Pay-For-Results Short-Term Bonus Plan - Hewlett-Packard Co.


 
                            HEWLETT-PACKARD COMPANY
                     PAY-FOR-RESULTS SHORT-TERM BONUS PLAN
                          (EFFECTIVE NOVEMBER 1, 2000)
 
    1.  PURPOSE.  The purpose of the Hewlett-Packard Company Pay-For-Results
Short-Term Bonus Plan is to provide certain employees of Hewlett-Packard Company
and its subsidiaries with incentive compensation based upon the level of
achievement of financial, business and other performance criteria.
 
    2.  DEFINITIONS.  As used in the Plan, the following terms shall have the
meanings set forth below:
 
        (a) "AFFILIATE" shall mean (i) any entity that, directly or 
            indirectly, is controlled by the Company and (ii) any entity in 
            which the Company has a significant equity interest, in either 
            case as determined by the Committee.
 
        (b) "AFM" shall mean the Company's Accounting and Financial Manual, 
            as posted from time to time on the Company's internal web site.
 
        (c) "BOARD" shall mean the Board of Directors of the Company.
 
        (d) "BONUS" shall mean a cash payment, which may be an addition to 
            Eligible Earnings, made pursuant to the Plan with respect to a 
            particular Performance Period. The amount of a Bonus may be less 
            than, equal to or greater than the Target Bonus; provided, 
            however, that a Bonus shall not be greater than an amount equal 
            to three hundred percent (300%) of the Target Bonus.
 
        (e) "CODE" shall mean the Internal Revenue Code of 1986 and the 
            regulations promulgated thereunder, all as amended from time to 
            time, and any successors thereto.
 
        (f) "COMMITTEE" shall mean the Committee designated pursuant to 
            Section 4 of the Plan.
 
        (g) "COMPANY" shall mean Hewlett-Packard Company, a Delaware 
            corporation.
 
        (h) "ELIGIBLE EARNINGS" shall mean the annual base rate of cash 
            compensation excluding discretionary or contractual bonuses, 
            actual commissions/bonus payments paid to commissioned employees 
            pursuant to an incentive plan, Bonuses, Target Bonuses, 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. Eligible Earnings may be modified in accordance 
            with local law or requirements.
 
            Notwithstanding the foregoing, with respect to an employee 
            described in Section 9(a) who is promoted into a position that is 
            eligible for participation in the Plan from a position that was 
            eligible for participation in the Company Performance Bonus Plan, 
            actual commissions/bonuses payable pursuant to an incentive plan 
            (other than the Company Performance Bonus Plan) will be included 
            in Eligible Earnings.
 
        (i) "FISCAL YEAR" shall mean the twelve-month period from November 1 
            through October 31.
 
        (j) "NET ORDER DOLLARS" shall be as defined in the Company's 
            Corporate Marketing Policy, as posted on the Company's internal 
            web site at the start of the Performance Period.
 
        (k) "NET PROFIT DOLLARS" shall be as defined in the AFM at the start 
            of the Performance Period.
 
        (l) "NET PROFIT GROWTH" shall be, with respect to any Performance 
            Period, as defined by the Committee, in its sole discretion.
 
        (m) "NET REVENUE DOLLARS" shall be as defined in the AFM at the start 
            of the Performance Period.



        (n) "PARTICIPANT" shall mean each salaried employee of the Company or 
            its Affiliates in active service whose position is designated, or 
            who is individually designated, as eligible for participation in 
            the Plan; subject to Section 3.
 
        (o) "PERFORMANCE MEASURE" shall mean any measurable criteria tied to 
            the Company's success that the Committee may determine, 
            including, but not limited to, Net Order Dollars, Net Profit 
            Dollars, Net Profit Growth, Net Revenue Dollars, Revenue Growth, 
            individual performance, other Company and business unit financial 
            objectives, customer satisfaction indicators and operational 
            efficiency measures.
 
        (p) "PERFORMANCE PERIOD" shall mean a six-month period of time based 
            upon the halves of the Company's Fiscal Year, or such other time 
            period as shall be determined by the Committee.
 
        (q) "PLAN" shall mean the Hewlett-Packard Company Pay-For-Results 
            Short-Term Bonus Plan as amended from time to time.
 
        (r) "REVENUE GROWTH" shall be, with respect to any Performance 
            Period, as defined by the Committee, in its sole discretion.
 
        (s) "TARGET BONUS" shall mean a Bonus amount that may be paid if 100% 
            of the targets for all applicable Performance Measures are 
            achieved in the Performance Period. The Target Bonus shall be 
            equal to a fixed percentage of the Participant's Eligible 
            Earnings for such Performance Period. Such percentage shall be 
            determined by the Committee prior to the beginning of the 
            Performance Period.
 
    3.  ELIGIBILITY.  Persons employed by the Company or any of its Affiliates
during a Performance Period and in active service are eligible to be
Participants under the Plan for such Performance Period (whether or not so
employed or living at the date a Bonus payment is made) and may be considered
for a Bonus. An individual is not rendered ineligible to be a Participant by
reason of being a member of the Board. The Committee shall have sole authority
to designate the positions and/or the individuals eligible for participation in
the Plan for any given Performance Period; provided that the Committee, in its
sole discretion, may delegate to certain person(s) or to a committee, the
authority to designate some or all of such positions and/or individuals, and/or
to exclude from participation individuals who would otherwise be Participants
because their positions have been designated as eligible for participation in
the Plan.
 
    4.  ADMINISTRATION.
 
        (a) Unless otherwise designated by the Board, the Compensation 
            Committee of the Board shall be the Committee under the Plan. A 
            director may serve as a member or an alternate member of the 
            Committee only during periods in which the director is an 
            "outside director" as described in Code Section 162(m). The 
            Committee shall have full power and authority to construe, 
            interpret and administer the Plan. It may issue rules and 
            regulations for administration of the Plan and shall meet at such 
            times and places as it may determine. A majority of the members 
            of the Committee shall constitute a quorum and all decisions of 
            the Committee shall be final, conclusive and binding upon all 
            parties, including the Company, its stockholders, employees and 
            Participants. The Committee may delegate to certain person(s) or 
            to a committee the authority to administer the Plan, to the 
            extent specified by the Committee at the time of delegation, and 
            subject to modification at any time thereafter. The decisions of 
            such person(s) or committee shall similarly be final, conclusive 
            and binding upon all parties.
 
        (b) The expenses of the administration of the Plan shall be borne by 
            the Company.
 
    5.  TERM.  Subject to Section 11(g), the Plan shall be effective for the
period November 1, 2000 through April 30, 2001; and thereafter shall be
applicable for future Fiscal Years of the Company unless amended or terminated
by the Board or the Committee pursuant to Section 11(e).
 
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    6.  BONUSES.  Prior to the beginning of each Performance Period, the
Committee or, if applicable, the Committee's delegate, shall designate or
approve (a) the positions or employees who will be Participants for a
Performance Period, (b) the minimum and maximum Bonuses and the Target Bonuses
for specific jobs, job families, or job levels, (c) the applicable Performance
Measures and combination of Performance Measures and percentages allocated to
the applicable Performance Measures at different organization levels; and
(d) the Performance Period. Performance measures in addition to those designated
or approved prior to the beginning of a period may only be used if approved by
the Committee.
 
    7.  DETERMINATION OF AMOUNT OF BONUS.
 
       (a) CALCULATION. As soon as administratively practicable after the end of
           the relevant Performance Period, the Committee, or, if applicable,
           the Committee's delegate, shall determine the amount of the Bonus for
           each Participant by:
 
           (i)   Determining the actual performance results for each 
                 Performance Measure;
 
           (ii)  Determining the amount to which each Participant is entitled 
                 based on the percentage allocated by the Committee to each 
                 Performance Measure against the Target Bonus for each 
                 Participant; and
 
           (iii) Certifying by resolution duly adopted by the Committee (or 
                 equivalent action by the Committee's delegate) the value of 
                 the Bonus for each Participant so determined.
 
       (b) ADJUSTMENTS TO BONUSES. In its sole discretion, the Committee or, if
           applicable, the Committee's delegate, may, but is not required to,
           make an adjustment to a Participant's Bonus to take into account:
           (i) acquisitions and investments; (ii) divestitures; (iii) major
           change(s) in U.S. accounting principles and/or (iv) major
           reorganization(s) within the Company if such situation(s) or
           event(s): (A) impacted the applicable Performance Period; (B) was not
           already taken into account in the Participant's Performance Measures
           for such period; and (C) exceeded U.S. $50 million: Only the
           Committee, in its sole discretion, may approve any other adjustments
           to a Participant's Bonus during a Performance Period.
 
    8.  PAYMENT OF BONUSES.
 
        (a) Payment of a Bonus to a Participant shall be made as soon as 
            practicable after determination of the amount of the Bonus under 
            Section 7 above, and after the Committee has approved the 
            aggregate bonus payout amount for the Performance Period, except 
            to the extent a Participant who is eligible to participate in the 
            Hewlett-Packard Company Executive Deferred Compensation Plan has 
            made a timely election to defer the payment of all or any part of 
            the portion of such Bonus under such plan.
 
        (b) A Participant will forfeit any Bonus for a Performance Period 
            during which he or she is involuntarily terminated for cause or 
            voluntarily terminates his or her employment with the Company for 
            any reason, except as otherwise provided in Section 8(c) below.
 
        (c) The payment of a Bonus with respect to a specific Performance 
            Period requires that the Participant be on the Company's payroll 
            as of the end of such Performance Period; subject to the 
            following:
 
           (i)   NON-PAY STATUS. A Participant who continues to be on 
                 approved non-pay status through the end of the Performance 
                 Period will receive a bonus payment if return to work is 
                 within the maximum period approved by the Company for the 
                 non-pay status. If the non-pay status results in a leave of 
                 absence or termination, guidelines governing those 
                 situations will apply.


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           (ii)  LEAVE OF ABSENCE. A Participant will receive a bonus payment 
                 while on an approved leave of absence even if the leave 
                 began prior to the end of the Performance Period. The Bonus 
                 will be based on the Participant's Eligible Earnings for the 
                 Performance Period. While on an approved medical leave of 
                 absence, accrual of Eligible Earnings will continue for as 
                 long as the employee is integrating disability benefits with 
                 flexible time off (FTO) hours, or sick or vacation hours. 
                 Only the FTO or sick or vacation hours will be included in 
                 Eligible Earnings.
 
           (iii) WORK-RELATED ILLNESS/INJURY. A Participant who cannot work 
                 due to a work-related injury/illness and who may be drawing 
                 Workers' Compensation benefits will be placed on medical 
                 leave from the last day worked. While on leave, a 
                 Participant will receive a bonus payment even if the leave 
                 began prior to the end of the Performance Period.
 
           (iv)  RETIREMENT. If the reason for a Participant's termination of 
                 employment prior to the end of a Performance Period is his 
                 or her retirement at the age and service-year level set by 
                 the Company or the local law requirements where the 
                 Participant is employed, any Bonus will be prorated based 
                 upon the employee's time spent actively at work prior to his 
                 or her retirement date.
 
           (v)   DEATH. If a Participant dies prior to the end of a 
                 Performance Period or after the end of a Performance Period 
                 but prior to payment, any Bonus will be paid to the 
                 Participant's estate and will be based on the Participant's 
                 Eligible Earnings for the Performance Period.
 
        (d) Payments of Bonuses to Participants who are on the payroll of 
            Affiliates of the Company shall be paid directly by such entities.
 
    9.  CHANGES IN STATUS
 
        (a) If prior to the end of a Performance Period, a person is hired 
            into a position previously designated by the Committee for 
            participation under the Plan, that person will commence 
            participation in the Plan on a prorated basis from the date of 
            hire. If an employee is promoted into such a position from a 
            position that was eligible for participation in the Company 
            Performance Bonus Plan or the ESS Invent Your Future Program, he 
            or she will be considered to have been a Participant in this Plan 
            from the beginning of the Performance Period or, if later, from 
            the date of hire.
 
        (b) If a Participant transfers from one eligible position to another 
            prior to the end of a Performance Period, any Bonus will be based 
            on performance as it relates to the latest position occupied.
 
        (c) If prior to the end of a Performance Period, a Participant 
            transfers into a position that is not eligible for participation 
            under the Plan, the employee will not receive a Bonus under the 
            Plan.
 
    10. COMMITTEE DISCRETION.  Notwithstanding any other provision of this
Plan, the Committee may, in the exercise of its sole discretion and based on any
factors the Committee deems appropriate, reduce or eliminate to zero the amount
of a Bonus to a Participant otherwise calculated in accordance with the
provisions of Section 7(a) prior to payment thereof. The Committee shall make a
determination of whether and to what extent to reduce Bonuses under the Plan for
each Performance Period at such time or times following the close of the
Performance Period as the Committee shall deem appropriate. The reduction in the
amount of a Bonus to a Participant for a Performance Period shall have no effect
on the amount of the Bonus to any other Participant for such period.
 
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    11.  MISCELLANEOUS.
 
       (a) NO ASSIGNMENT. No portion of any Bonus under the Plan may be assigned
           or transferred otherwise than by will or the laws of descent and
           distribution prior to the payment thereof.
 
       (b) TAX REQUIREMENTS. All payments made pursuant to the Plan or deferred
           pursuant to Section 8(a) shall be subject to all applicable taxes or
           contributions required by federal, state or local law to be withheld,
           in accordance with the procedures to be established by the Committee.
 
       (c) NO ADDITIONAL PARTICIPANT RIGHTS. The selection of an individual for
           participation in the Plan shall not give such Participant any right
           to be retained in the employ of the Company or any of its Affiliates,
           and the right of the Company and any such Affiliate to dismiss such
           Participant or to terminate any arrangement pursuant to which any
           such Participant provides services to the Company, with or without
           cause, is specifically reserved. No person shall have claim to a
           Bonus under the Plan, except as otherwise provided for herein, or to
           continued participation under the Plan. There is no obligation for
           uniformity of treatment of Participants under the Plan. The benefits
           provided for Participants under the Plan shall be in addition to and
           shall in no way preclude other forms of compensation to or in respect
           of such Participants. It is expressly agreed and understood that the
           employment is terminable at the will of either party and, if such
           Participant is a party to an employment contract with the Company or
           one of its Affiliates, in accordance with the terms and conditions of
           the Participant's employment contract.
 
       (d) LIABILITY. The Board and the Committee shall be entitled to rely on
           the advice of counsel and other experts, including the independent
           auditors for the Company. No member of the Board or of the Committee,
           any officers of the Company or its Affiliates or any of their
           designees shall be liable for any act or failure to act under the
           Plan, except in circumstances involving bad faith on the part of such
           member, officer or designee.
 
       (e) AMENDMENT; SUSPENSION; TERMINATION. The Board or Committee may, at
           any time and from time to time, amend, suspend or terminate the Plan
           or any part of the Plan as it may deem proper and in the best
           interests of the Company. In the case of Participants employed
           outside the United States, the Board, the Committee or their
           designees may vary the provisions of the Plan as deemed appropriate
           to conform with local laws, practices and procedures. In addition,
           the Executive Committee of the Board or any of the General Counsel,
           Secretary or Assistant Secretary of the Company is authorized to make
           certain minor or administrative changes required by or made desirable
           by government regulation. Any modification of the Plan may affect
           present and future Participants and the amount of any Bonus
           hereunder.
 
       (f) OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the Plan shall
           prevent the Company or any Affiliate of the Company from adopting or
           continuing in effect other compensation arrangements, which
           arrangements may be either generally applicable or applicable only in
           specific cases.
 
       (g) GOVERNING LAW. The validity, construction and effect of the Plan and
           any rules and regulations relating to the Plan shall be determined in
           accordance with the laws of the State of Delaware and applicable
           federal law.
 
       (h) SEVERABILITY. If any portion of this Plan is deemed to be in conflict
           with local law, that portion of the Plan, and that portion only, will
           be deemed null and void under that local law. All other provisions of
           the Plan will remain in full effect.
 
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       (i) NO TRUST. Neither the Plan nor any Bonus shall create or be construed
           to create a trust or separate fund of any kind or a fiduciary
           relationship between the Company or any Participant. To the extent
           that the Participant acquires a right to receive payments from the
           Company in respect of any Bonus, such right shall be no greater than
           the right of any unsecured general creditor of the Company.
 
       (j) DESIGNATION OF BENEFICIARIES. A Participant may, if the Committee
           permits, designate a beneficiary or beneficiaries to receive all or
           part of the Bonuses which may be paid to the Participant, or may be
           payable, after such Participant's death. A designation of beneficiary
           shall be made in accordance with procedures specified by the Company
           and may be replaced by a new designation or may be revoked by the
           Participant at any time. In case of the Participant's death, a Bonus
           with respect to which a designation of beneficiary has been made (to
           the extent it is valid and enforceable under applicable law) shall be
           paid to the designated beneficiary or beneficiaries. Any Bonus
           granted or payable to a Participant who is deceased and not subject
           to such a designation shall be distributed to the Participant's
           estate. If there shall be any question as to the legal right of any
           beneficiary to receive a Bonus under the Plan, the amount in question
           may be paid to the estate of the Participant, in which event the
           Company or its Affiliates shall have no further liability to anyone
           with respect to such amount.
 
    12.  EXECUTION
 
    IN WITNESS WHEREOF, the Company has caused this Plan to be adopted this 16th
day of November, 2000, effective November 1, 2000.
 
                                          HEWLETT-PACKARD COMPANY
                                          /s/ PHILIP M. CONDIT
                                          Philip M. Condit
                                          Chair, Compensation Committee
 
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