that will satisfy Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any regulations promulgated thereunder, as from time to time in effect, including any successor rule ("Rule 16b-3"), shall supervise and administer the Plan. The Committee shall consist solely of two or more non-employee directors of the Company, who shall be appointed by the Board. A member of the Board shall be deemed to be a "non-employee director" only if he satisfies such requirements as the Securities and Exchange Commission may establish for non-employee directors under Rule 16b-3. Members of the Board receive no additional compensation for their services in connection with the administration of the Plan. The Committee or the Board shall from time to time designate the key employees of the Participating Companies who shall be granted stock options, stock or cash awards under the Plan and the amount and nature of the award granted to each such employee. The Board or the Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. All questions of interpretation of the Plan or of any shares issued under it shall be determined by the Board or the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. Any or all powers and discretion vested in the Board or the Committee under this Plan may be exercised by any subcommittee so authorized by the Board or the Committee and satisfying the requirements of Rule 16b-3 for employees subject to Section 16 of the Exchange Act. In addition, the Board or the Committee may delegate to the Executive Committee of the Board of Directors the power to approve stock options and stock awards to employees not subject to Section 16 of the Exchange Act. Section X. Stock Appreciation Rights Paragraphs 5 and 6 of Section X. shall be replaced in their entirety with the following: No stock appreciation right or related Option may be exercised during the first six months of its term, except in the event of death or total and permanent disability of the holder occurs prior to the expiration of this six-month period. The Committee shall have the sole discretion to consent to approve or disapprove, in whole or in part, any election to receive any portion of the Appreciation in cash. 5 6 Section XXII. Amendment of the Plan The Board or the Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that the Company may seek shareholder approval of an amendment if determined to be required by or advisable by any law or regulation, including without limitation, any regulations of the Securities and Exchange Commission or the Internal Revenue Service, the rules of any stock exchange on which the Company's stock is listed or other applicable law or regulation. 1979 Incentive Stock Option Plan: Sections II., XII., and XIV. of the Company's 1979 Incentive Stock Option Plan are hereby amended to read, respectively, as follows: Section II. Administration The Board of Directors (the "Board") of the Company or any committee (the "Committee") of the Board that will satisfy Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any regulations promulgated thereunder, as from time to time in effect, including any successor rule ("Rule 16b-3"), shall supervise and administer the Plan. The Committee shall consist solely of two or more non-employee directors of the Company, who shall be appointed by the Board. A member of the Board shall be deemed to be a "non-employee director" only if he satisfies such requirements as the Securities and Exchange Commission may establish for non-employee directors under Rule 16b-3. Members of the Board receive no additional compensation for their services in connection with the administration of the Plan. The Committee or the Board shall from time to time designate the key employees of the Participating Companies who shall be granted stock options under the Plan and the amount of stock to be optioned to each such employee. The Board or the Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. All questions of interpretation of the Plan or of any shares issued under it shall be determined by the Board or the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. Any or all powers and discretion vested in the Board or the Committee under this Plan may be exercised by any subcommittee so authorized by the Board or the Committee and satisfying the requirements of Rule 16b-3 for employees subject to Section 16 of the Exchange Act. In addition, the Board or the 6 7 Committee may delegate to the Executive Committee of the Board of Directors the power to approve stock options and stock awards to employees not subject to Section 16 of the Exchange Act. Section XII. Amendment of the Plan The Board or the Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that the Company may seek shareholder approval of an amendment if determined to be required by or advisable by any law or regulation, including without limitation, any regulations of the Securities and Exchange Commission or the Internal Revenue Service, the rules of any stock exchange on which the Company's stock is listed or other applicable law or regulation. Section XIV. Stock Appreciation Rights Paragraphs 5 and 6 of Section XIV. shall be replaced in their entirety with the following: No stock appreciation right or related Option may be exercised during the first six months of its term, except in the event of death or total and permanent disability of the holder occurs prior to the expiration of this six-month period. The Board or the Committee shall have the sole discretion to consent to approve or disapprove, in whole or in part, any election to receive any portion of the Appreciation in cash. 7 EX-10.(U) 8 EXECUTIVE DEFERRED COMPENSATION PLAN 1 EXHIBIT 10(u) HEWLETT-PACKARD COMPANY EXECUTIVE DEFERRED COMPENSATION PLAN (Amended and Restated as of November 21, 1996) Section 1. Establishment and Purpose of Plan The Hewlett-Packard Company Executive Deferred Compensation Plan was adopted and established effective January 1, 1994. The Plan provides deferred compensation for a select group of management or highly compensated employees as established in Title I of ERISA. As of November 21, 1996, the Plan is modified in the following principal respect: Employees with "applicable employee remuneration" in excess of the limitation set forth under Code section 162(m) may defer an amount of Base Earnings equal to the amount of such excess, even if this amount exceeds 40% of Base Earnings. The Plan is intended to be an unfunded and unsecured deferred compensation arrangement between the Participant and the Company, in which the Participant agrees to give up a portion of the Participant's current salary in exchange for the Company's unfunded and unsecured promise to make a deferred payment at a future date, as specified in Section 6. The Company retains the right, as provided in Section 14, to amend or terminate the Plan at any time. Certain capitalized items used in the text of the Plan are defined in Section 19 in alphabetical order. 1 2 Section 2. Participation in the Plan Employees on the U.S. payroll of the Company are eligible to defer compensation under the Plan if they have Base Earnings, at the time of election as specified in Section 3, equal to or in excess of the sum of (1) the amount defined in Code Section 401(a)(17), as adjusted by the Secretary of the Treasury under Code section 415(d), in effect on January 1 of the calendar year for which amounts are to be deferred, plus (2) $6,000. Section 3. Amount of Deferred Compensation An Eligible Employee shall make an annual election to participate in the Plan. The election to participate must be made prior to the beginning of the calendar year for which amounts are to be deferred. Once an election by an Eligible Employee is made, an annual whole dollar amount will be deferred from Base Earnings, taken equally over twenty-four (24) pay periods. The minimum amount which may be deferred is $6,000 a year and the maximum amount which may be deferred shall be the lesser of (1) 40% of Base Earnings or (2) Base Earnings less the amount defined in the Code section 401(a)(17), as adjusted by the Secretary of the Treasury under Code section 415(d), in effect on January 1 of the calendar year for which amounts are to be deferred. Notwithstanding the maximum deferral amount set forth in the immediately preceding sentence, an Eligible Employee receiving "applicable employee remuneration" in excess of the limitation amount set forth in Code section 162(m), as amended, or as adjusted by regulation or other 2 3 Internal Revenue Service promulgation, pronouncement or other action ($1,000,000 for calendar year 1996), may defer an amount of Base Earnings equal to such excess. Section 4. Deferral Accounts Deferred Amounts made pursuant to Section 3 shall be credited to a Deferral Account in the name of the Participant. The Deferred Amounts shall be credited to the Deferral Account at least quarterly. The Participant's rights in the Deferral Account shall be no greater than the rights of any unsecured general creditor of the Company. Deferred Amounts and Earnings thereon invested hereunder shall for all purposes be part of the general funds of the Company. Section 5. Earnings on the Deferral Account The money allocated to the Participant's Deferral Account by the Company will be credited at least quarterly with Earnings until it is paid out to the Participant under this Plan as set forth below in Section 6. All Earnings attributable to the money allocated to the Deferral Account shall be added to the liability and retained therein by the Company. Any such addition to the liability shall be appropriately reflected on the books and records of the Company and identified as an addition to the total sum owing the Participant. 3 4 Section 6. Payment to the Participants If the Participant terminates employment on or after his or her Retirement Date and an election as to the form and timing of the benefit is made twelve (12) months or more prior to the Retirement Date, the Participant may elect to receive either (a) a single lump sum payout by January 15 of the year following termination of employment, or (b) payouts in annual installments over a five (5) to fifteen (15) year period beginning with the January 15th following the year of termination of employment. If the Participant terminates employment on or after his or her Retirement Date and an election as to the form and timing of the benefit is made twelve (12) months or more prior to the Retirement Date, the Participant may elect to further defer commencement of payout, under either the single lump sum or the annual installment election, an additional one (1), two (2) or three (3) years beginning after the January 15 following the year of termination of employment. The payout installment election made by the Participant is based on the entire Deferral Account, and shall be determined by dividing the unpaid balance as of January 1 of the payout year by the number of annual payments remaining to be made. If the Participant terminates employment on or after his or her Retirement Date and an election as to the form and timing of the benefit is not made twelve (12) months or more prior to his or her Retirement Date, the Participant will receive his or her payout in annual installments over the fifteen (15) year period beginning with the January 15 following the year of termination of employment. If the Participant dies and an election was made, the Beneficiary will be paid according to the election even though the election was not made twelve (12) months or more 4 5 prior to the Participant's death. If the Participant dies and no election was made,then the Beneficiary will receive his or her payout in annual installments over the fifteen (15) year period beginning with the January 15 following the year of the Participant's death. If the Participant terminates employment prior to his or her Retirement Date, then the Participant will receive a single lump sum payout at termination of employment. Section 7. Hardship Provision Neither the Participant nor his or her Beneficiary is eligible to withdraw funds from the Deferral Account prior to the time specified in Section 6. However, funds in the Deferral Account may be subject to early withdrawal if an "Unforeseeable Emergency" occurs that is caused by an event beyond the Participant's or Beneficiary's control and would result in severe financial hardship to the individual if early withdrawal is not permitted. A significant hardship exists only when all other reasonably available financial resources have been exhausted. The Compensation Committee of the Board of Directors of the Company (the "Committee") shall have sole discretion to determine whether to approve any hardship withdrawal, which amount will be limited to the amount necessary to meet the emergency. The Committee's decision will be final and binding on all interested parties. If the Committee approves a hardship withdrawal, the Participant may not defer Base Earnings, as specified in Section 3, for (1) the remainder of the calendar year in which the hardship 5 6 withdrawal is received, and (2) the calendar year following the calendar year in which the hardship withdrawal is received. Section 8. Use of Funds Neither the Participant nor his or her Beneficiary is eligible to withdraw funds from the Deferral Account prior to the time specified in Section 6. However, funds in the Deferral Account may be subject to early withdrawal if an "Unanticipated Need For Funds" occurs, other than a need specified in Section 7; provided that the Participant permanently forfeits ten (10) percent of the amount to be withdrawn. Additionally, withdrawals based on an "Unanticipated Need For Funds" may be made no more than once each calendar year and the amount to be withdrawn must be at least $12,000. If the Participant withdraws funds under this section, he or she may not defer Base Earnings, as specified in Section 3, for (1) the remainder of the calendar year in which the withdrawal is received, and (2) the calendar year following the calendar year in which the withdrawal is received. Section 9. Designation of Beneficiary The Participant shall, by written notice to the Company, (1) at the time of the first election designate a Beneficiary hereunder, and (2) shall have the right thereafter to change any 6 7 Beneficiary previously designated by the Participant. In the case of a Participant's death, payment due under this Plan shall be made to the designated Beneficiary or, in the absence of such designation, by will or the laws of descent and distribution in the state of residence of the Participant. Section 10. Change in Control In the event of a proposed change in control of the Company, as defined below, the Committee shall have complete authority and discretion, but no obligation to accelerate payments of both terminated and active Participants. A "proposed change in control" shall mean (1) a tender offer by any person or entity, other than the Company or a Company subsidiary, to acquire securities representing 40 percent or more of the voting power of the Company or (2) the submission to the Company's shareholders for approval of a transaction involving the sale of all or substantially all of the assets of the Company or a merger of the Company with or into another corporation. The Committee may also ask the Board of Directors to negotiate, as part of any agreement involving the sale or merger of the Company, or a sale of substantially all of the Company's assets or a similar transaction, terms providing for protection of Participants and their interests in the Plan. 7 8 Section 11. Limitation on Assignments Benefits under this Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishments by creditors of the Participant or the Participant's Beneficiary and any attempt to do so shall be void. Section 12. Administration The Plan shall be administered by the Committee. No member of the Committee shall become a Participant of the Plan. The Committee shall have the sole authority to interpret the Plan, to establish and revise rules and regulations relating to the Plan and to make any other determinations that it believes necessary or advisable for the administration of the Plan. Decisions and determination by the Committee shall be final and binding upon all parties, including shareholders, Participants, Beneficiaries and other employees. The Committee may delegate its responsibilities as it sees fit. Books and records maintained for the purpose of the Plan shall be maintained by the officers and employees of the Company at its expense and subject to supervision and control of the Committee. 8 9 Section 13. No Funding Obligation The Company is under no obligation to transfer amounts credited to the Participant's Deferral Account to any trust or escrow account, and the Company is under no obligation to secure any amount credited to a Participant's Deferral Account by any specific assets of the Company or any other asset in which the Company has an interest. This Plan shall not be construed to require the Company to fund any of the benefits provided hereunder nor to establish a trust for such purpose. The Company may make such arrangements as it desires to provide for the payment of benefits, including, but not limited to, the establishment of a rabbi trust or such other equivalent arrangements as the Company may decide. No such arrangement shall cause the Plan to be a funded plan within the meaning of Title I of ERISA, nor shall any such arrangement change the nature of the obligation of the Company nor the rights of the Participants under the Plan as provided in this document. Neither the Participant nor his or her estate shall have any rights against the Company with respect to any portion of the Deferral Account except as a general unsecured creditor. No Participant has an interest in his or her Deferral Account until the Participant actually receives the deferred payment. Section 14. Amendment and Termination of the Plan The Company, by action of the Committee, in its sole discretion may suspend or terminate the Plan or revise or amend it in any respect whatsoever, provided, however, that amounts already allocated to the Deferral Accounts will continue to be owed to the Participants or Beneficiaries 9 10 and will continue to accrue Earnings and continue to be a liability of the Company. Any amendment or termination of the Plan will not affect the entitlement of any Participant or the Beneficiary of a Participant who terminates employment before the amendment or termination. All benefits to which any Participant or Beneficiary may be entitled shall be determined under the Plan as in effect at the time the Participant terminates employment and shall not be affected by any subsequent change in the provisions of the Plan; provided, that the Company reserves the right to change the basis of return on investment of the Deferral Account with respect to any Participant or Beneficiary. Participants or Beneficiaries will be given notice prior to the discontinuance of the Plan or reduction of any benefits provided by the Plan. Section 15. Tax Withholding If any federal, state, or local income or employment tax withholding is required with respect to any deferral of income or payment hereunder, the Committee shall make appropriate arrangements with the Participant or his or her Beneficiary for satisfaction of such obligation. Section 16. Choice of Law This Plan, and all rights under this Plan, shall be interpreted and construed in accordance with ERISA and, to the extent not preempted, the law of the State of California, unless otherwise stated in the Plan. 10 11 Section 17. Notice Any written notice to the Company required by any of the provisions of this Plan shall be addressed to the chief personnel officer of the Company or his or her delegate and shall become effective when it is received. Section 18. No Employment Rights Nothing in the Plan, nor any action of the Company pursuant to the Plan, shall be deemed to give any person any right to remain in the employ of the Company or affect the right of the Company to terminate a persons's employment at any time, with or without cause. Section 19. Definitions (a) Base Earnings means the annual base rate of pay for employees on the U.S. payroll of the Company. It does not include bonuses, commissions, overtime pay, shift differential, payments under the Hewlett-Packard Company Employee Benefits Organization Income Protection Plan and the Hewlett-Packard Company Supplemental Income Protection Plan, or any other additional compensation. (b) Beneficiary means the person or persons designated by a Participant under Section 9 to receive any amounts payable under the Plan in the event of the Participant's death. (c) Code means the Internal Revenue Code of 1986, as amended from time to time. 11 12 (d) Committee means the Compensation Committee of the Board of Directors of the Company. (e) Company means Hewlett-Packard Company, a California corporation. (f) Deferral Account means the account of the Participant which includes all Deferred Amounts and the Earnings thereon prior to payout to the Participant. (g) Deferred Amount means the amount the Participant annually elects to have deferred from Base Earnings. (h) Earnings means the deemed return on investment (or charge on investment loss) on money allocated to the Participant's Deferral Account, based on the return of the Fund, reduced ten (10) percent to partially offset the costs of the Plan, as described in Section 5. (i) Eligible Employee means an employee on the U.S. payroll of the Company who has Base Earnings at the time of election as specified in Section 3 equal to or in excess of the sum of (1) the amount defined in Code section 401(a)(17), as adjusted by the Secretary of the Treasury under Code section 415(d), in effect on January 1 of the calendar year for which amounts are to be deferred, plus (2) $6,000. (j) ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. (k) Fund means an S&P 500 Index Fund, as designated by the Committee from time to time. (l) Participant means any individual who has benefits in the Deferral Account under the Plan or who is receiving or entitled to receive benefits under the Plan. 12 13 (m) Plan means the Hewlett-Packard Company Executive Deferred Compensation Plan amended and restated as of November 21, 1996, as amended from time to time. (n) Retirement Date means the date on which a Participant has completed at least 15 years of service, as defined in the Retirement Plan, and has attained age 55. (o) Retirement Plan means the Hewlett-Packard Company Retirement Plan in effect as of November 1, 1993, as amended from time to time. Section 20. Execution IN WITNESS WHEREOF, the Company has caused this Plan to be duly executed by the undersigned this 21 day of November, 1996. Hewlett-Packard Company By: /s/ Susan P. Orr --------------------------- SUSAN P. ORR CHAIR, COMPENSATION COMMITTEE 13 EX-13 9 ANNUAL REPORT TO SHAREHOLDERS 1 EXHIBIT 13 SELECTED FINANCIAL DATA Unaudited
For the years ended October 31 In millions except per share amounts and employees 1996 1995 1994 1993 1992 -------- -------- ------- ------- ------- U.S. orders $ 17,181 $ 14,686 $11,692 $ 9,462 $ 7,569 International orders 21,708 17,999 13,658 11,310 9,192 -------- -------- ------- ------- ------- Total orders $ 38,889 $ 32,685 $25,350 $20,772 $16,761 ======== ======== ======= ======= ======= Net revenue $ 38,420 $ 31,519 $24,991 $20,317 $16,410 Earnings from operations $ 3,726 $ 3,568 $ 2,549 $ 1,879 $ 1,404 Earnings, before effect of accounting change in 1992 $ 2,586 $ 2,433 $ 1,599 $ 1,177 $ 881 Net earnings $ 2,586 $ 2,433 $ 1,599 $ 1,177 $ 549 Per share amounts, restated for 1996 stock split: Earnings, before effect of accounting change in 1992 $ 2.46 $ 2.31 $ 1.54 $ 1.16 $ .87 Net earnings $ 2.46 $ 2.31 $ 1.54 $ 1.16 $ .55 Cash dividends $ .44 $ .35 $ .275 $ .225 $ .18 At year-end: Total assets $ 27,699 $ 24,427 $19,567 $16,736 $13,700 Long-term debt $ 2,579 $ 663 $ 547 $ 667 $ 425 Employees 112,000 102,300 98,400 96,200 92,600 ======== ======== ======= ======= =======
1992 results include an after-tax charge of $.32 per share for the cumulative effect of a change in accounting for retiree medical benefits. - -------------------- Graphs A bar chart entitled "Total Orders (In millions)" at the bottom left of page 29 of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had total orders (shown on the y-axis) in the respective amounts provided in the table entitled "Selected Financial Data (Unaudited)" on page 29 of the Annual Report. A bar chart entitled "Earnings from Operations (In millions)" at the bottom center of page 29 of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had earnings from operations (shown on the y-axis) in the respective amounts provided in the table entitled "Selected Financial Data (Unaudited)" on page 29 of the Annual Report. A bar chart entitled "Employees and Net Revenue Per Employee (In thousands)" at the bottom right of page 29 of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had employees in the respective numbers (shown on the y-axis) provided in the table entitled "Selected Financial Data (Unaudited)" on page 29 of the Annual Report. In addition, the graph shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had net revenue per employee (shown on the y-axis) of $180,800, $215,200, $256,900, $314,100 and $358,600, respectively. 2 CONSOLIDATED STATEMENT OF EARNINGS
For the years ended October 31 In millions except per share amounts 1996 1995 1994 ------- ------- ------- Net revenue: Products $33,114 $27,125 $21,380 Services 5,306 4,394 3,611 ------- ------- ------- Total net revenue 38,420 31,519 24,991 ------- ------- ------- Costs and expenses: Cost of products sold 22,013 17,069 13,012 Cost of services 3,486 2,945 2,478 Research and development 2,718 2,302 2,027 Selling, general and administrative 6,477 5,635 4,925 ------- ------- ------- Total costs and expenses 34,694 27,951 22,442 ------- ------- ------- Earnings from operations 3,726 3,568 2,549 Interest income and other, net 295 270 29 Interest expense 327 206 155 ------- ------- ------- Earnings before taxes 3,694 3,632 2,423 Provision for taxes 1,108 1,199 824 ------- ------- ------- Net earnings $ 2,586 $ 2,433 $ 1,599 ======= ======= ======= Net earnings per share $ 2.46 $ 2.31 $ 1.54 ======= ======= ======= Weighted average shares and equivalents outstanding 1,052 1,052 1,041 ======= ======= =======
The accompanying notes are an integral part of these financial statements. 3 FINANCIAL REVIEW Unaudited RESULTS OF OPERATIONS In 1996, HP continued its 20 percent-plus growth in revenue, adding almost $7 billion in revenue during the year. Order growth was strong as well, at 19 percent, and the company also made progress in reducing its operating-expense ratio. However, the first half of the year was stronger than the second half, in which order and revenue growth were reduced by various factors including inventory adjustments in the reseller channel and the company's decision to exit disk-mechanism manufacturing in the third quarter. As a result, full-year operating- and net-profit margins were lower than in 1995, and net earnings growth was 6 percent, compared with 52 percent in 1995. HP's orders increased 19 percent over 1995 to $38.9 billion, compared with a 29 percent increase in 1995. Slower, but still very healthy growth rates, in the company's computer businesses, representing approximately 80 percent of HP's orders, were key factors in the order growth from 1995. Geographically, domestic and international orders grew 17 and 21 percent, respectively, compared to growth of 26 percent and 32 percent, respectively, in the prior year. Net revenue grew 22 percent both in the U.S. and internationally in 1996 to $17.0 billion and $21.4 billion, respectively, following increases of 22 percent in the U.S. and 30 percent internationally in 1995. Currency unfavorably impacted the international growth rate as the dollar strengthened in 1996. Net revenue from product sales increased 22 percent, compared with 27 percent in 1995. The sustained increase in net revenue, while lower than in 1995, primarily reflects the company's continued success in technological innovation and rapid time to market with new products. Shipments of the company's computer and peripheral products, such as the HP Vectra and Pavilion PCs, HP NetServer PC servers, multiuser UNIX systems, and HP's families of DeskJet and LaserJet printers, continued strong in 1996. As in 1995, strong unit volume growth was driven primarily by new product introductions. In addition, intense competition contributed to declines in the average selling price for many of these products. As a result, unit volume growth outpaced revenue growth. Sales of consumable supplies for the company's printer products increased strongly this year, reflecting increased printer usage and a larger installed base. Revenue growth in the company's non-computer businesses was slowed by various industry-specific factors during the year, including weakness in the markets for components and semiconductor-test equipment. Information on orders and net revenue by groupings of similar products and services is presented on page 53 of this report. Services such as systems integration, selective-outsourcing management, consulting, education, product financing and rentals, as well as hardware and software support and maintenance, are an integral part of the company's offerings. Net revenue from services grew 21 percent, compared with 22 percent in 1995. During 1996 and 1995, service and support - --------------- Graphs A graph entitled "Net Revenue (in millions)" at the top right of page 31 of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had total net revenue (shown on the y-axis) in the respective amounts provided in the table entitled "Selected Financial Data (Unaudited)" on page 29 of the Annual Report; and international net revenue of $9,198 million, $10,971 million, $13,522 million, $17,556 million and $21,379 million, respectively. In addition, the graph shows that for the fiscal years 1992 and 1993 (shown on the x-axis) the company had U.S. net revenue (shown on the y-axis) of $7,212 million and $9,346 million, respectively; and U.S. net revenue for the fiscal years 1994, 1995 and 1996 (shown on the x-axis) in the respective amounts (shown on the y-axis) provided in the section entitled "Geographic Area Information" under the caption "United States: Unaffiliated customer sales" in the table on page 51 of the Annual Report. A graph entitled "U.S. Dollar Relative to Major Foreign Currencies (Fiscal 1980 equals 1.00)" at the bottom right of page 31 of the Annual Report shows that in the months running consecutively from November 1991 through October 1996 (shown on the x-axis) the U.S. Dollar was equal to (shown on the y-axis) 1.06, 1.04, 1.04, 1.07, 1.09, 1.09, 1.06, 1.04, .99, .98, .99, 1.04, 1.11, 1.12, 1.14, 1.17, 1.17, 1.13, 1.13, 1.15, 1.19, 1.20, 1.16, 1.18, 1.21, 1.21, 1.22, 1.21, 1.19, 1.19, 1.18, 1.16, 1.13, 1.13, 1.12, 1.09, 1.11, 1.13, 1.12, 1.11, 1.07, 1.06, 1.06, 1.06, 1.05, 1.07, 1.08, 1.06, 1.06, 1.07, 1.08, 1.09, 1.09, 1.10, 1.11, 1.11, 1.09, 1.09, 1.09, and 1.10, respectively, multiplied by the currencies of the following foreign countries, with varying weights assigned to each of such currencies: Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Spain, Sweden, Switzerland and United Kingdom. 4 revenue continued to grow with the increase in the installed base, higher leasing revenue and the continued success of the professional services businesses. Costs, expenses and earnings as a percentage of net revenue were as follows:
For the years ended October 31 1996 1995 1994 - ------------------------------ ---- ---- ---- Cost of products sold and services 66.4% 63.5% 62.0% Research and development 7.1% 7.3% 8.1% Selling, general and administrative 16.8% 17.9% 19.7% Earnings from operations 9.7% 11.3% 10.2% Net earnings 6.7% 7.7% 6.4% ==== ==== ====
During 1996, cost of products sold and services as a percentage of net revenue was 66.4 percent, an increase of 2.9 percentage points, compared with a 1.5 percentage point increase in 1995. Intense price competition affected product revenues and resulted in reduced gross profit margins. Additionally, the continued shift in the mix of products sold towards lower gross-margin, high-volume product families, as well as costs associated with the stream of new-product introductions, helped drive both the 1996 and 1995 increases in cost of sales. These factors are likely to continue to put some upward pressure on the cost of sales ratio. Pretax charges of approximately $135 million due to the exit from disk-mechanism manufacturing, and the related operating losses in that business, also contributed to the overall increase in the cost of sales ratio over the year-ago period. Cost of products sold and services as a percentage of net revenue would have been 65.5 percent for 1996 without these factors. Research and development expenditures increased 18 percent in 1996 to $2.7 billion, versus 14 percent growth and expenditures of $2.3 billion in 1995. The ongoing increase in spending on research and development reflects the company's belief that success in a global marketplace requires a continuing flow of innovative, high-quality products. Selling, general and administrative expenses grew 15 percent in 1996 and 14 percent in 1995. This growth was due largely to increased selling costs related to order and revenue growth, and increased advertising and marketing costs associated with the company's growing presence in high-volume, consumer-oriented businesses. Both research and development and selling, general and administrative expenses decreased as a percentage of net revenue in 1996 and 1995, which reflects the growth of the net revenue base in both years. These decreases also reflect the company's focused management of operating-expense growth, which was most evident in the second half of 1996 when the company quickly adjusted to slowing order and revenue growth. Interest income and other, net was $295 million in 1996, compared with $270 million in 1995 and $29 million in 1994. The increased levels in 1996 and 1995 are primarily due to increased earnings on cash and other investments, increased income from equity investees, and gains on sales of real estate and other assets. Interest expense was $327 million in 1996, compared with $206 million in 1995 and $155 million in 1994, reflecting increasing levels of debt outstanding, as well as interest rate changes during the respective periods. - --------------- Graphs A graph entitled "Costs and Expenses (As a percentage of net revenue)" at the top left of page 32 of the Annual Report shows that for the fiscal years 1992 and 1993 (shown on the x-axis) the Company had (shown on the y-axis) cost of products sold and services of 55.8% and 59.7%, respectively, of net revenue; selling, general and administrative expenses of 25.7% and 22.4%, respectively, of net revenue; and research and development expenses of 9.9% and 8.7%, respectively, of net revenue. In addition, the graph shows that for the fiscal years 1994, 1995 and 1996 (shown on the x-axis) the Company had, as a percentage of net revenue (shown on the y-axis), cost of products sold and services, selling, general and administrative expenses and research and development expenses in the respective amounts provided in the table at the top of page 32 of the Annual Report. A bar chart entitled "Net Earnings (In millions)" at the bottom left of page 32 of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had net earnings (shown on the y-axis) in the respective amounts provided in the table entitled "Selected Financial Data (Unaudited)" on page 29 of the Annual Report. 5 The company's effective tax rate was 30 percent in 1996, compared with 33 percent in 1995 and 34 percent in 1994. A combination of factors led to the decreases, including continued shifts in the geographical composition of earnings and resolution of certain issues related to tax returns filed in previous years. Net earnings increased 6 percent to $2.6 billion in 1996. This compares with a 52 percent increase in 1995 and a 36 percent increase in 1994. As a percentage of net revenue, net earnings were 6.7 percent in 1996, compared with 7.7 percent in 1995 and 6.4 percent in 1994. Net earnings growth for 1996 would have been higher without the effects of the company's exit from disk-mechanism manufacturing. FINANCIAL CONDITION AND LIQUIDITY HP's financial position remains strong, with cash and cash equivalents and short-term investments of $3.3 billion at October 31, 1996, and $2.6 billion at October 31, 1995. In addition, other long-term investments, relatively low levels of debt compared to assets, and a large equity base continue to demonstrate the company's financial flexibility. Operating activities generated $3.5 billion in cash in 1996, compared with $1.6 billion and $2.2 billion in 1995 and 1994, respectively. The increase in cash generated from operations in 1996 compared with 1995 is primarily due to substantially reduced receivables and inventory growth. Receivables as a percentage of net revenue decreased to 18.5 percent at October 31, 1996, from 21.4 percent a year ago, while inventories as a percentage of net revenue decreased to 16.7 percent from 19.1 percent. Slowing revenue growth in the second half of the year contributed to these declines. The company's efforts to enhance processes, with a focus on improving asset utilization and supply-chain management in order to accommodate shorter product life cycles and rapid product ramps, were also a factor in the improvements of these ratios. Capital expenditures in 1996 were $2.2 billion, compared with $1.6 billion and $1.3 billion in 1995 and 1994, respectively. The increases in capital expenditures relate primarily to expansion of production capacity to accommodate higher volumes and the introduction of new products, but also reflect increasing expenditures to support growth in the company's leasing business. The company invests excess cash in short- and long-term investments, depending on its projected cash needs for operations, capital expenditures and other business purposes. Additionally, the company from time to time supplements its internally generated cash flow with a combination of short- and long-term borrowings. Recent changes in tax laws in Puerto Rico have resulted in the company liquidating a substantial portion of its short-term investments there and using the cash to pay down notes payable and short-term borrowings. Long-term debt has increased, however, as it is utilized to support increased investments in the company's lease portfolio and to finance interest-bearing assets. Cash flow from net changes in debt structure resulted in net borrowings of $811 million in 1996 compared - --------------- Graphs A bar chart entitled "Selected Cash Flows (In millions)" at the top right of page 33 of the Annual Report shows that for the fiscal years 1992 and 1993 (shown on the x-axis) the Company had cash flows from operating activities (shown on the y-axis) of $1,288 and $1,142 million, respectively; capital expenditures of $1,032 million and $1,405 million, respectively; and dividends paid of $183 million and $228 million, respectively. In addition, the bar chart shows that for the fiscal years 1994, 1995 and 1996 (shown on the x-axis) the Company had cash flows from operating activities and dividends paid (shown on the y-axis) in the respective amounts provided in the table entitled "Consolidated Statement of Cash Flows" on page 38 of the Annual Report. Finally, the bar chart shows that for the fiscal years 1994, 1995 and 1996 (shown on the x-axis) the Company had capital expenditures (shown on the y-axis) in the respective amounts shown as "Investment in property, plant and equipment" provided in the table entitled "Consolidated Statement of Cash Flows" on page 38 of the Annual Report. A graph entitled "Asset Management (As a percentage of net revenue)" at the bottom right of page 33 of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had (shown on the y-axis) net property, plant and equipment of 22.2%, 20.6%, 17.3%, 14.9% and 14.4%, respectively, of net revenue; accounts and notes receivable of 21.3%, 20.7%, 20.1%, 21.4% and 18.5%, respectively, of net revenue; and inventories of 15.9%, 18.2%, 17.1%, 19.1% and 16.7%, respectively, of net revenue. 6 CONSOLIDATED BALANCE SHEET
October 31 In millions except par value and number of shares 1996 1995 - -------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 2,885 $ 1,973 Short-term investments 442 643 Accounts and notes receivable 7,126 6,735 Inventories: Finished goods 3,956 3,368 Purchased parts and fabricated assemblies 2,445 2,645 Other current assets 1,137 875 - -------------------------------------------------------------------------------------------------- Total current assets 17,991 16,239 - -------------------------------------------------------------------------------------------------- Property, plant and equipment: Land 475 485 Buildings and leasehold improvements 4,257 3,810 Machinery and equipment 5,466 4,452 - -------------------------------------------------------------------------------------------------- 10,198 8,747 Accumulated depreciation (4,662) (4,036) - -------------------------------------------------------------------------------------------------- 5,536 4,711 Long-term investments and other assets 4,172 3,477 - -------------------------------------------------------------------------------------------------- Total assets $27,699 $24,427 ================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable and short-term borrowings $ 2,125 $ 3,214 Accounts payable 2,375 2,422 Employee compensation and benefits 1,675 1,568 Taxes on earnings 1,514 1,494 Deferred revenues 951 782 Other accrued liabilities 1,983 1,464 - -------------------------------------------------------------------------------------------------- Total current liabilities 10,623 10,944 - -------------------------------------------------------------------------------------------------- Long-term debt 2,579 663 Other liabilities 1,059 981 Commitments and contingencies Shareholders' equity: Preferred stock, $1 par value (authorized: 300,000,000 shares; issued: none) -- -- Common stock and capital in excess of $1 par value (authorized: 2,400,000,000 shares; issued and outstanding: 1,014,123,000 in 1996 and 1,019,910,000 in 1995) 1,014 1,381 Retained earnings 12,424 10,458 - -------------------------------------------------------------------------------------------------- Total shareholders' equity 13,438 11,839 - -------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $27,699 $24,427 ==================================================================================================
The accompanying notes are an integral part of these financial statements. 7 with $857 million and $155 million in 1995 and 1994, respectively. At October 31, 1996, the company had various uncommitted borrowing arrangements in place with borrowing capacity totaling $4.6 billion. The company split its stock on a 2-for-1 basis effective June 21, 1996, following a similar split in March of last year. All share and per share amounts have been restated to reflect the retroactive effect of this split. Shares are repurchased periodically to manage the dilution created by shares issued under various employee stock plans. In 1996, 24.6 million shares were repurchased at an aggregate price of $1,089 million. In 1995, 20.8 million shares were repurchased for $686 million and in 1994, 16.1 million shares were repurchased for $325 million. Additional stock repurchases, based on certain price and volume criteria, are periodically authorized by the Board of Directors. FACTORS THAT MAY AFFECT FUTURE RESULTS HP's future operating results may be adversely affected if the company is unable to continue to rapidly develop, manufacture and market innovative products and services that meet customer requirements. The process of developing new high technology products and solutions is inherently complex and uncertain. It requires accurate anticipation of customers' changing needs and emerging technological trends. The company then must make long-term investments and commit significant resources before knowing whether its predictions will eventually result in products that achieve market acceptance. After a product is developed, the company must quickly ramp manufacturing in sufficient volumes at acceptable costs. This is a process that requires accurate forecasting of volumes, mix of products and configurations. Moreover, the supply and timing of a new product or service must match the customers' demand and timing for those particular products or services. Given the wide variety of systems, products and services the company offers, the process of planning production and managing inventory levels becomes increasingly difficult. Inventory management has also become increasingly complex as the company continues to sell a greater mix of products, especially printers and personal computers, through third-party distribution channels. Resellers constantly adjust their ordering patterns in response to the company's, and its competitors', supply into the channel and the timing of their new product introductions and relative feature sets, as well as seasonal fluctuations in end-user demand such as the back-to-school and holiday selling periods. Resellers may increase orders during times of shortages, cancel orders if the channel is filled with currently available products, or delay orders in anticipation of new products. Any excess supply could result in price reductions and inventory writedowns, which in turn could adversely affect the company's gross margins. The short life cycles of many of the company's products pose a challenge for the effective management of the transition from existing products to new products and could adversely affect the company's future operating results. Product development or manufacturing 8 delays, variations in product costs, and delays in customer purchases of existing products in anticipation of new product introductions are among the factors that make a smooth transition from current products to new products difficult. In addition, the timing of competitors' introductions of new products and services may negatively affect the future operating results of the company, especially when these introductions coincide with periods leading up to the company's own introduction of new or enhanced products. Furthermore, some of the company's own new products replace or compete with others of the company's current products. Portions of the company's manufacturing operations are dependent on the ability of suppliers to deliver components, subassemblies and completed products in time to meet critical manufacturing and distribution schedules. The company periodically experiences constrained supply of certain component parts in some product lines as a result of strong demand in the industry for those parts. Such constraints, if persistent, may adversely affect the company's operating results until alternate sourcing could be developed. In order to secure components for production and introduction of new products, the company frequently makes advance payments to certain suppliers, and often enters into noncancelable purchase commitments with vendors for such components. Volatility in the prices of these component parts, the possible inability of the company to secure enough components at reasonable prices to build new products in a timely manner in the quantities and configurations demanded or, conversely, a temporary oversupply of these parts, could adversely affect the company's future operating results. The company continues to expand into third-party distribution channels to accommodate changing customer preferences. As a result, the financial health of these resellers, and the company's continuing relationships with them, become more important to the company's success. Some of these companies are thinly capitalized and may be unable to withstand changes in business conditions. The company's financial results could be adversely affected if the financial condition of these resellers substantially weakens or the company's relationship with such resellers deteriorates. Sales outside the United States make up more than half of the company's revenues. In addition, a portion of the company's product and component manufacturing, along with key suppliers, are located outside the United States. Accordingly, the company's future results could be adversely affected by a variety of factors, including changes in foreign currency exchange rates, changes in a specific country's or region's political or economic conditions, trade protection measures, import or export licensing requirements, the overlap of different tax structures, unexpected changes in regulatory requirements and natural disasters. As a matter of course, the company frequently engages in discussions with a variety of parties relating to possible acquisitions, strategic alliances, joint ventures and divestitures. Although the consummation of any transaction is unlikely to have a material effect on the 9 company's results as a whole, the implementation or integration of the transaction may contribute to the company's results differing from the investment community's expectation in a given quarter. Divestitures may result in the cancellation of orders and charges to earnings. Acquisitions and strategic alliances may require, among other things, integration or coordination with a different company culture, management team organization, and business infrastructure. They may also require the development, manufacture and marketing of product offerings with the company's products in a way that enhances the performance of the combined business or product line. Depending on the size and complexity of the transaction, successful integration or implementation depends on a variety of factors, including the hiring and retention of key employees, management of geographically separate facilities, and the integration or coordination of different research and development and product manufacturing facilities. All of these efforts require varying levels of management resources, which may temporarily adversely impact other business operations. A portion of the company's research and development activities, its corporate headquarters, other critical business operations and certain of its suppliers are located near major earthquake faults. The ultimate impact on the company, its significant suppliers and the general infrastructure is unknown, but operating results could be materially affected in the event of a major earthquake. The company is predominantly self-insured for losses and interruptions caused by earthquakes. Operations of the company involve the use of substances regulated under various federal, state and international laws governing the environment. It is the company's policy to apply strict standards for environmental protection to sites inside and outside the U.S., even if not subject to regulations imposed by local governments. The liability for environmental remediation and related costs is accrued when it is considered probable and the costs can be estimated. Environmental costs are presently not material to the company's operations or financial position. Although the company believes that it has the product offerings and resources needed for continuing success, future revenue and margin trends cannot be reliably predicted and may cause the company to adjust its operations. The company's stock price, like that of other technology companies, is subject to significant volatility. The announcement of new products, services or technological innovations by the company or its competitors, quarterly variations in the company's results of operations, changes in revenue or earnings estimates by the investment community and speculation in the press or investment community are among the factors affecting the company's stock price. In addition, the stock price may be affected by general market conditions and domestic and international macroeconomic factors unrelated to the company's performance. Because of the foregoing reasons, recent trends should not be considered reliable indicators of future stock prices or financial results. 10 CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended October 31 In millions 1996 1995 1994 ------- ------- ------- Cash flows from operating activities: Net earnings $ 2,586 $ 2,433 $ 1,599 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,297 1,139 1,006 Deferred taxes on earnings (284) (102) (156) Changes in current assets and liabilities: Accounts and notes receivable (293) (1,696) (848) Inventories (356) (1,740) (582) Accounts payable (55) 956 243 Taxes on earnings 102 180 320 Other current assets and liabilities 553 663 585 Other, net (94) (220) 57 ------- ------- ------- Net cash provided by operating activities 3,456 1,613 2,224 ------- ------- ------- Cash flows from investing activities: Investment in property, plant and equipment (2,201) (1,601) (1,257) Disposition of property, plant and equipment 316 294 291 Purchase of short-term investments (6,652) (3,191) (2,758) Maturities of short-term investments 7,074 3,669 2,392 Purchase of long-term investments (734) (308) (332) Maturities of long-term investments -- -- 47 Acquisitions, net of cash acquired -- -- (62) Other, net 22 (38) 69 ------- ------- ------- Net cash used in investing activities (2,175) (1,175) (1,610) ------- ------- ------- Cash flows from financing activities: Change in notes payable and short-term borrowings (1,137) 755 250 Issuance of long-term debt 1,989 434 64 Payment of current maturities of long-term debt (41) (332) (159) Issuance of common stock under employee stock plans 363 361 300 Repurchase of common stock (1,089) (686) (325) Dividends (450) (358) (280) Other, net (4) 4 4 ------- ------- ------- Net cash (used in) provided by financing activities (369) 178 (146) ------- ------- ------- Increase in cash and cash equivalents 912 616 468 Cash and cash equivalents at beginning of year 1,973 1,357 889 ------- ------- ------- Cash and cash equivalents at end of year $ 2,885 $ 1,973 $ 1,357 ======= ======= ======= Supplemental cash flow disclosures: Income taxes paid, net $ 1,159 $ 1,058 $ 626 Interest paid $ 267 $ 187 $ 143 ======= ======= =======
The accompanying notes are an integral part of these financial statements. 11 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common stock ---------------------------- Par value Number of and capital in Retained In millions except number of shares in thousands shares excess of par earnings Total --------- -------------- -------- -------- Balance October 31, 1993 1,010,852 $ 1,447 $ 7,064 $ 8,511 Employee stock plans: Shares issued 24,568 421 -- 421 Shares repurchased (16,112) (325) -- (325) Dividends -- -- (280) (280) Net earnings -- -- 1,599 1,599 --------- ------- -------- -------- Balance October 31, 1994 1,019,308 1,543 8,383 9,926 Employee stock plans: Shares issued 21,392 524 -- 524 Shares repurchased (20,790) (686) -- (686) Dividends -- -- (358) (358) Net earnings -- -- 2,433 2,433 --------- ------- -------- -------- Balance October 31, 1995 1,019,910 1,381 10,458 11,839 Acquisition via immaterial pooling 3,056 137 (162) (25) Employee stock plans: Shares issued 15,737 577 -- 577 Shares repurchased (24,580) (1,081) (8) (1,089) Dividends -- -- (450) (450) Net earnings -- -- 2,586 2,586 --------- ------- -------- -------- BALANCE OCTOBER 31, 1996 1,014,123 $ 1,014 $ 12,424 $ 13,438 ========= ======= ======== ========
The accompanying notes are an integral part of these financial statements. 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Hewlett-Packard Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. USE OF ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as revenues and expenses reported for the periods presented. The company regularly assesses these estimates and, while actual results may differ, management believes that the estimates are reasonable. REVENUE RECOGNITION Revenue from product sales is generally recognized at the time the product is shipped, with provisions established for price protection programs and for estimated product returns. Upon shipment, the company also provides for the estimated cost that may be incurred for product warranties and post-sales support. Service revenue is recognized over the contractual period or as services are rendered and accepted by the customer. ADVERTISING Advertising costs are expensed as incurred and amounted to $999 million in 1996, $830 million in 1995, and $686 million in 1994. TAXES ON EARNINGS Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. NET EARNINGS PER SHARE Net earnings per share is computed using the weighted-average number of common shares and common share equivalents outstanding during each period. Common share equivalents represent the dilutive effect of outstanding stock options. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The company has classified investments as cash equivalents if the original maturity of such investments is three months or less. Short-term investments are principally comprised of certificates of deposit, temporary money-market instruments and repurchase agreements and are stated at cost, which approximates market. INVENTORIES Inventories are valued at standard costs that approximate actual costs computed on a first-in, first-out basis, not in excess of market values. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Additions, improvements and major renewals are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. Depreciation is provided using accelerated methods, principally over the following useful lives: buildings and improvements, 15 to 40 years; machinery and equipment, 3 to 10 years. Depreciation of leasehold improvements is provided using the straight-line method over the life of the lease or the asset, whichever is shorter. LONG-TERM INVESTMENTS The company's investments are primarily comprised of debt securities which are held-to-maturity. 13 EMPLOYEE STOCK COMPENSATION The company accounts for its employee stock compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation," which is effective for fiscal year 1997. Under SFAS 123 companies may elect, but are not required, to use a fair value methodology to recognize compensation expense for all stock-based awards. In fiscal 1997, the company will implement the disclosure-only provisions of SFAS 123. FOREIGN CURRENCY TRANSLATION The company uses the U.S. dollar as its functional currency. Foreign currency assets and liabilities are translated into U.S. dollars at end-of-period exchange rates except for inventories, property, plant and equipment, other assets and deferred revenue, which are translated at historical exchange rates. Revenues and expenses are translated at average exchange rates in effect during each period, except for those expenses related to balance sheet amounts which are translated at historical exchange rates. Gains or losses from foreign currency translation are included in net earnings. The effect of foreign currency exchange rate fluctuations on cash and cash equivalents denominated in foreign currencies was not material. ACQUISITIONS The company acquired several companies during the last three years, which were not significant to its financial position or results of operations. During 1996, one acquisition was accounted for as a pooling of interests; however, prior period consolidated financial statements were not restated because the retroactive effect was not material. All other acquisitions were accounted for using the purchase method. Under the purchase method, the results of operations of acquired companies are included prospectively from the date of acquisition, and the acquisition cost is allocated to the acquirees' assets and liabilities based upon their fair market values at the date of the acquisition. At October 31, 1996, the net book value of goodwill associated with acquisitions was $288 million and is being amortized on a straight-line basis over 3 to 10 years. FINANCIAL INSTRUMENTS OFF-BALANCE-SHEET RISK The company enters into foreign exchange contracts to hedge against possible exposure from changes in foreign currency exchange rates. Such exposure arises from assets and liabilities that are denominated in currencies other than the U.S. dollar as well as firm foreign currency commitments. When foreign exchange contracts hedge balance sheet exposure, such effects are recognized when the exchange rate changes. When the company's foreign exchange contracts hedge operational exposure, the effects of movements in exchange rates on these instruments are recognized when the related revenues and expenses are recognized. Because the impact of movements in exchange rates on foreign exchange contracts offsets the related impact on the underlying items being hedged, these instruments do not subject the company to risk that would otherwise result from such changes. Foreign exchange contracts require the company to exchange foreign currencies for U.S. dollars and generally mature within six months. The company had foreign exchange contracts of $7.1 billion and $5.4 billion at October 31, 1996 and 1995, respectively. At October 31, 1996 and 1995, deferred gains and deferred losses on these contracts amounted to $66 million and $78 million, and $126 million and $82 million, respectively. 14 The company enters into interest rate swap agreements to manage its exposure to interest rate changes. The transactions generally involve the exchange of fixed and floating interest payment obligations without the exchange of the underlying principal amounts. Interest rate differentials under interest rate swap agreements are recognized over the life of the contracts as interest expense. The notional amounts and maturities of interest rate swap agreements match those of the underlying debt. At October 31, 1996 and 1995, off-balance-sheet exposures under interest rate swap agreements were not material. CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the company to significant concentrations of credit risk consist principally of cash, investments, trade accounts receivable and certain other off-balance-sheet financial instruments. The company maintains cash and cash equivalents, short- and long-term investments and certain other off-balance-sheet financial instruments with various financial institutions. These financial institutions are located in many different geographies, and company policy is designed to limit exposure with any one institution. As part of its cash and risk management processes, the company performs periodic evaluations of the relative credit standing of the financial institutions. The company has not sustained material credit losses from these instruments. The company sells a significant portion of its products through third-party resellers and, as a result, maintains individually significant receivable balances with major distributors. If the financial condition and operations of these distributors deteriorate substantially, the company's operating results could be adversely affected. The ten largest distributor receivable balances collectively represent 13 percent of total accounts and notes receivable at both October 31, 1996 and 1995. Credit risk with respect to other trade accounts receivable is generally diversified due to the large number of entities comprising the company's customer base and their dispersion across many different industries and geographies. The company performs ongoing credit evaluations of its third-party resellers' and other customers' financial condition, utilizes flooring arrangements with third-party financing companies and requires collateral, such as letters of credit and bank guarantees, in certain circumstances. FAIR VALUE OF FINANCIAL INSTRUMENTS For certain of the company's financial instruments, including cash and cash equivalents, short-term investments, accounts and notes receivable, notes payable and short-term borrowings, accounts payable, and other accrued liabilities, the carrying amounts approximate fair value due to their short maturities. Long-term floating rate notes, long-term stock investments and certificates of deposit are carried at amounts that approximate fair value. The estimated fair value of long-term debt is primarily based on quoted market prices, as well as borrowing rates currently available to the company for bank loans with similar terms and maturities. This fair value, when adjusted for unrealized gains and losses on related interest rate swap agreements, approximates the carrying amount of long-term debt. The estimated fair value for foreign exchange contracts is primarily based on quoted market prices for the same or similar instruments, adjusted where necessary for maturity differences. At October 31, 1996 and 1995, the estimated fair value of foreign exchange contracts with carrying values of $(7) million and $(15) million, respectively, amounted to $(19) million and $44 million, respectively. 15 The estimated fair values may not be representative of actual values of the financial instruments that could have been realized as of year-end or that will be realized in the future. FINANCE RECEIVABLES AND EQUIPMENT ON OPERATING LEASES Finance receivables represent sales-type and direct-financing leases and installment sales resulting from the marketing of the company's and complementary third-party products. These receivables have terms from two to five years and are typically collateralized by a security interest in the underlying assets. The components of finance receivables, net, which are included in accounts and notes receivable and long-term investments and other assets at October 31, are:
In millions 1996 1995 ------- ------- Gross finance receivables $ 2,004 $ 1,723 Unearned income (224) (181) ------- ------- Finance receivables, net 1,780 1,542 Less current portion (897) (791) ------- ------- Amounts due after one year, net $ 883 $ 751 ======= =======
Contractual maturities of the company's gross finance receivables at October 31, 1996 are $1,022 million in 1997, $527 million in 1998, $291 million in 1999, $116 million in 2000 and $48 million thereafter. Actual cash collections may differ, however, primarily due to customer early buy-outs and refinancings. The company also leases its products to customers under operating leases. Equipment on operating leases was $849 million and $573 million at October 31, 1996 and 1995, respectively, and is included in machinery and equipment. Accumulated depreciation on equipment on operating leases was $378 million and $286 million at October 31, 1996 and 1995, respectively. Minimum future rentals on noncancelable operating leases with original terms of one year or longer are $466 million in 1997, $259 million in 1998, $92 million in 1999, $17 million in 2000 and $14 million thereafter. TAXES ON EARNINGS The provision for income taxes is comprised of:
In millions 1996 1995 1994 ------- ------- ----- U.S. federal taxes: Current $ 614 $ 642 $ 511 Deferred (115) (87) (156) Non-U.S. taxes: Current 716 609 441 Deferred (169) (15) -- State taxes 62 50 28 ------- ------- ----- $ 1,108 $ 1,199 $ 824 ======= ======= =====
16 The significant components of deferred tax assets, which required no valuation allowance, and deferred tax liabilities included on the balance sheet at October 31 are:
1996 1995 --------------------------- ------------------------- Deferred Deferred Deferred Deferred tax tax tax tax In millions assets liabilities assets liabilities ------ ----------- ------ ----------- Inventory $ 497 $ 13 $ 381 $ 50 Fixed assets 142 8 110 10 Retiree medical benefits 251 -- 248 -- Other retirement benefits -- 111 -- 111 Employee benefits, other than retirement 178 34 130 42 Leasing activities -- 84 -- 86 Other 272 133 325 228 ------ ------ ------ ---- $1,340 $ 383 $1,194 $527 ====== ====== ====== ====
Tax benefits of $123 million, $91 million and $41 million associated with the exercise of employee stock options were allocated to equity in 1996, 1995 and 1994, respectively. The differences between the U.S. federal statutory income tax rate and the company's effective rate are:
1996 1995 1994 ---- ---- ---- U.S. federal statutory income tax rate 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit 1.1 0.9 0.8 Lower rates in other jurisdictions, net (6.9) (5.0) (4.8) Other, net 0.8 2.1 3.0 ---- ---- ---- 30.0% 33.0% 34.0% ==== ==== ====
After allocating eliminations and corporate items, earnings before taxes are:
In millions 1996 1995 1994 ------ ------ ------ U.S. operations including Puerto Rico $1,535 $1,548 $ 915 Non-U.S 2,159 2,084 1,508 ------ ------ ------ $3,694 $3,632 $2,423 ====== ====== ======
The company has not provided for U.S. federal income and foreign withholding taxes on $3.8 billion of non-U.S. subsidiaries' undistributed earnings as of October 31, 1996, because such earnings are intended to be reinvested indefinitely. If these earnings were distributed, foreign tax credits should become available under current law to reduce or eliminate the resulting U.S. income tax liability. Where excess cash has accumulated in the company's non-U.S. subsidiaries and it is advantageous for tax or foreign exchange reasons, subsidiary earnings are remitted. 17 As a result of certain employment and capital investment actions undertaken by the company, income from manufacturing activities in certain countries is subject to reduced tax rates, and in some cases is wholly exempt from taxes, for years through 2010. The income tax benefits attributable to the tax status of these subsidiaries are estimated to be $212 million, $168 million and $163 million for 1996, 1995 and 1994, respectively. The Internal Revenue Service (IRS) has completed its examination of the company's federal income tax returns filed through 1983. The IRS has not commenced its examination of returns for years subsequent to 1992. The company believes that adequate accruals have been provided for all years. BORROWINGS Notes payable and short-term borrowings and the related average interest rates at October 31 are:
1996 1995 ----------------------------- ----------------------------- Average Average interest interest In millions rate rate ----------------------------- ----------------------------- Commercial paper $1,848 5.3% $2,785 5.8% Notes payable to banks 200 7.5% 315 6.6% Other short-term borrowings 77 6.2% 114 3.5% ------ --- ------ --- $2,125 $3,214 ====== ======
At October 31, 1996, the company had various borrowing arrangements in place with unused borrowing capacity totaling $4.6 billion. These credit arrangements are generally uncommitted and generally do not require commitment fees. Long-term debt and related maturities and interest rates at October 31 are:
In millions 1996 1995 ------- ----- U.S. dollar notes due 1997-2017 at 5.25%-7.98% $ 1,348 $ 488 Deutschemark notes, due 2000-2002 at 4.75%-5.63% 513 -- Yen notes, due 1999-2002 at 1.80%-5.00% 567 -- British pound issue, due 1999 at 7.13% 149 149 Other 87 65 Less current portion (85) (39) ------- ----- Long-term debt $ 2,579 $ 663 ======= =====
The company utilizes interest rate swaps to modify the interest expense on its long-term debt to achieve primarily U.S. LIBOR-based floating rates. The company also hedges currency exposure on its foreign-currency denominated long-term debt. The aggregate future repayments of long-term debt outstanding at October 31, 1996 are $85 million in 1997, $256 million in 1998, $1,245 million in 1999, $417 million in 2000, $246 million in 2001 and $415 million thereafter. 18 SHAREHOLDERS' EQUITY STOCK SPLIT The company made a 2-for-1 split of its $1 par value common stock in the form of a 100 percent distribution to shareholders of record as of June 21, 1996. As a result of the stock split, authorized, outstanding, and reserved common shares doubled and retained earnings was reduced by the par value of the additional common shares issued. The rights of the holders of these securities were not otherwise modified. All share and per share data and stockholders' equity balances have been restated for the effect of the stock split. EMPLOYEE STOCK PURCHASE PLAN Eligible company employees may generally contribute up to 10 percent of their base compensation to the quarterly purchase of company stock under the Employee Stock Purchase Plan. Under this plan, employee contributions to purchase HP stock are partially matched with shares contributed by the company. At October 31, 1996, approximately 89,000 employees were eligible to participate and approximately 52,000 employees were participants in the plan. INCENTIVE COMPENSATION PLANS The company has four principal stock option plans, adopted in 1979, 1985, 1990 and 1995. All plans permit options granted to qualify as "Incentive Stock Options" under the Internal Revenue Code. The exercise price of a stock option is generally equal to the fair market value of the company's common stock on the date the option is granted. Under the 1990 and 1995 Incentive Stock Plans, however, the Compensation Committee, in certain cases, may choose to establish a discounted exercise price at no less than 75 percent of fair market value on the grant date. In 1996 and 1995, discounted options totaling 1,165,000 shares and 1,536,000 shares, respectively, were granted. Stock compensation expense related to the discounted options was not material. Options generally vest at a rate of 25 percent per year over a period of four years from the date of grant except for discounted options, which generally may not be exercised before the fifth anniversary of the option grant date, at which time such options become 100 percent vested. The plans also provide for the granting of stock appreciation rights with respect to options granted to officers. The company has not included stock appreciation rights with options granted to officers since October 31, 1991. The following table summarizes option activity during 1996:
Price In thousands except price per share amounts Options per share ------- --------- Outstanding at October 31, 1995 49,616 $ 7-48 Granted 7,876 29-53 Exercised (7,214) 7-49 Cancelled (934) 7-53 ------ ------ Outstanding at October 31, 1996 49,344 $ 7-53 ====== ======
19 At October 31, 1996, options to purchase 25,649,000 shares were exercisable at prices ranging from $7 to $47 per share. Shares available for option grants at October 31, 1996 and 1995 were 65,531,000 and 74,488,000, respectively. Approximately 49,000 employees were considered eligible to receive stock options in fiscal 1996. There were approximately 29,000 employees holding options under one or more of the option plans as of October 31, 1996. Under the 1985 Incentive Compensation Plan and the 1990 and 1995 Incentive Stock Plans, certain key employees may be granted cash or restricted stock awards. Cash and restricted stock awards are independent of option grants and are subject to restrictions considered appropriate by the company's Compensation Committee. The majority of the shares of restricted stock outstanding at October 31, 1996 are subject to forfeiture if employment terminates prior to five years from the date of grant. During that period, ownership of the shares cannot be transferred. Restricted stock has the same dividend and voting rights as other common stock and is considered to be currently issued and outstanding. The cost of the awards, determined to be the fair market value of the shares at the date of grant, is expensed ratably over the period the restrictions lapse. Such expense was not material in 1996, 1995 or 1994. At October 31, 1996 and 1995, the company had 3,926,000 and 3,062,000 shares, respectively, of restricted stock outstanding. SHARES RESERVED The company has reserved shares for future issuance under the employee stock plans. At October 31, 1996 and 1995, 145,622,000 and 160,468,000 shares, respectively, were reserved. STOCK REPURCHASE PROGRAM Under the company's stock repurchase program, shares of HP common stock are purchased primarily to manage the dilution created by shares issued under the employee stock plans. In 1996, 1995 and 1994, 24,580,000, 20,790,000 and 16,112,000 shares were repurchased for an aggregate purchase price of $1,089 million, $686 million and $325 million, respectively. At October 31, 1996, HP had authorization for an aggregate of $230 million in future repurchases under this program based on certain price and volume criteria. During November 1996, the Board of Directors authorized an additional $1 billion in stock repurchases. RETIREMENT PLANS AND RETIREE MEDICAL BENEFITS PENSION AND DEFERRED PROFIT-SHARING PLANS Substantially all of the company's employees are covered under various pension and deferred profit-sharing retirement plans. Worldwide pension and deferred profit-sharing costs were $281 million in 1996, $233 million in 1995, and $196 million in 1994. U.S. employees who meet certain minimum eligibility criteria are provided retirement benefits under the Hewlett-Packard Company Retirement Plan (Retirement Plan). Defined benefits are based upon an employee's highest average pay rate and length of service. For eligible service through October 31, 1993, the benefit payable under the Retirement Plan is reduced by any amounts due to the employee under the company's frozen defined contribution Deferred Profit-Sharing Plan (DPS), which has since been closed to new participants. 20 The combined status of the Retirement Plan and DPS follows:
In millions 1996 1995 ------ ------ Fair value of plan assets $2,744 $2,400 Retirement benefit obligation $2,799 $2,413 ------ ------
Employees outside the U.S. generally receive retirement benefits under various defined benefit and defined contribution plans based upon factors such as years of service and employee compensation levels. Eligibility is generally determined in accordance with local statutory requirements. RETIREE MEDICAL PLAN In addition to providing pension benefits, the company also sponsors a medical plan that provides defined benefits to U.S. retired employees. Substantially all of the company's current U.S. employees could become eligible for these benefits and the existing benefit obligation relates primarily to those employees. Once participating in the plan, retirees may choose from managed-care and indemnity options, with their contributions dependent on options chosen and length of service. 401(K) PLAN U.S. employees of the company may participate in the Tax Saving Capital Accumulation Plan (TAXCAP), which was established as a supplemental retirement program. Under the TAXCAP program, the company matches contributions by employees up to a maximum of 4 percent of an employee's annual compensation. The maximum combined contribution to the Employee Stock Purchase Plan and TAXCAP is 17 percent of an employee's annual base compensation subject to certain regulatory and plan limitations. At October 31, 1996, 52,000 employees were participating in TAXCAP out of 58,000 who were eligible. FUNDED STATUS The funded status of the defined benefit and retiree medical plans is:
U.S. defined benefit plan Non-U.S. defined benefit plans U.S. retiree medical plan ------------------------- ------------------------------ ------------------------- In millions 1996 1995 1996 1995 1996 1995 ----- ----- ------- ------- ----- ----- Fair value of plan assets $ 485 $ 358 $ 1,223 $ 1,116 $ 365 $ 310 Benefit obligation (540) (371) (1,246) (1,182) (429) (412) ----- ----- ------- ------- ----- ----- Benefit obligation in excess of plan assets (55) (13) (23) (66) (64) (102) Unrecognized net experience (gain) loss (19) (8) 50 95 (225) (176) Unrecognized prior service cost (benefit) related to plan changes 48 52 27 32 (163) (173) Unrecognized net transition asset* (31) (39) -- -- -- -- ----- ----- ------- ------- ----- ----- Prepaid (accrued) costs $ (57) $ (8) $ 54 $ 61 $(452) $(451) ===== ===== ======= ======= ===== ===== Vested benefit obligation $(232) $(157) $ (893) $ (812) Accumulated benefit obligation $(232) $(157) $ (944) $ (859) ----- ----- ------- -------
*Amortized over 15 years for the U.S. plan and over periods ranging from 12 to 20 years for non-U.S. plans. 21 Plan assets consist primarily of listed stocks and bonds for the U.S. plans and listed stocks, bonds and cash surrender value of life insurance policies for the non-U.S. plans. It is the company's practice to fund these costs to the extent they are tax-deductible. NET PERIODIC COST The company's net pension and retiree medical costs are comprised of:
Pension ----------------------------------------------------- U.S. plans Non-U.S. plans U.S. retiree medical plan ------------------------- ----------------------- ------------------------- In millions 1996 1995 1994 1996 1995 1994 1996 1995 1994 ----- ----- ----- ----- ---- ---- ---- ---- ---- Service cost --benefits earned during the period $ 137 $ 108 $ 112 $ 86 $ 88 $ 73 $ 23 $ 21 $ 27 Interest cost on benefit obligation 27 15 6 74 72 58 32 28 33 Actual return on plan assets (61) (59) (7) (120) (26) (44) (55) (52) (7) Net amortization and deferral 25 25 (29) 36 (52) (16) 8 18 (27) ----- ----- ----- ----- ---- ---- ---- ---- ---- Net plan cost $ 128 $ 89 $ 82 $ 76 $ 82 $ 71 $ 8 $ 15 $ 26 ===== ===== ===== ===== ==== ==== ==== ==== ====
ASSUMPTIONS The assumptions used to measure the benefit obligations and to compute the expected long-term return on assets for the company's defined benefit and retiree medical plans are:
1996 1995 1994 ------- ------- ------- U.S. defined benefit plan: Discount rate 7.5% 7.5% 8.0% Average increase in compensation levels 5.5% 5.5% 5.5% Expected long-term return on assets 9.0% 9.0% 9.0% Non-U.S. defined benefit plans: Discount rate 4.0 to 8.5% 4.0 to 8.5% 5.0 to 8.8% Average increase in compensation levels 3.5 to 6.5% 3.5 to 6.5% 4.1 to 7.0% Expected long-term return on assets 5.8 to 10.0% 5.8 to 10.0% 7.0 to 9.5% U.S. retiree medical plan: Discount rate 7.5% 7.5% 8.0% Expected long-term return on assets 9.0% 9.0% 9.0% Current medical cost trend rate 10.0% 10.4% 10.8% Ultimate medical cost trend rate 6.0% 6.0% 6.0% Medical cost trend rate decreases to ultimate rate in year 2007 2007 2007 Effect of a 1% increase in the medical cost trend rate (millions): Increase in benefit obligation $ 90 $ 87 $ 66 Increase in the annual retiree medical cost $ 13 $ 12 $ 13 ------- ------- -------
22 COMMITMENTS The company leases certain real and personal property under non-cancelable operating leases. Future minimum lease payments at October 31, 1996 are $182 million for 1997, $151 million for 1998, $111 million for 1999, $87 million for 2000, $78 million for 2001 and $287 million thereafter. Certain leases require the company to pay property taxes, insurance and routine maintenance and include escalation clauses. Rent expense was $353 million in 1996, $302 million in 1995 and $274 million in 1994. CONTINGENCIES AND FACTORS THAT COULD AFFECT FUTURE RESULTS CONTINGENCIES The company is involved in lawsuits, claims, investigations and proceedings, including patent, commercial, and environmental matters, which arise in the ordinary course of business. There are no such matters pending that the company expects to be material in relation to its business, financial condition, or results of operations. FACTORS THAT COULD AFFECT FUTURE RESULTS A substantial portion of the company's revenues each year are generated from the development, manufacture and rapid release to market of high technology products newly introduced during the year. In the extremely competitive industry environment in which the company operates, such product generation, manufacturing and marketing processes are uncertain and complex, requiring accurate prediction of market trends and demand as well as successful management of various manufacturing risks inherent in such products. Additionally, the company's production strategy relies on certain key suppliers' ability to deliver completed products, subassemblies, and component parts in time to meet critical manufacturing and distribution schedules, and its sales strategy on the ability of certain third-party resellers to support sales channels to the mass market effectively. In light of these dependencies, it is reasonably possible that failure to successfully manage a significant product introduction, failure of certain key suppliers to deliver as needed, or failure of certain resellers to remain customers and channel partners could have a severe near-term impact on the company's order growth, revenue growth, or results of operations. 23 GEOGRAPHIC AREA INFORMATION The company, operating in a single industry segment, designs, manufactures and services products and systems for measurement, computation and communications. Net revenue, earnings from operations and identifiable assets, classified by the major geographic areas in which the company operates, are:
In millions 1996 1995 1994 -------- -------- -------- NET REVENUE United States: Unaffiliated customer sales $ 17,041 $ 13,963 $ 11,469 Interarea transfers 7,263 5,728 4,653 -------- -------- -------- 24,304 19,691 16,122 -------- -------- -------- Europe: Unaffiliated customer sales 13,252 11,142 8,423 Interarea transfers 1,643 1,432 1,058 -------- -------- -------- 14,895 12,574 9,481 -------- -------- -------- Japan, Other Asia Pacific,Canada, Latin America: Unaffiliated customer sales 8,127 6,414 5,099 Interarea transfers 5,470 3,783 2,765 -------- -------- -------- 13,597 10,197 7,864 -------- -------- -------- Eliminations (14,376) (10,943) (8,476) -------- -------- -------- $ 38,420 $ 31,519 $ 24,991 ======== ======== ======== EARNINGS FROM OPERATIONS United States $ 2,470 $ 2,259 $ 1,472 Europe 769 930 660 Japan, Other Asia Pacific, Canada, Latin America 1,173 1,240 824 Eliminations and corporate (686) (861) (407) -------- -------- -------- $ 3,726 $ 3,568 $ 2,549 ======== ======== ======== IDENTIFIABLE ASSETS United States $ 14,321 $ 12,347 $ 9,848 Europe 7,991 7,168 4,991 Japan, Other Asia Pacific, Canada, Latin America 7,200 5,854 4,052 Eliminations and corporate (1,813) (942) 676 -------- -------- -------- $ 27,699 $ 24,427 $ 19,567 ======== ======== ========
Net revenue from sales to unaffiliated customers is based on the location of the customer. Interarea transfers are sales among HP affiliates principally made at market price, less an allowance primarily for subsequent manufacturing and/or marketing costs. Earnings from operations and identifiable assets are classified based on the location of the company's facilities. Identifiable corporate assets, which are net of eliminations, comprise primarily cash and cash equivalents, property, plant and equipment, and other assets, and aggregate $4,810 million in 1996, $4,343 million in 1995 and $4,594 million in 1994. 24 STATEMENT OF MANAGEMENT RESPONSIBILITY The company's management is responsible for the preparation, integrity and objectivity of the consolidated financial statements and other financial information presented in this report. The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles and reflect the effects of certain estimates and judgments made by management. The company's management maintains an effective system of internal control that is designed to provide reasonable assurance that assets are safeguarded and transactions are properly recorded and executed in accordance with management's authorization. The system is continuously monitored by direct management review and by internal auditors who conduct an extensive program of audits throughout the company. The company selects and trains qualified people who are provided with and expected to adhere to the company's standards of business conduct. These standards, which set forth the highest principles of business ethics and conduct, are a key element of the company's control system. The company's consolidated financial statements have been audited by Price Waterhouse LLP, independent accountants. Their audits were conducted in accordance with generally accepted auditing standards, and included a review of financial controls and tests of accounting records and procedures as they considered necessary in the circumstances. The Audit Committee of the Board of Directors, which consists of outside directors, meets regularly with management, the internal auditors and the independent accountants to review accounting, reporting, auditing and internal control matters. The committee has direct and private access to both internal and external auditors. /s/ Lew Platt /s/ Robert Wayman - ----------------------------- --------------------------- Lew Platt Robert Wayman Chairman of the Board, President and Executive Vice President, Finance and Administration Chief Executive Officer Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF HEWLETT-PACKARD COMPANY In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of earnings, cash flows and shareholders' equity present fairly, in all material respects, the financial position of Hewlett-Packard Company and its subsidiaries at October 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ Price Waterhouse LLP San Jose, California November 18, 1996 25 ORDERS AND NET REVENUE BY GROUPINGS OF SIMILAR PRODUCTS AND SERVICES Unaudited
For the years ended October 31 In millions 1996 1995 1994 ------- ------- ------- ORDERS Computer products, service and support $31,828 $25,980 $19,882 Electronic test and measurement instrumentation, systems and service 3,912 3,499 2,759 Medical electronic equipment and service 1,423 1,385 1,170 Chemical analysis and service 895 855 777 Electronic components 831 966 762 ------- ------- ------- $38,889 $32,685 $25,350 ======= ======= ======= NET REVENUE Computer products, service and support $31,430 $25,269 $19,632 Electronic test and measurement instrumentation, systems and service 3,798 3,288 2,722 Medical electronic equipment and service 1,416 1,300 1,141 Chemical analysis and service 858 806 754 Electronic components 918 856 742 ------- ------- ------- $38,420 $31,519 $24,991 ======= ======= =======
The table above provides supplemental information showing orders and net revenue by groupings of similar products and services. In fiscal 1996, the company changed its order-reporting policies for its support businesses to report orders when received instead of as services are provided. Fiscal 1995 orders have been restated to reflect this change, which did not have a material impact on order growth rates. The groupings are as follows: COMPUTER PRODUCTS, SERVICE AND SUPPORT Computer equipment and systems (hardware and software), networking products, desktop and large-format printers and scanners; extended-storage products; terminals and handheld calculators; consulting and integration services; support and maintenance services; and parts and supplies. ELECTRONIC TEST AND MEASUREMENT INSTRUMENTATION, SYSTEMS AND SERVICE Instruments and systems used to design, synchronize and produce electronics; instruments and systems that test, synchronize and extract data from communications networks; digital communications products; and consulting services. MEDICAL ELECTRONIC EQUIPMENT AND SERVICE Clinical measurement instrumentation and information systems used for patient monitoring, diagnostic cardiology and ultrasound imaging; support, systems-integration and equipment-maintenance services; and medical supplies. CHEMICAL ANALYSIS AND SERVICE Gas and liquid chromatographs, mass spectrometers and spectrophotometers used to analyze chemical compounds; laboratory data and information management systems; support and maintenance services; and consumables and supplies. ELECTRONIC COMPONENTS Microwave semiconductor and optoelectronic devices. 26 QUARTERLY SUMMARY Unaudited
For the three months ended In millions except per share amounts January 31 April 30 July 31 October 31 ---------- -------- ------- ---------- 1996 U.S. orders $ 3,923 $ 4,672 $3,888 $ 4,698 International orders 6,179 5,438 4,784 5,307 ------- ------- ------ ------- Total orders $10,102 $10,110 $8,672 $10,005 ------- ------- ------ ------- Net revenue $ 9,288 $ 9,880 $9,105 $10,147 Cost of products sold and services $ 5,988 $ 6,498 $6,194 $ 6,819 Earnings from operations $ 1,195 $ 1,041 $ 611 $ 879 Net earnings $ 790 $ 723 $ 425 $ 648 Per share amounts, restated for 1996 stock split: Net earnings $ .75 $ .69 $ .40 $ .62 Cash dividends $ .10 $ .10 $ .12 $ .12 Range of stock prices $37 7/8-47 1/2 $43 1/8-55 $38 5/8-56 7/8 $ 40-49 ============ ========= ============ ======= 1995 U.S. orders $ 3,167 $ 3,523 $3,733 $ 4,263 International orders 4,668 4,609 4,317 4,405 ------- ------- ------ ------- Total orders $ 7,835 $ 8,132 $8,050 $ 8,668 ------- ------- ------ ------- Net revenue $ 7,304 $ 7,428 $7,739 $ 9,048 Cost of products sold and services $ 4,547 $ 4,654 $4,907 $ 5,906 Earnings from operations $ 932 $ 875 $ 824 $ 937 Net earnings $ 602 $ 577 $ 576 $ 678 Per share amounts, restated for 1996 stock split: Net earnings $ .57 $ .55 $ .55 $ .64 Cash dividends $ .075 $ .075 $ .10 $ .10 Range of stock prices $23-26 5/8 $25 1/4-33 $32 1/8-41 3/4 $36 1/4-48 ============ ========= ============ =========
- --------------- Graphs A bar chart entitled "Net Earnings Per Share (In dollars)" at the top right of page 54 of the Annual Report shows that for the fiscal quarters in the years 1995 and 1996 (shown on the x-axis) the Company had net earnings per share (shown on the y-axis) in the respective amounts provided in the table entitled "Quarterly Summary (Unaudited)" on page 54 of the Annual Report. In addition, a note to the bar chart states that these amounts have been restated for the effect of a 2-for-1 stock split in 1996. A bar chart entitled "Range of Common Stock Prices (In dollars per share)" at the bottom right of page 54 of the Annual Report shows that for the fiscal quarters in the years 1995 and 1996 (shown on the x-axis) the range of stock prices (shown on the y-axis) was in the respective amounts provided in the table entitled "Quarterly Summary (Unaudited)" on page 54 of the Annual Report. In addition, a note to the bar chart states that these amounts have been restated for the effect of a 2-for-1 stock split in 1996. EX-21 10 SUBSIDIARIES OF REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES AND AFFILIATES OF HEWLETT-PACKARD COMPANY - -------------------------------------------------------------------------------- Organized Under Laws of - -------------------------------------------------------------------------------- DOMESTIC SUBSIDIARIES OF HEWLETT-PACKARD COMPANY Hewlett-Packard Chesapeake Inc. Delaware Hewlett-Packard Delaware, Inc. Delaware Hewlett-Packard Delaware Capital, Inc. Delaware Hewlett-Packard Delaware Funding, Inc. Delaware Hewlett-Packard Delaware Holding, Inc. Delaware Hewlett-Packard Delaware Investment, Inc. Delaware Hewlett-Packard Finance Company California Hewlett-Packard Global Trading, Inc. California Hewlett-Packard Hellas California Hewlett-Packard Inter-Americas California Hewlett-Packard Laboratories Japan, Inc. Delaware Hewlett-Packard Little Falls, Inc. Delaware Hewlett-Packard Pipeline Company Colorado Hewlett-Packard World Trade, Inc. Delaware Apollo World Trade, Inc. Delaware Convex Computer Corporation Delaware ElseWare Corporation Washington The Tall Tree Insurance Company Vermont Versatest, Inc. California DOMESTIC SUBSIDIARY OF HEWLETT-PACKARD CHESAPEAKE INC. Hewlett-Packard Puerto Rico California DOMESTIC SUBSIDIARY OF HEWLETT-PACKARD LITTLE FALLS, INC. Fleet Systems, Inc. California DOMESTIC SUBSIDIARY OF HEWLETT-PACKARD WORLD TRADE, INC. Hewlett-Packard Export Trade Co. California DOMESTIC SUBSIDIARIES OF CONVEX COMPUTER CORPORATION Convex Computer (China) Inc. Delaware Convex International, Inc. Delaware 1 2 FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD COMPANY China Hewlett-Packard Company, Ltd. PRC Grupo Hewlett-Packard Latin America S.A. de C.V. Mexico Hewlett-Packard Asia Pacific Ltd. Hong Kong Hewlett-Packard Australia Ltd. Australia Hewlett-Packard Bilgisayar Ve Olcum Sistemleri Anonim Sirketi Turkey Hewlett-Packard Hong Kong Ltd. Hong Kong Hewlett-Packard Korea Ltd. Korea Hewlett-Packard Medical Products (Qingdao) Ltd. PRC Hewlett-Packard Penang Sdn. Bhd. Malaysia Hewlett-Packard Portugal-Sistemas De Informatica E De Medida S.A. Portugal Hewlett-Packard Sales (Malaysia) Snd. Bhd. Malaysia Hewlett-Packard Taiwan, Ltd. ROC Edisa Hewlett-Packard S.A. Brazil EEsof K.K. Japan EEsof Pte. Ltd. Singapore P.T. Hewlett-Packard Berca Servisindo Indonesia FOREIGN SUBSIDIARIES OF CONVEX COMPUTER CORPORATION Convex Computer Australia Pty Ltd. Australia Convex Computer Barbados Ltd. Barbados Convex Computer Canada Ltd. Canada Convex S.p.A. Italy Convex Computer Japan K.K. Japan Convex Computer Pte. Ltd. Singapore Convex Computer AG Switzerland Convex Computer B.V. The Netherlands Convex Computer Ltd. U.K. FOREIGN SUBSIDIARIES OF GRUPO HEWLETT-PACKARD LATIN AMERICA S.A. DE C.V. Arrendadora Hewlett-Packard S.A. de C.V. Mexico Hewlett-Packard de Mexico S.A. de C.V. Mexico FOREIGN SUBSIDIARY OF HEWLETT-PACKARD ASIA PACIFIC LTD. Hewlett-Packard Australia Finance Ltd. Australia FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD AUSTRALIA LTD. Hewlett-Packard New Zealand Ltd. New Zealand Telstra Hewlett-Packard (R&D) Pty. Inc. Australia 2 3 FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD DELAWARE, INC. Hewlett-Packard Chile, S.A. Chile Hewlett-Packard de Venezuela, C.A. Venezuela Hewlett-Packard do Brasil, S.A. Brazil Hewlett-Packard Malaysia Technology, Sdn. Bhd. Malaysia Hewlett-Packard (Thailand) Ltd. Thailand FOREIGN SUBSIDIARY OF HEWLETT-PACKARD DELAWARE HOLDING, INC. Hewlett-Packard (India) Software Operation Pte. Ltd. India FOREIGN SUBSIDIARY OF EDISA HEWLETT-PACKARD S.A. HP Computadores Brazil FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD HOLDING GMBH Hewlett-Packard GmbH Germany CoCreate Software GmbH Germany IDACOM Electronics GmbH Germany Leasametric GmbH Germany FOREIGN SUBSIDIARIES OF COCREATE SOFTWARE GMBH CoCreate Software, Inc. California CoCreate Software Ltd. U.K. FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD EUROPE B.V. Hewlett-Packard Belgium S.A./N.V. Belgium Hewlett-Packard (Canada) Ltd. Canada Hewlett-Packard Caribe B.V. Netherlands Hewlett-Packard (China) Investment Co., Ltd. PRC Hewlett-Packard Colombia Limitada Columbia Hewlett-Packard Coordination Center SC Belgium Hewlett-Packard Far East Pte. Ltd. Singapore Hewlett-Packard Holding GmbH Germany Hewlett-Packard Holding B.V. Netherlands Hewlett-Packard Holdings (M) Sdn. Bhd. Malaysia Hewlett-Packard India Ltd. India Hewlett-Packard Ireland Ltd. Ireland Hewlett-Packard Ireland (Holdings) Ltd. Ireland 3 4 FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD EUROPE B.V. (Continued) Hewlett-Packard Israel Science Center Ltd. Israel Hewlett-Packard Italiana S.p.A. Italy Hewlett-Packard Japan, Ltd. Japan Hewlett-Packard Ltd. U.K. Hewlett-Packard Netherland B.V. Netherlands Hewlett-Packard Philippines Philippines Hewlett-Packard S.A. Switzerland Hewlett-Packard Singapore (Sales) Pte. Ltd. Singapore Hewlett-Packard Vietnam, Ltd. Vietnam Technologies et Participations S.A. France FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD (CHINA) INVESTMENT CO., LTD. Hewlett-Packard Computer Products (Shanghai) Co., Ltd. PRC Hewlett-Packard Shanghai Analytical Products Co. Ltd. PRC FOREIGN SUBSIDIARY OF HEWLETT-PACKARD HOLDINGS (M) SDN. BHD. Hewlett-Packard Storage Products (M) Sdn. Bhd. Malaysia FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD IRELAND (HOLDINGS) LTD. Hewlett-Packard (Manufacturing) Ltd. Ireland Hewlett-Packard Europe Finance Ltd. Ireland FOREIGN SUBSIDIARY OF HEWLETT-PACKARD ITALIANA S.P.A. Hewlett-Packard Servizi Finanziari S.p.A. Italy FOREIGN SUBSIDIARY OF HEWLETT-PACKARD JAPAN, LTD. SYC Ltd. Japan FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD LTD. Hewlett-Packard Finance Ltd. U.K. Hewlett-Packard Product Leasing Ltd. U.K. Apollo Computer (UK) Ltd. U.K. BT&D Technologies Ltd. U.K. 4 5 FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD S.A. Hewlett-Packard Argentina S.A. Argentina Hewlett-Packard A/S Denmark Hewlett-Packard Ges.m.b.H Austria Hewlett-Packard Espanola, S.A. Spain Hewlett-Packard (Malaysia) Sdn. Bhd. Malaysia Hewlett-Packard Norge AS Norway Hewlett-Packard OY Finland Hewlett-Packard (Schweiz) AG Switzerland Hewlett-Packard Singapore Pte. Ltd. Singapore Hewlett-Packard Sverige AB Sweden Hewlett-Packard Technical B.V. Netherlands Hewlett-Packard Trading S.A. Switzerland FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD SINGAPORE PTE. LTD. Hewlett-Packard Investment Ltd. Liberia Geneva Investments N.V. Netherlands Antilles W.W. Investment Holding Pte. Ltd. Singapore FOREIGN SUBSIDIARY OF HEWLETT-PACKARD INVESTMENT LTD. Banque de Savoie S.A. France FOREIGN SUBSIDIARY OF W.W. INVESTMENT HOLDING PTE. LTD. W.W. Real Estate and Development Pte. Ltd. Singapore FOREIGN SUBSIDIARIES OF W.W. REAL ESTATE AND DEVELOPMENT PTE. LTD. W-Wide Offshore Ventures Pte. Ltd. Singapore CB Pierre France FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD WORLD TRADE, INC. Hewlett-Packard AO Russia Hewlett-Packard Europe B.V. Netherlands Hewlett-Packard International Sales Corporation B.V. Netherlands Hewlett-Packard Magyarorszag Kft. Hungary Hewlett-Packard Polska spol.z.o.o. Poland Hewlett-Packard RE Ltd. Ireland Hewlett-Packard s.r.o. Czech Republic P.T. Hewlett-Packard Finance Indonesia Indonesia Yokogawa Analytical Systems, Inc. Japan 5 6 FOREIGN SUBSIDIARY OF LEASAMETRIC GmbH Leasametric S.A. France FOREIGN SUBSIDIARIES OF TECHNOLOGIES et PARTICIPATIONS S.A. Hewlett-Packard France France Technologies et Participations Immobilieres France FOREIGN SUBSIDIARY OF HEWLETT-PACKARD FRANCE Hewlett-Packard France Finance France 6 EX-23 11 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the following Registration Statements on Form S-8 of our report dated November 18, 1996 which appears on page 52 of the 1996 Annual Report to Shareholders of Hewlett-Packard Company which is incorporated in this Annual Report on Form 10-K. Registration No. 2-66780 through Post-Effective Amendment No. 6 Registration No. 2-90239 Registration No. 2-92331 through Post-Effective Amendment No. 3 Registration No. 2-96361 through Post-Effective Amendment No. 1 Registration No. 33-30769 Registration No. 33-31496 Registration No. 33-31500 Registration No. 33-38579 Registration No. 33-50699 Registration No. 33-52291 Registration No. 33-58447 Registration No. 33-65179 /s/ Price Waterhouse LLP - ------------------------ PRICE WATERHOUSE LLP San Jose, California January 24, 1997 EX-27 12 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the consolidated balance sheer and the consolidated statement of earnings and is qualified in its entirety by reference to such financial statements. 1,000,000 U.S. DOLLARS 12-MOS OCT-31-1996 NOV-01-1995 OCT-31-1996 1 2,885 442 7,126 0 6,401 17,991 10,198 4,662 27,699 10,623 2,579 0 0 1,014 12,424 27,699 33,114 38,420 22,013 25,499 9,195 0 327 3,694 1,108 2,586 0 0 0 2,586 2.46 0
EX-99 13 1996 EMPLOYEE SPP ANNUAL REPORT ON FORM 11-K 1 EXHIBIT 99 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 11-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended October 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _______________ to _______________ Commission File Number: 1-4423 A. Full title of the plan and address of the plan, if different from that of the issuer named below: HEWLETT-PACKARD COMPANY EMPLOYEE STOCK PURCHASE PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: HEWLETT-PACKARD COMPANY 3000 HANOVER STREET PALO ALTO, CALIFORNIA 94304 REQUIRED INFORMATION Not applicable. SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE ADMINISTRATOR OF THE PLAN HAS DULY CAUSED THIS ANNUAL REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. HEWLETT-PACKARD COMPANY EMPLOYEE STOCK PURCHASE PLAN By: /s/ Ann O. Baskins --------------------------------------- Ann O. Baskins Managing Counsel and Assistant Secretary Date: January 28, 1997 -----END PRIVACY-ENHANCED MESSAGE-----