Master Separation and Distribution Agreement - Hewlett-Packard Co. and Agilent Technologies Inc.


                  Master Separation and Distribution Agreement



                                     Between



                             Hewlett-Packard Company



                                       and



                           Agilent Technologies, Inc.





                                 Effective As Of



                                 August 12, 1999

 
                                TABLE OF CONTENTS
 
 
                                                                                                                      Page
                                                                                                                      ----
                                                                                                                      
ARTICLE I SEPARATION................................................................................................    2
         Section 1.1       Separation Date..........................................................................    2
         Section 1.2       Closing of Transactions..................................................................    2
         Section 1.3       Exchange of Secretary's Certificates.....................................................    2
                                                                                                                        
ARTICLE II DOCUMENTS AND ITEMS TO BE DELIVERED ON THE SEPARATION DATE...............................................    2
         Section 2.1       Documents to Be Delivered By HP..........................................................    2
         Section 2.2       Cash to be Transferred by HP.............................................................    3
         Section 2.3       Documents to Be Delivered by Agilent.....................................................    4
                                                                                                                        
ARTICLE III THE IPO AND ACTIONS PENDING THE IPO.....................................................................    5
         Section 3.1       Transactions Prior to the IPO............................................................    5
         Section 3.2       Proceeds of the IPO......................................................................    5
         Section 3.3       Cooperation..............................................................................    5
         Section 3.4       Conditions Precedent to Consummation of the IPO..........................................    6
                                                                                                                        
ARTICLE IV THE DISTRIBUTION.........................................................................................    7
         Section 4.1       The Distribution.........................................................................    7
         Section 4.2       Actions Prior To The Distribution........................................................    7
         Section 4.3       Sole Discretion of HP....................................................................    8
         Section 4.4       Conditions To Distribution...............................................................    8
         Section 4.5       Fractional Shares........................................................................    9
                                                                                                                        
ARTICLE V COVENANTS AND OTHER MATTERS...............................................................................    9
         Section 5.1       Other Agreements.........................................................................    9
         Section 5.2       Further Instruments......................................................................    9
         Section 5.3       Additional Service Level Agreements......................................................   10
         Section 5.4       Agreement For Exchange of Information....................................................   10
         Section 5.5       Auditors and Audits; Annual and Quarterly Statements and Accounting......................   12
         Section 5.6       Consistency with Past Practices..........................................................   13
         Section 5.7       Payment of Expenses......................................................................   13
         Section 5.8       Foreign Subsidiaries.....................................................................   14
         Section 5.9       Dispute Resolution.......................................................................   14
         Section 5.10      Governmental Approvals...................................................................   15
         Section 5.11      No Representation or Warranty............................................................   15
         Section 5.12      Non-Solicitation of Employees............................................................   15
         Section 5.13      Employee Agreements......................................................................   16
         Section 5.14      Cooperation in Obtaining New Agreements..................................................   17
         Section 5.15      Property Damage to Agilent Assets Prior to the Separation Date...........................   17
 

                                      -i-

 
                               TABLE OF CONTENTS
                                  (continued)



                                                                                                                      Page
                                                                                                                      ----
                                                                                                                       
ARTICLE VI MISCELLANEOUS............................................................................................   18
         Section 6.1       Limitation of Liability..................................................................   18
         Section 6.2       Entire Agreement.........................................................................   18
         Section 6.3       Governing Law............................................................................   18
         Section 6.4       Termination..............................................................................   18
         Section 6.5       Notices..................................................................................   18
         Section 6.6       Counterparts.............................................................................   19
         Section 6.7       Binding Effect; Assignment...............................................................   19
         Section 6.8       Severability.............................................................................   19
         Section 6.9       Failure or Indulgence Not Waiver; Remedies Cumulative....................................   19
         Section 6.10      Amendment................................................................................   19
         Section 6.11      Authority................................................................................   19
         Section 6.12      Interpretation...........................................................................   19
         Section 6.13      Conflicting Agreements...................................................................   20
                                                                                                                       
ARTICLE VII DEFINITIONS.............................................................................................   20
         Section 7.1       Affiliated Company.......................................................................   20
         Section 7.2       Agilent Assets...........................................................................   20
         Section 7.3       Agilent Business.........................................................................   20
         Section 7.4       Agilent Group............................................................................   20
         Section 7.5       Agilent Pro Forma Balance Sheet..........................................................   20
         Section 7.6       Agilent's Auditors.......................................................................   20
         Section 7.7       Ancillary Agreements.....................................................................   20
         Section 7.8       Assignment Agreement.....................................................................   21
         Section 7.9       Business Day.............................................................................   21
         Section 7.10      Code.....................................................................................   21
         Section 7.11      Commission...............................................................................   21
         Section 7.12      Disputes.................................................................................   21
         Section 7.13      Distribution.............................................................................   21
         Section 7.14      Distribution Agent.......................................................................   21
         Section 7.15      Distribution Date........................................................................   21
         Section 7.16      Employee Agreement.......................................................................   21
         Section 7.17      Exchange Act.............................................................................   21
         Section 7.18      Governmental Approvals...................................................................   21
         Section 7.19      Governmental Authority...................................................................   21
         Section 7.20      HP Business..............................................................................   21
         Section 7.21      HP Group.................................................................................   21
         Section 7.22      HP's Auditors............................................................................   21
         Section 7.23      Information..............................................................................   22
         Section 7.24      IPO......................................................................................   22
         Section 7.25      IPO Closing Date.........................................................................   22
 

                                     -ii-

 
                               TABLE OF CONTENTS
                                  (continued)



                                                                                                                      Page
                                                                                                                      ----
                                                                                                                       
         Section 7.26      IPO Net Proceeds.........................................................................   22
         Section 7.27      IPO Over-allotment Option................................................................   22
         Section 7.28      IPO Registration Statement...............................................................   22
         Section 7.29      Nasdaq...................................................................................   22
         Section 7.30      Non-US Plan..............................................................................   22
         Section 7.31      NYSE.....................................................................................   22
         Section 7.32      Person...................................................................................   22
         Section 7.33      Prime Rate...............................................................................   22
         Section 7.34      Record Date..............................................................................   22
         Section 7.35      Retained Payables........................................................................   22
         Section 7.36      Retained Receivables.....................................................................   23
         Section 7.37      Separation...............................................................................   23
         Section 7.38      Separation Date..........................................................................   23
         Section 7.39      Subsidiary...............................................................................   23
         Section 7.40      Underwriters.............................................................................   23
         Section 7.41      Underwriting Agreement...................................................................   23
         Section 7.42      WSGR.....................................................................................   23
 

                                     -iii-

 
                                    EXHIBITS

Exhibit A         Certificate of Secretary of HP

Exhibit B         Certificate of Secretary of Agilent

Exhibit C         General Assignment and Assumption Agreement

Exhibit D-1       Master Technology Ownership and License Agreement

Exhibit D-2       Master Patent Ownership and License Agreement

Exhibit D-3       Master Trademark Ownership and License Agreement

Exhibit D-4       ICBD Technology Ownership and License Agreement

Exhibit E         Employee Matters Agreement

Exhibit F         Tax Sharing Agreement

Exhibit G         Master IT Service Level Agreement

Exhibit H         Real Estate Agreement

Exhibit I         Environmental Matters Agreement

Exhibit J         Master Confidential Disclosure Agreement

Exhibit K         Indemnification and Insurance Matters Agreement

Exhibit L         Intentionally Omitted

Exhibit M         Reorganization of Operations Outside the US (the Non-US Plan)

                                     -iv-

 
                                    SCHEDULES

Schedule 2.1(b)            Subsidiaries of HP to be Transferred to Agilent

Schedule 2.2(b)            Cash Held in Subsidiaries

Schedule 7.1(a)            Affiliated Companies of HP to be Included in the HP
                           Group

Schedule 7.1(b)            Affiliated Companies of Agilent to be Included in the
                           Agilent Group

                                      -v-

 
                  MASTER SEPARATION AND DISTRIBUTION AGREEMENT

         This Master Separation and Distribution Agreement (this "Agreement") is
entered into as of August 12, 1999, between Hewlett-Packard Company ("HP"), a
Delaware corporation, and Agilent Technologies, Inc. ("Agilent"), a Delaware
corporation. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to such terms in Article VII hereof.


                                    RECITALS

         WHEREAS, the Boards of Directors of HP and Agilent have each determined
that it would be appropriate and desirable for HP to contribute and transfer to
Agilent, and for Agilent to receive and assume, directly or indirectly,
substantially all of the assets and liabilities currently associated with the
Agilent Business and the stock, investments or similar interests currently held
by HP in subsidiaries and other entities that conduct such business (the
"Separation");

         WHEREAS, HP has caused Agilent to be incorporated in order to effect
the Separation and HP currently owns all of the issued and outstanding common
stock of Agilent;

         WHEREAS, HP and Agilent currently contemplate that, following the
contribution and assumption of assets and liabilities, Agilent will make an
initial public offering ("IPO") of an amount of its common stock pursuant to a
registration statement on Form S-1 pursuant to the Securities Act of 1933, as
amended (the "IPO Registration Statement"), that will reduce HP's ownership of
Agilent to not less than 80.1%;

         WHEREAS, Agilent intends to distribute all of the proceeds of the IPO
(including the proceeds from the sale of shares pursuant to the exercise of the
Underwriters' over-allotment option (the "IPO Over-allotment Option")), net of
underwriting discounts and commissions (the "IPO Net Proceeds") to HP by means
of a dividend declared prior to the IPO, which IPO Net Proceeds HP ultimately
intends to use to satisfy obligations to creditors or to repurchase shares of HP
common stock within twelve (12) months following the closing of the IPO (the
"IPO Closing Date");

         WHEREAS, HP currently contemplates that, several months following such
initial public offering, HP will distribute to the holders of its common stock,
$ 0.01 par value, by means of a pro rata distribution, all of the shares of
Agilent common stock owned by HP (the "Distribution");

         WHEREAS, HP and Agilent intend that the contribution and assumption of
assets and liabilities and the Distribution will qualify as a tax-free
reorganization under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code
of 1986, as amended (the "Code"), and that this Agreement is intended to be, and
is hereby adopted as, a plan of reorganization under Section 368 of the Code;
and

         WHEREAS, the parties intend in this Agreement, including the Exhibits
and Schedules hereto, to set forth the principal arrangements between them
regarding the separation of the Agilent Business.

 
         NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:

                                   ARTICLE I

                                   SEPARATION

     Section 1.1  Separation Date. Unless otherwise provided in this Agreement,
or in any agreement to be executed in connection with this Agreement, the
effective time and date of each transfer of property, assumption of liability,
license, undertaking, or agreement in connection with the Separation shall be
12:01 a.m., Pacific Time, November 1, 1999 or such other date as may be fixed by
the Board of Directors of HP (the "Separation Date").

     Section 1.2  Closing of Transactions. Unless otherwise provided herein, the
closing of the transactions contemplated in Article II shall occur by the
lodging of each of the executed instruments of transfer, assumptions of
liability, undertakings, agreements, instruments or other documents executed or
to be executed with Wilson Sonsini Goodrich & Rosati ("WSGR"), 650 Page Mill
Road, Palo Alto, California 94304, to be held in escrow for delivery as provided
in Section 1.3 of this Agreement.

     Section 1.3  Exchange of Secretary's Certificates. Upon receipt of a
certificate of the Secretary or an Assistant Secretary of HP in the form
attached to this Agreement as Exhibit A, WSGR shall deliver to Agilent on behalf
of HP all of the items required to be delivered by HP hereunder pursuant to
Section 2.1 of this Agreement and each such item shall be deemed to be delivered
to Agilent as of the Separation Date upon delivery of such certificate. Upon
receipt of a certificate of the Secretary or an Assistant Secretary of Agilent
in the form attached to this Agreement as Exhibit B, WSGR shall deliver to HP on
behalf of Agilent all of the items required to be delivered by Agilent hereunder
and each such item shall be deemed to be delivered to HP as of the Separation
Date upon receipt of such certificate.


                                  ARTICLE II

          DOCUMENTS AND ITEMS TO BE DELIVERED ON THE SEPARATION DATE

     Section 2.1  Documents to Be Delivered By HP. On the Separation Date, or 
such later date as agreed in connection with the Non-US Plan, HP will deliver,
or will cause its appropriate Subsidiaries to deliver, to Agilent all of the
following items and agreements (collectively, together with all agreements and
documents contemplated by such agreements, the "Ancillary Agreements"):

          (a) A duly executed General Assignment and Assumption Agreement (the
"Assignment Agreement") substantially in the form attached hereto as Exhibit C;

          (b) Certificates representing the stock and/or investments in the
Subsidiaries and other holdings of HP set forth on Schedule 2.1(b) with duly
executed stock powers in the form proper for transfer; 

                                      -2-

 
          (c) A duly executed Master Technology Ownership and License Agreement
substantially in the form attached hereto as Exhibit D-1, a duly executed Master
Patent Ownership and License Agreement substantially in the form attached hereto
as Exhibit D-2, a duly executed Master Trademark Ownership and License Agreement
substantially in the form attached as Exhibit D-3 and a duly executed ICBD
Technology Ownership and License Agreement substantially in the form attached
hereto as Exhibit D-4, and;

          (d) A duly executed Employee Matters Agreement substantially in the
form attached hereto as Exhibit E;

          (e) A duly executed Tax Sharing Agreement substantially in the form
attached hereto as Exhibit F;

          (f) A duly executed Master IT Service Level Agreement substantially in
the form attached hereto as Exhibit G;

          (g) A duly executed Real Estate Matters Agreement substantially in
the form attached hereto as Exhibit H; 

          (h) A duly executed Environmental Matters Agreement substantially in
the form attached hereto as Exhibit I;

          (i) A duly executed Master Confidential Disclosure Agreement
substantially in the form attached hereto as Exhibit J;

          (j) A duly executed Indemnification and Insurance Matters Agreement
substantially in the form attached hereto as Exhibit K;

          (k) Resignations of each person who is an officer or director of any
member of Agilent or its Subsidiaries, immediately prior to the Separation Date,
and who will be employees of HP from and after the Separation Date; and

          (l) Such other agreements, documents or instruments as the parties may
agree are necessary or desirable in order to achieve the purposes hereof,
including, without limitation, all service level agreements entered into in
accordance with Section 5.3 and those documents referred to in Section 5.8.

     Section 2.2  Cash to be Transferred by HP. 

          (a) Cash Requirements. On or around the Separation Date, HP and its
Subsidiaries will provide that Agilent and its Subsidiaries have sufficient cash
to satisfy the following obligations or requirements (as adjusted with the
parties' mutual agreement):

               (i)    (A) HP's obligations under the Agreement for the
Redemption and Sale of Shares and Termination of Joint Venture Relationship
dated July 6, 1999 by and between HP and Yokogawa Electric Corporation (the "YEW
Agreement"), which obligations Agilent will

                                      -3-

 
assume from HP pursuant to the Assignment Agreement and (B) Hewlett-Packard
Japan Ltd.'s obligations under the YEW Agreement;

               (ii)   Working capital and acquisition requirements of $250
million;

              (iii)   An amount equal to: 

                      (1) the Retained Receivables minus the Retained Payables,
plus or minus

                      (2) the liabilities retained by HP Japan related to the HP
Business, net of the assets retained by HP Japan related to the HP Business;

               (iv)   The requirements of Section 5.9 of the Tax Sharing
Agreement entitled Japan Restructuring Taxes; and 

                (v)   As described in Section 3.1(a) of the Tax Sharing 
Agreement, an amount equal to taxes of Agilent Historical Affiliates for periods
before their acquisition by the HP Group.

all in accordance with the parties' best estimates on the Separation Date of
such amounts as of October 31, 1999; and 
          
          (b)  Cash Held in Subsidiaries. Additional cash in amounts to be
determined by the parties on the Separation Date will be held in certain
Subsidiaries of Agilent, all of which are either listed on Schedule 2.2(b)
hereto or will be geographical counterparts of Subsidiaries of HP listed on
Schedule 2.2(b) hereto.

          (c)  True-Up. On December 15, 1999, the parties will recalculate the
cash payments made pursuant to this Section 2.2, based on the amounts included
in the HP balance sheet as of October 31, 1999 and the Agilent balance sheet as
of October 31, 1999. To the extent the new calculations differ from the
estimates upon which the cash payments made pursuant to this Section 2.2 were
based, the parties shall reallocate cash in the amount of such difference.

     Section 2.3  Documents to Be Delivered by Agilent. As of the Separation
Date, Agilent will or will cause its appropriate Subsidiaries to deliver to HP
all of the following:

          (a)  In each case where Agilent is a party to any agreement or
instrument referred to in Section 2.1, a duly executed counterpart of such
agreement or instrument; and

          (b)  Resignations of each person who is an officer or director of any
member of HP or its Subsidiaries, immediately prior to the Separation Date, and
who will be employees of Agilent from and after the Separation Date.

                                      -4-

 
                                  ARTICLE III

                       THE IPO AND ACTIONS PENDING THE IPO

     SECTION 3.1  Transactions Prior to the IPO. Subject to the conditions
specified in Section 3.4, HP and Agilent shall use their reasonable commercial
efforts to consummate the IPO. Such efforts shall include, but not necessarily
be limited to, those specified in this Section 3.1

          (a) Registration Statement. Agilent shall file the IPO Registration
Statement, and such amendments or supplements thereto, as may be necessary in
order to cause the same to become and remain effective as required by law or by
the managing underwriters for the IPO (the "Underwriters"), including, but not
limited to, filing such amendments to the IPO Registration Statement as may be
required by the underwriting agreement to be entered into among Agilent and the
Underwriters (the "Underwriting Agreement"), the Securities and Exchange
Commission (the "Commission") or federal, state or foreign securities laws. HP
and Agilent shall also cooperate in preparing, filing with the Securities and
Exchange Commission and causing to become effective a registration statement
registering the common stock of Agilent under the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), and any registration statements or
amendments thereof which are required to reflect the establishment of, or
amendments to, any employee benefit and other plans necessary or appropriate in
connection with the IPO, the Separation, the Distribution or the other
transactions contemplated by this Agreement.

          (b) Underwriting Agreement. Agilent shall enter into the Underwriting
Agreement, in form and substance reasonably satisfactory to Agilent, and shall
comply with its obligations thereunder.

          (c) Other Matters. HP and Agilent shall consult with each other and
the Underwriters regarding the timing, pricing and other material matters with
respect to the IPO.

          (d) Blue Sky. Agilent shall use its reasonable commercial efforts to
take all such action as may be necessary or appropriate under state securities
and blue sky laws of the United States (and any comparable laws under any
foreign jurisdictions) in connection with the IPO.

          (e) NYSE or Nasdaq Listing. Agilent shall prepare, file and use
reasonable commercial efforts to seek to make effective, an application for
listing of the common stock of Agilent issued in the IPO on the New York Stock
Exchange (the "NYSE") or the Nasdaq National Market ("Nasdaq"), subject to
official notice of issuance.

     Section 3.2  Proceeds of the IPO. The IPO will be a primary offering of
common stock of Agilent. All of the IPO Net Proceeds will be distributed to HP
by means of a dividend declared prior to the IPO, which IPO Net Proceeds HP
ultimately intends to use to satisfy obligations to creditors or to repurchase
shares of HP common stock within twelve (12) months following the IPO Closing
Date.

     Section 3.3  Cooperation. Agilent shall consult with, and cooperate in all
respects with, HP in connection with the pricing of the common stock of Agilent
to be offered in the IPO and shall, 

                                      -5-

 
at HP's direction, promptly take any and all actions necessary or desirable to
consummate the IPO as contemplated by the IPO Registration Statement and the
Underwriting Agreement.

     Section 3.4  Conditions Precedent to Consummation of the IPO. As soon as
practicable after the Separation Date, the parties hereto shall use their
reasonable commercial efforts to satisfy the conditions listed below to the
consummation of the IPO. The IPO Closing Date is currently scheduled to occur
prior to December 31, 1999. The obligations of the parties to use their
reasonable commercial efforts to consummate the IPO shall be conditioned on the
satisfaction, or waiver by HP, of the following conditions:

          (a) Registration Statement. The IPO Registration Statement shall have
been filed and declared effective by the Commission, and there shall be no 
stop-order in effect with respect thereto.

          (b) Blue Sky. The actions and filings with regard to state securities
and blue sky laws of the United States (and any comparable laws under any
foreign jurisdictions) described in Section 3.1 shall have been taken and, where
applicable, have become effective or been accepted.

          (c) NYSE or Nasdaq Listing. The common stock of Agilent to be issued
in the IPO shall have been accepted for listing on the NYSE or Nasdaq, on
official notice of issuance.

          (d) Underwriting Agreement. Agilent shall have entered into the
Underwriting Agreement and all conditions to the obligations of Agilent and the
Underwriters shall have been satisfied or waived.

          (e) Common Stock Ownership. HP shall be satisfied in its sole
discretion that it will own at least 80.1% of the outstanding common stock of
Agilent following the IPO. All other conditions to permit the Distribution to
qualify as a tax-free distribution to HP, Agilent and HP's stockholders shall,
to the extent applicable as of the time of the IPO, be satisfied. There shall be
no event or condition that is likely to cause any of such conditions not to be
satisfied as of the time of the Distribution or thereafter.

          (f) No Legal Restraints. No order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Separation or the IPO or any of
the other transactions contemplated by this Agreement shall be in effect.

          (g) Separation. The Separation shall have become effective.

          (h) Other Actions. Such other actions as the parties hereto may, based
upon the advice of counsel, reasonably request to be taken prior to the IPO in
order to assure the successful completion of the IPO shall have been taken.

          (i) No Termination. This Agreement shall not have been terminated.

                                      -6-

 
                                  ARTICLE IV

                               THE DISTRIBUTION

     Section 4.1  The Distribution

          (a) Delivery of Shares for Distribution. Subject to Section 4.4
hereof, on or prior to the date the Distribution is effective (the "Distribution
Date"), HP will deliver to the distribution agent (the "Distribution Agent") to
be appointed by HP to distribute to the stockholders of HP the shares of common
stock of Agilent held by HP pursuant to the Distribution for the benefit of
holders of record of common stock of HP on the Record Date, a single stock
certificate, endorsed by HP in blank, representing all of the outstanding shares
of common stock of Agilent then owned by HP, and shall cause the transfer agent
for the shares of common stock of HP to instruct the Distribution Agent to
distribute on the Distribution Date the appropriate number of such shares of
common stock of Agilent to each such holder or designated transferee or
transferees of such holder.

          (b) Shares Received. Subject to Sections 4.4 and 4.5, each holder of
common stock of HP on the Record Date (or such holder's designated transferee or
transferees) will be entitled to receive in the Distribution a number of shares
of common stock of Agilent equal to the number of shares of common stock of HP
held by such holder on the Record Date multiplied by a fraction the numerator of
which is the number of shares of common stock of Agilent beneficially owned by
HP on the Record Date and the denominator of which is the number of shares of
common stock of HP outstanding on the Record Date.

          (c) Obligation to Provide Information. Agilent and HP, as the case may
be, will provide to the Distribution Agent all share certificates and any
information required in order to complete the Distribution on the basis
specified above.

     Section 4.2  Actions Prior To The Distribution. 

          (a) Information Statement. HP and Agilent shall prepare and mail,
prior to the Distribution Date, to the holders of common stock of HP, such
information concerning Agilent and the Distribution and such other matters as HP
shall reasonably determine are necessary and as may be required by law. HP and
Agilent will prepare, and Agilent will, to the extent required under applicable
law, file with the Commission any such documentation which HP and Agilent
determines is necessary or desirable to effectuate the Distribution, and HP and
Agilent shall each use its reasonable commercial efforts to obtain all necessary
approvals from the Commission with respect thereto as soon as practicable.

          (b) Blue Sky. HP and Agilent shall take all such actions as may be
necessary or appropriate under the securities or blue sky laws of the United
States (and any comparable laws under any foreign jurisdiction) in connection
with the Distribution.

          (c) NYSE or Nasdaq Listing. Agilent shall prepare and file, and shall
use its reasonable commercial efforts to have approved, an application for the
listing of the common stock 

                                      -7-

 
of Agilent to be distributed in the Distribution on the NYSE or Nasdaq, subject
to official notice of distribution.

           (d) Conditions. HP and Agilent shall take all reasonable steps
necessary and appropriate to cause the conditions set forth in Section 4.4 to be
satisfied and to effect the Distribution on the Distribution Date.

     Section 4.3  Sole Discretion of HP. HP currently intends, following the
consummation of the IPO, to complete the Distribution by June 1, 2000. HP shall,
in its sole and absolute discretion, determine the date of the consummation of
the Distribution and all terms of the Distribution, including, without
limitation, the form, structure and terms of any transaction(s) and/or
offering(s) to effect the Distribution and the timing of and conditions to the
consummation of the Distribution. In addition, HP may at any time and from time
to time until the completion of the Distribution modify or change the terms of
the Distribution, including, without limitation, by accelerating or delaying the
timing of the consummation of all or part of the Distribution. Agilent shall
cooperate with HP in all respects to accomplish the Distribution and shall, at
HP's direction, promptly take any and all actions necessary or desirable to
effect the Distribution, including, without limitation, the registration under
the Securities Act of the common stock of Agilent on an appropriate registration
form or forms to be designated by HP. HP shall select any investment banker(s)
and manager(s) in connection with the Distribution, as well as any financial
printer, solicitation and/or exchange agent and outside counsel for HP;
provided, however, that nothing herein shall prohibit Agilent from engaging (at
its own expense) its own financial, legal, accounting and other advisors in
connection with the Distribution.

     Section 4.4  Conditions To Distribution. The following are conditions to
the consummation of the Distribution. The conditions are for the sole benefit of
HP and shall not give rise to or create any duty on the part of HP or the HP
Board of Directors to waive or not waive any such condition.

          (a) IRS Ruling. HP shall have obtained a private letter ruling from
the Internal Revenue Service in form and substance satisfactory to HP (in its
sole discretion), and such ruling shall remain in effect as of the Distribution
Date, to the effect that (i) the transfer by the HP Group to the Agilent Group
of the property, subject to liabilities, of the Agilent Business in exchange for
the issuance to HP of the stock of Agilent, the distribution of the IPO Net
Proceeds and Agilent's assumption of liabilities, followed by the distribution
by HP of all of its Agilent stock to the stockholders of HP, will qualify as a
reorganization under Sections 368(a)(1)(D) and 355 of the Code; (ii) no gain or
loss will be recognized by HP on its transfer of the property of the Agilent
Business to Agilent in exchange for Agilent common stock and the distribution of
the IPO Net Proceeds, followed by the transfer of the IPO Net Proceeds to HP's
creditors and/or stockholders: (iii) no gain or loss will be recognized by
Agilent on its receipt of the property of the Agilent Business from HP in
exchange for the issuance of Agilent common stock; and (iv) no gain or loss will
be recognized by (and no amount will otherwise be included in the income of) the
stockholders of HP upon their receipt of Agilent common stock pursuant to the
Distribution.

          (b) Government Approvals. Any material governmental approvals and
consents necessary to consummate the Distribution shall have been obtained and
be in full force and effect;

                                      -8-

 
          (c) No Legal Restraints. No order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Distribution shall be in effect
and no other event outside the control of HP shall have occurred or failed to
occur that prevents the consummation of the Distribution; and

          (d) No Material Adverse Effect. No other events or developments shall
have occurred subsequent to the IPO Closing Date that, in the judgment of the
Board of Directors of HP, would result in the Distribution having a material
adverse effect on HP or on the stockholders of HP.

     Section 4.5  Fractional Shares. As soon as practicable after the
Distribution Date, HP shall direct the Distribution Agent to determine the
number of whole shares and fractional shares of common stock of Agilent
allocable to each holder of record or beneficial owner of common stock of HP as
of the Record Date, to aggregate all such fractional shares and sell the whole
shares obtained thereby at the direction of HP, in open market transactions, at
then prevailing trading prices, and to cause to be distributed to each such
holder or for the benefit of each such beneficial owner to which a fractional
share shall be allocable such holder's or owner's ratable share of the proceeds
of such sale, after making appropriate deductions of the amount required to be
withheld for federal income tax purposes and after deducting an amount equal to
all brokerage charges, commissions and transfer taxes attributed to such sale.
HP and the Distribution Agent shall use their reasonable commercial efforts to
aggregate the shares of common stock of HP that may be held by any beneficial
owner thereof through more than one account in determining the fractional share
allocable to such beneficial owner.

                                   ARTICLE V

                          COVENANTS AND OTHER MATTERS

     Section 5.1  Other Agreements. In addition to the specific agreements,
documents and instruments annexed to this Agreement, HP and Agilent agree to
execute or cause to be executed by the appropriate parties and deliver, as
appropriate, such other agreements, instruments and other documents as may be
necessary or desirable in order to effect the purposes of this Agreement and the
Ancillary Agreements.

     SECTION 5.2  Further Instruments. At the request of Agilent and without
further consideration, HP will execute and deliver, and will cause its
applicable Subsidiaries to execute and deliver, to Agilent and its Subsidiaries
such other instruments of transfer, conveyance, assignment, substitution and
confirmation and take such action as Agilent may reasonably deem necessary or
desirable in order more effectively to transfer, convey and assign to Agilent
and its Subsidiaries and confirm Agilent's and its Subsidiaries' title to all of
the assets, rights and other things of value contemplated to be transferred to
Agilent and its Subsidiaries pursuant to this Agreement, the Ancillary
Agreements, and any documents referred to therein, to put Agilent and its
Subsidiaries in actual possession and operating control thereof and to permit
Agilent and its Subsidiaries to exercise all rights with respect thereto
(including, without limitation, rights under contracts and other arrangements as
to which the consent of any third party to the transfer thereof shall not have
previously been obtained). At the request of HP and without further
consideration, Agilent will

                                      -9-

 
execute and deliver, and will cause its applicable Subsidiaries to execute and
deliver, to HP and its Subsidiaries all instruments, assumptions, novations,
undertakings, substitutions or other documents and take such other action as HP
may reasonably deem necessary or desirable in order to have Agilent fully and
unconditionally assume and discharge the liabilities contemplated to be assumed
by Agilent under this Agreement or any document in connection herewith and to
relieve the HP Group of any liability or obligation with respect thereto and
evidence the same to third parties. Neither HP nor Agilent shall be obligated,
in connection with the foregoing, to expend money other than reasonable out-of-
pocket expenses, attorneys' fees and recording or similar fees. Furthermore,
each party, at the request of another party hereto, shall execute and deliver
such other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.

     Section 5.3  Additional Service Level Agreements. HP and its Subsidiaries
and Agilent and its Subsidiaries will enter into interim service level
agreements covering the provision of various interim services, including
financial, accounting, building services, legal, and other services by HP (and
its Subsidiaries) to Agilent (and its Subsidiaries) or, in certain
circumstances, vice versa. Such services will generally be provided for a fee
equal to the actual Direct Costs and Indirect Costs of providing such services
plus five percent (5%). The interim service level agreements will generally
provide for a term of two (2) years. However, some interim service level
agreements, including those for building services and information technology
services, may be extended beyond the initial two-year period. If these
agreements are extended, Agilent will reimburse HP at the fair market rental
value for the rental component of the building services and cost plus 10% for
information technology and other services and the non-rental components of
building services. "Direct Costs" shall include compensation and travel expenses
attributable to employees, temporary workers, and contractors directly engaged
in performing the services as well as materials and supplies consumed in
performing the services. "Indirect Costs" shall include occupancy, IT
supervision and other overhead burden of the department incurring the direct
costs of providing the service.

     Section 5.4  Agreement For Exchange of Information. Each of HP and Agilent
agrees to provide, or cause to be provided, to each other, at any time before or
after the Distribution Date, as soon as reasonably practicable after written
request therefor, any Information in the possession or under the control of such
party that the requesting party reasonably needs (i) to comply with reporting,
disclosure, filing or other requirements imposed on the requesting party
(including under applicable securities laws) by a Governmental Authority having
jurisdiction over the requesting party, (ii) for use in any other judicial,
regulatory, administrative or other proceeding or in order to satisfy audit,
accounting, claims, regulatory, litigation or other similar requirements, (iii)
to comply with its obligations under this Agreement or any Ancillary Agreement
or (iv) in connection with the ongoing businesses of HP or Agilent, as the case
may be; provided, however, that in the event that any party determines that any
such provision of Information could be commercially detrimental, violate any law
or agreement, or waive any attorney-client privilege, the parties shall take all
reasonable measures to permit the compliance with such obligations in a manner
that avoids any such harm or consequence.

          (a) Internal Accounting Controls; Financial Information. After the
Separation Date, (i) each party shall maintain in effect at its own cost and
expense adequate systems and controls for its business to the extent necessary
to enable the other party to satisfy its reporting, accounting, audit

                                      -10-

 
and other obligations, and (ii) each party shall provide, or cause to be
provided, to the other party and its Subsidiaries in such form as such
requesting party shall request, at no charge to the requesting party, all
financial and other data and information as the requesting party determines
necessary or advisable in order to prepare its financial statements and reports
or filings with any Governmental Authority.

          (b)  Ownership of Information.  Any Information owned by a party that
is provided to a requesting party pursuant to this Section 5.4 shall be deemed
to remain the property of the providing party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed as granting or
conferring rights of license or otherwise in any such Information.

          (c)  Record Retention.  To facilitate the possible exchange of
Information pursuant to this Section 5.4 and other provisions of this Agreement
after the Distribution Date, each party agrees to use its reasonable commercial
efforts to retain all Information in their respective possession or control on
the Distribution Date substantially in accordance with the policies of HP as in
effect on the Separation Date. However, except as set forth in the Tax Sharing
Agreement, at any time after the Distribution Date, each party may amend their
respective record retention policies at such party's discretion; provided,
however, that if a party desires to effect the amendment within three (3) years
after the Distribution Date, the amending party must give thirty (30) days prior
written notice of such change in the policy to the other party to this
Agreement.

               (i)  No party will destroy, or permit any of its Subsidiaries to
destroy, any Information that exists on the Separation Date (other than
Information that is permitted to be destroyed under the current record retention
policy of such party) without first using its reasonable commercial efforts to
notify the other party of the proposed destruction and giving the other party
the opportunity to take possession of such Information prior to such
destruction.

          (d)  Limitation of Liability.  No party shall have any liability to
any other party in the event that any Information exchanged or provided pursuant
to this Section is found to be inaccurate, in the absence of willful misconduct
by the party providing such Information. No party shall have any liability to
any other party if any Information is destroyed or lost after reasonable
commercial efforts by such party to comply with the provisions of Section
5.4(c).

          (e)  Other Agreements Providing For Exchange of Information.  The
rights and obligations granted under this Section 5.4 are subject to any
specific limitations, qualifications or additional provisions on the sharing,
exchange or confidential treatment of Information set forth in this Agreement
and any Ancillary Agreement.

          (f)  Production of Witnesses; Records; Cooperation.  After the
Distribution Date, except in the case of a legal or other proceeding by one
party against another party (which shall be governed by such discovery rules as
may be applicable under Section 5.9 or otherwise), each party hereto shall use
its reasonable commercial efforts to make available to each other party, upon
written request, the former, current and future directors, officers, employees,
other personnel and agents of such party as witnesses and any books, records or
other documents within its control or which it otherwise has the ability to make
available, to the extent that any such person (giving consideration to business
demands of such directors, officers, employees, other personnel and agents) or
books, 

                                      -11-

 
records or other documents may reasonably be required in connection with any
legal, administrative or other proceeding in which the requesting party may from
time to time be involved, regardless of whether such legal, administrative or
other proceeding is a matter with respect to which indemnification may be sought
hereunder. The requesting party shall bear all costs and expenses in connection
therewith.

     Section 5.5  Auditors and Audits; Annual and Quarterly Statements and
Accounting. Each party agrees that, for so long as HP is required in accordance
with United States generally accepted accounting principles to consolidate
Agilent's results of operations and financial position:

          (a)  Selection of Auditors.  Agilent shall not select a different
accounting firm than PricewaterhouseCoopers LLP to serve as its (and its
Subsidiaries') independent certified public accountants ("Agilent's Auditors")
for purposes of providing an opinion on its consolidated financial statements
without HP's prior written consent (which shall not be unreasonably withheld).

          (b)  Date of Auditors' Opinion and Quarterly Reviews.  Agilent shall
use its reasonable commercial efforts to enable the Agilent Auditors to complete
their audit such that they will date their opinion on Agilent's audited annual
financial statements on the same date that HP's independent certified public
accountants ("HP's Auditors") date their opinion on HP's audited annual
financial statements, and to enable HP to meet its timetable for the printing,
filing and public dissemination of HP's annual financial statements. Agilent
shall use its reasonable commercial efforts to enable the Agilent Auditors to
complete their quarterly review procedures such that they will provide clearance
on Agilent's quarterly financial statements on the same date that HP's Auditors
provide clearance on HP's quarterly financial statements.

          (c)  Annual and Quarterly Financial Statements.  Agilent shall provide
to HP on a timely basis all Information that HP reasonably requires to meet its
schedule for the preparation, printing, filing, and public dissemination of HP's
annual and quarterly financial statements. Without limiting the generality of
the foregoing, Agilent will provide all required financial Information with
respect to Agilent and its Subsidiaries to Agilent's Auditors in a sufficient
and reasonable time and in sufficient detail to permit Agilent's Auditors to
take all steps and perform all reviews necessary to provide sufficient
assistance to HP's Auditors with respect to Information to be included or
contained in HP's annual and quarterly financial statements. Similarly, HP shall
provide to Agilent on a timely basis all Information that Agilent reasonably
requires to meet its schedule for the preparation, printing, filing, and public
dissemination of Agilent's annual and quarterly financial statements. Without
limiting the generality of the foregoing, HP will provide all required financial
Information with respect to HP and its Subsidiaries to HP's Auditors in a
sufficient and reasonable time and in sufficient detail to permit HP's Auditors
to take all steps and perform all reviews necessary to provide sufficient
assistance to Agilent's Auditors with respect to Information to be included or
contained in Agilent's annual and quarterly financial statements.

          (d)  Identity of Personnel Performing the Annual Audit and Quarterly
Reviews.  Agilent shall authorize Agilent's Auditors to make available to HP's
Auditors both the personnel who performed or are performing the annual audits
and quarterly reviews of Agilent and work papers related to the annual audits
and quarterly reviews of Agilent, in all cases within a reasonable time prior to
Agilent's Auditors' opinion date, so that HP's Auditors are able to perform the

                                      -12-

 
procedures they consider necessary to take responsibility for the work of
Agilent's Auditors as it relates to HP's Auditors' report on HP's financial
statements, all within sufficient time to enable HP to meet its timetable for
the printing, filing and public dissemination of HP's annual and quarterly
statements. Similarly, HP shall authorize HP's Auditors to make available to
Agilent's Auditors both the personnel who performed or are performing the annual
audits and quarterly reviews of HP and work papers related to the annual audits
and quarterly reviews of HP, in all cases within a reasonable time prior to HP's
Auditors' opinion date, so that Agilent's Auditors are able to perform the
procedures they consider necessary to take responsibility for the work of HP's
Auditors as it relates to Agilent's Auditors' report on Agilent's statements,
all within sufficient time to enable Agilent to meet its timetable for the
printing, filing and public dissemination of Agilent's annual and quarterly
financial statements.

          (e)  Access to Books and Records.  Agilent shall provide HP's internal
auditors and their designees access to Agilent's and its Subsidiaries' books and
records so that HP may conduct reasonable audits relating to the financial
statements provided by Agilent pursuant hereto as well as to the internal
accounting controls and operations of Agilent and its Subsidiaries. Similarly,
HP shall provide Agilent's internal auditors and their designees access to HP's
and its Subsidiaries' books and records so that Agilent may conduct reasonable
audits relating to the financial statements provided by HP pursuant hereto as
well as to the internal accounting controls and operations of HP and its
Subsidiaries

          (f)  Notice of Change in Accounting Principles.  Agilent shall give HP
as much prior notice as reasonably practical of any proposed determination of,
or any significant changes in, its accounting estimates or accounting principles
from those in effect on the Separation Date. Agilent will consult with HP and,
if requested by HP, Agilent will consult with HP's independent public
accountants with respect thereto. HP shall give Agilent as much prior notice as
reasonably practical of any proposed determination of, or any significant
changes in, its accounting estimates or accounting principles from those in
effect on the Separation Date.

          (g)  Conflict with Third-Party Agreements.  Nothing in Sections 5.4
and 5.5 shall require Agilent to violate any agreement with any third parties
regarding the confidentiality of confidential and proprietary information
relating to that third party or its business; provided, however, that in the
event that Agilent is required under Sections 5.4 and 5.5 to disclose any such
information, Agilent shall use all commercially reasonable efforts to seek to
obtain such customer's consent to the disclosure of such information.

     Section 5.6  Consistency with Past Practices.  At all times HP will cause
the Agilent Business before the Separation Date to continue to ship products,
invoice customers, make payments, maintain properties and otherwise conduct
business in the ordinary course, consistent with past practices and will not
undertake or permit any arrangement with any third party which is intended to or
has the effect of delaying the payment of any account receivable beyond the
Separation Date or delaying or accelerating the payment of any account payable
before the Separation Date.

     Section 5.7  Payment of Expenses.  Except as otherwise provided in this
Agreement, the Ancillary Agreements or any other agreement between the parties
relating to the Separation, the IPO

                                      -13-

 
or the Distribution, all costs and expenses of the parties hereto in connection
with the IPO (excluding underwriting discounts and commissions) and the
Distribution  and certain costs and expenses of the parties hereto in connection
with the Separation shall be paid by HP.  Notwithstanding the foregoing, Agilent
shall pay any internal fees, costs and expenses incurred by Agilent in
connection with the Separation, the IPO and the Distribution.

     Section 5.8  Foreign Subsidiaries.  HP and Agilent shall cause each of
their foreign subsidiaries to execute such local transfer agreements,
assignments, assumptions, novations and other documents as shall be necessary to
carry out the plan of reorganization described in Exhibit M (the "Non-US Plan")
hereto to effect the purposes of this Agreement with respect to their respective
operations outside the United States.

     Section 5.9  Dispute Resolution.  Except as otherwise set forth in the
Ancillary Agreements, resolution of any and all disputes arising from or in
connection with this Agreement, whether based on contract, tort, or otherwise
(collectively, "Disputes"), shall be exclusively governed by and settled in
accordance with the provisions of this Section 5.9.

          (a)  Negotiation.  The parties shall make a good faith attempt to
resolve any Dispute arising out of or relating to this Agreement through
negotiation. Within thirty (30) days after notice of a Dispute is given by
either party to the other party, each party shall select a first tier
negotiating team comprised of general manager level employees of such party and
shall meet and make a good faith attempt to resolve such Dispute and shall
continue to negotiate in good faith in an effort to resolve the Dispute or
renegotiate the applicable section or provision without the necessity of any
formal proceedings. If the first tier negotiating teams are unable to agree
within thirty (30) days of their first meeting, then each party shall select a
second tier negotiating team comprised of vice president level employees of such
party and shall meet within thirty (30) days after the end of the first thirty
(30) day negotiating period to attempt to resolve the matter. During the course
of negotiations under this Section 5.9(a), all reasonable requests made by one
party to the other for information, including requests for copies of relevant
documents, will be honored. The specific format for such negotiations will be
left to the discretion of the designated negotiating teams but may include the
preparation of agreed upon statements of fact or written statements of position
furnished to the other party.

          (b)  Non-Binding Mediation. In the event that any Dispute arising out
of or related to this Agreement is not settled by the parties within fifteen
(15) days after the first meeting of the second tier negotiating teams under
Section 5.9(a), the parties will attempt in good faith to resolve such Dispute
by non-binding mediation in accordance with the American Arbitration Association
Commercial Mediation Rules. The mediation shall be held within thirty (30) days
of the end of such fifteen (15) day negotiation period of the second tier
negotiating teams. Except as provided below in Section 5.9(c), no litigation for
the resolution of such dispute may be commenced until the parties try in good
faith to settle the dispute by such mediation in accordance with such rules and
either party has concluded in good faith that amicable resolution through
continued mediation of the matter does not appear likely. The costs of mediation
shall be shared equally by the parties to the mediation. Any settlement reached
by mediation shall be recorded in writing, signed by the parties, and shall be
binding on them.

                                      -14-

 
          (c)  Proceedings.  Nothing herein, however, shall prohibit either
party from initiating litigation or other judicial or administrative proceedings
if such party would be substantially harmed by a failure to act during the time
that such good faith efforts are being made to resolve the Dispute through
negotiation or mediation. In the event that litigation is commenced under this
Section 5.9(c), the parties agree to continue to attempt to resolve any Dispute
according to the terms of Sections 5.9(a) and 5.9(b) during the course of such
litigation proceedings under this Section 5.9(c).

          (d)  Pay and Dispute.  Except as provided herein or in any Ancillary
Agreement, in the event of any dispute regarding payment of a third-party
invoice (subject to standard verification of receipt of products or services),
the party named in a third party's invoice must make timely payment to such
third party, even if the party named in the invoice desires to pursue the
dispute resolution procedures outlined in this Section 5.9. If the party that
paid the invoice is found pursuant to this Section 5.9 to not be responsible for
such payment, such paying party shall be entitled to reimbursement, with
interest accrued at a compound annual rate of the Prime Rate plus 2%, from the
party found responsible for such payment.

     Section 5.10  Governmental Approvals.  To the extent that the Separation
requires any Governmental Approvals, the parties will use their reasonable
commercial efforts to obtain any such Governmental Approvals.

     Section 5.11  No Representation or Warranty.  HP does not, in this
Agreement or any other agreement, instrument or document contemplated by this
Agreement, make any representation as to, warranty of or covenant with respect
to:

          (a)  the value of any asset or thing of value to be transferred to
Agilent;

          (b)  the freedom from encumbrance of any asset or thing of value to be
transferred to Agilent;

          (c)  the absence of defenses or freedom from counterclaims with
respect to any claim to be transferred to Agilent; or

          (d)  the legal sufficiency of any assignment, document or instrument
delivered hereunder to convey title to any asset or thing of value upon its
execution, deliver and filing.

     Except as may expressly be set forth herein or in any Ancillary Agreement,
all assets to be transferred to Agilent shall be transferred "AS IS, WHERE IS"
and Agilent shall bear the economic and legal risk that any conveyance shall
prove to be insufficient to vest in Agilent good and marketable title, free and
clear of any lien, claim, equity or other encumbrance.

     Section 5.12  Non-Solicitation of Employees.  Each party agrees not to
directly solicit or recruit the other party's employees for a period of two
years following the Distribution Date if such solicitation or recruitment would
be disruptive or damaging or would interfere with the operation or business of
the other party. This prohibition on solicitation does not apply to actions
taken by a party (i) as a result of an employee's affirmative response to a
general recruitment effort carried out through a public solicitation or a
general solicitation or (ii) as a result of an employee's initiative.

                                      -15-

 
     Section 5.13  Employee Agreements.  Definition.  As used in this Section
5.13, "Employee Agreement" means the Agreement Regarding Confidential
Information and Proprietary Developments and corresponding agreements in foreign
countries.

          (a)  Survival of HP Employee Agreement Obligations and HP's Common Law
Rights.  The HP Employee Agreements of all former HP employees transferred to
Agilent as of the Distribution Date shall remain in full force and effect
according to their terms; provided, however, that none of the following acts
committed by former HP employees within the scope of their Agilent employment
shall constitute a breach of such HP Employee Agreements: (i) the use or
disclosure of Confidential Information (as that term is defined in the former HP
employee's HP Employee Agreement) for or on behalf of Agilent, if such
disclosure is consistent with the license rights granted to Agilent and
restrictions imposed on Agilent under this Agreement, any other Ancillary
Agreement or any other agreement between the parties, (ii) the disclosure and
assignment to Agilent of rights in Proprietary Developments authored or
conceived by the former HP employee after the Separation Date and resulting from
the use of, or based upon intellectual property (whether patented or not) which
is retained by HP (as Proprietary Developments are defined in the former HP
employee's HP Employee Agreement); provided, however, that in no event shall
such disclosure and assignment be regarded as assigning the underlying
intellectual property to Agilent, (iii) the rendering of any services, directly
or indirectly, to Agilent to the extent such services are consistent with the
assignment or license of rights granted to Agilent and the restrictions imposed
on Agilent under this Agreement, any other Ancillary Agreement or any other
agreement between the parties and (iv) solicitation of the employees of one
party by the other party prior to the Distribution Date. Further, HP retains any
rights it has under statute or common law with respect to actions by its former
employees to the extent such actions are inconsistent with the rights granted to
Agilent and restrictions imposed on Agilent under this Agreement, any other
Ancillary Agreement or any other agreement between the parties.

          (b)  Assignment, Cooperation for Compliance and Enforcement.

                    (i)  HP retains all rights under the HP Employee Agreements
of all former HP employees necessary to permit HP to protect the rights and
interests of HP, but hereby transfers and assigns to Agilent its rights under
the HP Employee Agreements of all former HP employees to the extent required to
permit Agilent to enjoin, restrain, recover damages from or obtain specific
performance of the HP Employee Agreements or obtain other remedies against any
employee who breaches his/her HP Employee Agreement, and to the extent necessary
to permit Agilent to protect the rights and interests of the businesses being
transferred to Agilent on the Separation Date.

                    (ii) HP and Agilent agree, at their own respective cost and
expense, to use their reasonable efforts to cooperate as follows: (A) Agilent
shall advise HP of: (1) any violation(s) of the HP Employee Agreement by former
HP employees, and (2) any violation(s) of the Agilent Employee Agreement which
affect HP's rights; and (B) HP shall advise Agilent of any violations of the HP
Employee Agreement by current or former HP employees which affect Agilent's
rights; provided, however, that the foregoing obligations shall only apply to
violations which become known to an attorney within the legal department of the
party obligated to provide notice thereof.

                                      -16-

 
                    (iii) HP and Agilent each may separately enforce the HP
Employee Agreements of former HP employees to the extent necessary to reasonably
protect their respective interests, provided, however, that (i) Agilent shall
not commence any litigation relating thereto without first consulting with HP's
Director of Intellectual Property or his/her designee and (ii) HP shall not
commence any litigation relating thereto against any former HP employee who is
at the time an Agilent employee without first consulting with Agilent's Director
of Intellectual Property or his/her designee. If either party, in seeking to
enforce any HP Employee Agreement, notifies the other party that it requires, or
desires, the other party to join in such action, then the other party shall do
so. In addition, if either party commences or becomes a party to any action to
enforce a HP Employee Agreement of a former HP employee, the other party shall,
whether or not it becomes a party to the action, cooperate with the other party
by making available its files and employees who have information or knowledge
relevant to the dispute, subject to appropriate measures to protect the
confidentiality of any proprietary or confidential information that may be
disclosed in the course of such cooperation or action and subject to any
relevant privacy laws and regulations. Any such action shall be conducted at the
expense of the party bringing the action and the parties shall agree on a case
by case basis on compensation, if any, of the other party for the value of the
time of such other party's employees as reasonably required in connection with
the action.

                    (iv)  HP and Agilent understand and acknowledge that matters
relating to the making, performance, enforcement, assignment and termination of
employee agreements are typically governed by the laws and regulations of the
national, federal, state or local governmental unit where an employee resides,
or where an employee's services are rendered, and that such laws and regulations
may supersede or limit the applicability or enforceability of this Section 5.13.
In such circumstances, HP and Agilent agree to take action with respect to the
employee agreements that best accomplishes the parties' objectives as set forth
in this Section 5.13 and that is consistent with applicable law.

     Section 5.14  Cooperation in Obtaining New Agreements.  HP understands
that, prior to the Separation Date, Agilent has derived benefits under certain
agreements between HP and third parties, which agreements are not being assigned
to Agilent in connection with the Separation. Upon the request of Agilent, HP
agrees to make introductions to appropriate Agilent personnel to HP's contacts
at such third parties, and agrees to provide reasonable assistance to Agilent,
at HP's own expense, so that Agilent may obtain agreements from such third
parties under substantially equivalent terms and conditions, including financial
terms and conditions, that apply to HP. Such assistance may include, but is not
limited to, (i) requesting and encouraging such third parties to enter into such
agreements with Agilent, (ii) attending meetings and negotiating sessions with
Agilent and such third parties, and (iii) participating in buying consortiums
with Agilent. HP also understands that there are certain agreements between HP
and third parties, which agreements are being assigned to Agilent in connection
with the Separation but which may require the consent of the applicable third
party. Upon the request of Agilent, HP agrees to assist Agilent in seeking and
obtaining the consent of such third parties to such assignment. The parties
expect that the activities contemplated by this Section will be substantially
completed by the Distribution Date, but in no event will HP have any obligations
hereunder after the first anniversary of the Distribution Date.



                                      -17-

 
     Section 5.16  Newly Discovered Environmental Conditions at Agilent Schedule
1 Facilities. If between the date of this Agreement and the Separation Date, 
Environmental Conditions (as defined in Section 4.21 of the Indemnification and 
Insurance Matters Agreement) are discovered on an Agilent Schedule 1 Facility 
(as defined in Section 4.11 of the Indemnification and Insurance Matters 
Agreement) for which HP, consistent with its past practices, would accrue a 
reserve, then HP and Agilent shall determine the allocation of responsibility 
for any Environmental Actions (as defined in Section 4.20 of the Indemnification
and Insurance Matters Agreement) arising, whether before or after the 
Separation Date, out of such Environmental Conditions, in a manner consistent 
with the provisions of Section 1.4 of the Indemnification and Insurance Matters 
Agreement.

                                  ARTICLE VI

                                 MISCELLANEOUS

     Section 6.1  Limitation of Liability.  IN NO EVENT SHALL ANY MEMBER OF THE
HP GROUP OR AGILENT GROUP BE LIABLE TO ANY OTHER MEMBER OF THE HP GROUP OR
AGILENT GROUP FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE
DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY
(INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED,
HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S
INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN THE
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT.

     Section 6.2  Entire Agreement.  This Agreement, the other Ancillary
Agreements and the Exhibits and Schedules referenced or attached hereto and
thereto, constitutes the entire agreement between the parties with respect to
the subject matter hereof and shall supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof.

     Section 6.3  Governing Law.  This Agreement shall be governed and construed
and enforced in accordance with the laws of the State of Delaware as to all
matters regardless of the laws that might otherwise govern under the principles
of conflicts of laws applicable thereto.

     Section 6.4  Termination.  This Agreement and all Ancillary Agreements may
be terminated and the Distribution abandoned at any time prior to the IPO
Closing Date by and in the sole discretion of HP without the approval of
Agilent. This Agreement may be terminated at any time after the IPO Closing Date
and before the Distribution Date by mutual consent of HP and Agilent. In the
event of termination pursuant to this Section, no party shall have any liability
of any kind to the other party.

     Section 6.5  Notices.  Any notice, demand, offer, request or other
communication required or permitted to be given by either party pursuant to the
terms of this Agreement shall be in writing and shall be deemed effectively
given the earlier of (i) when received, (ii) when delivered personally, (iii)
one (1) business day after being delivered by facsimile (with receipt of
appropriate confirmation), (iv) one (1) business day after being deposited with
an overnight courier service or (v) four (4) days after being deposited in the
U.S. mail, First Class with postage prepaid, and addressed to the attention of
the party's General Counsel at the address of its principal executive office or
such other address as a party may request by notifying the other in writing.

                                      -18-

 
     Section 6.6   Counterparts.  This Agreement, including the Schedules and
Exhibits hereto and the other documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.

     Section 6.7   Binding Effect; Assignment.  This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. This Agreement may
not be assigned by any party hereto. This Agreement may be enforced separately
by each member of the HP Group and each member of the Agilent Group.

     Section 6.8   Severability.  If any term or other provision of this
Agreement or the Schedules or Exhibits attached hereto is determined by a
nonappealable decision by a court, administrative agency or arbitrator to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the fullest
extent possible.

     Section 6.9   Failure or Indulgence Not Waiver; Remedies Cumulative.  No
failure or delay on the part of either party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement or the Schedules or Exhibits attached hereto are cumulative
to, and not exclusive of, any rights or remedies otherwise available.

     Section 6.10  Amendment.  No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to such agreement. 

     Section 6.11  Authority.  Each of the parties hereto represents to the
other that (a) it has the corporate or other requisite power and authority to
execute, deliver and perform this Agreement, (b) the execution, delivery and
performance of this Agreement by it have been duly authorized by all necessary
corporate or other actions, (c) it has duly and validly executed and delivered
this Agreement, and (d) this Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equity principles.

     Section 6.12  Interpretation.  The headings contained in this Agreement, in
any Exhibit or Schedule hereto and in the table of contents to this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule or
Exhibit but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article or a

                                      -19-

 
Section, Exhibit or Schedule, such reference shall be to an Article or Section
of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated.

     Section 6.13  Conflicting Agreements.  In the event of conflict between
this Agreement and any Ancillary Agreement or other agreement executed in
connection herewith, the provisions of such other agreement shall prevail.

                                  ARTICLE VII

                                  DEFINITIONS

     Section 7.1   Affiliated Company.  "Affiliated Company" means, with respect
to HP, any entity in which HP holds a 50% or less ownership interest and that is
listed on Schedule 7.1(a) hereto and, with respect to Agilent, any entity in
which Agilent holds a 50% or less ownership interest and that is listed on
Schedule 7.1(b) hereto. Schedules 7.1(a) and 7.1(b) may be amended from time to
time after the date hereof upon mutual written consent of the parties.

     Section 7.2  Agilent Assets.  "Agilent Assets" has the meaning set forth
in Section 1.2 of the Assignment Agreement.

     Section 7.3  Agilent Business.  "Agilent Business" means (a) the business
and operations of the business entities of HP currently known under the
following names, as described in the IPO Registration Statement and as such
business and operations will continue following the Separation Date: (i) the
Test and Measurement Organization, (ii) the Semiconductor Products Group, (iii)
the Chemical Analysis Group, (iv) the Healthcare Solutions Group and (v) the
portion of HP Labs and infrastructure organizations related to these businesses
and (b) except as otherwise expressly provided herein, any terminated, divested
or discontinued businesses or operations that at the time of termination,
divestiture or discontinuation primarily related to the Agilent Business as then
conducted.

     Section 7.4  Agilent Group.  "Agilent Group" means Agilent, each
Subsidiary and Affiliated Company of Agilent immediately after the Separation
Date or that is contemplated to be a Subsidiary or Affiliated Company of Agilent
pursuant to the Non-US Plan and each Person that becomes a Subsidiary or
Affiliate Company of Agilent after the Separation Date.

     Section 7.5  Agilent Pro Forma Balance Sheet.  "Agilent Pro Forma Balance
Sheet" means the unaudited pro forma condensed consolidated balance sheet
appearing in the IPO Registration Statement.

     Section 7.6  Agilent's Auditors.  "Agilent's Auditors" means Agilent's
independent certified public accountants.

     Section 7.7  Ancillary Agreements.  "Ancillary Agreements" has the meaning
set forth in Section 2.1 hereof.

                                      -20-

 
     Section 7.8   Assignment Agreement.  "Assignment Agreement" has the meaning
set forth in Section 2.1(a) hereof.

     Section 7.9   Business Day.  "Business Day" means a day other than a
Saturday, a Sunday or a day on which banking institutions located in the State
of California are authorized or obligated by law or executive order to close.

     Section 7.10  Code.  "Code" means the Internal Revenue Code of 1986, as
amended from time to time.

     Section 7.11  Commission.  "Commission" means the Securities and Exchange
Commission.

     Section 7.12  Disputes.  "Disputes" has the meaning set forth in Section
5.9 hereof.

     Section 7.13  Distribution.  "Distribution" has the meaning set forth in
the Recitals hereof.

     Section 7.14  Distribution Agent.  "Distribution Agent" has the meaning set
forth in Section 4.1 hereof.

     Section 7.15  Distribution Date.  "Distribution Date" has the meaning set
forth in Section 4.1 hereof.

     Section 7.16  Employee Agreement.  "Employee Agreement" has the meaning set
forth in Section 5.13(a) hereof.

     Section 7.17  Exchange Act.  "Exchange Act" means the Securities and
Exchange Act of 1934, as amended.

     Section 7.18  Governmental Approvals.  "Governmental Approvals" means any
notices, reports or other filings to be made, or any consents, registrations,
approvals, permits or authorizations to be obtained from, any Governmental
Authority.

     Section 7.19  Governmental Authority.  "Governmental Authority" shall mean
any federal, state, local, foreign or international court, government,
department, commission, board, bureau, agency, official or other regulatory,
administrative or governmental authority.

     Section 7.20  HP Business.  "HP Business" means any business of HP other
than the Agilent Business.

     Section 7.21  HP Group.  "HP Group" means HP, each Subsidiary and
Affiliated Company of HP (other than any member of the Agilent Group)
immediately after the Separation Date, after giving effect to the Non-US Plan
and each Person that becomes a Subsidiary or Affiliate Company of HP after the
Separation Date.

     Section 7.22  HP's Auditors.  "HP's Auditors" means HP's independent
certified public accountants.

                                      -21-

 
     Section 7.23  Information.  "Information" means information, whether or not
patentable or copyrightable, in written, oral, electronic or other tangible or
intangible forms, stored in any medium, including studies, reports, records,
books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.

     Section 7.24  IPO.  "IPO" has the meaning set forth in the Recitals hereof.

     Section 7.25  IPO Closing Date.  "IPO Closing Date" has the meaning set
forth in the Recitals hereof.

     Section 7.26  IPO Net Proceeds.  "IPO Net Proceeds" has the meaning set
forth in the Recitals hereof.

     Section 7.27  IPO Over-allotment Option.  "IPO Over-allotment Option" has
the meaning set forth in the Recitals hereof.

     Section 7.28  IPO Registration Statement.  "IPO Registration Statement"
means the registration statement on Form S-1 pursuant to the Securities Act of
1933, as amended, to be filed with the Commission registering the shares of
common stock of Agilent to be issued in the IPO, together with all amendments
thereto.

     Section 7.29  Nasdaq.  "Nasdaq" means the Nasdaq National Market.

     Section 7.30  Non-US Plan.  "Non-US Plan" has the meaning set forth in
Section 5.8 hereof.

     Section 7.31  NYSE.  "NYSE" means the New York Stock Exchange.

     Section 7.32  Person.  "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.

     Section 7.33  Prime Rate.  "Prime Rate" means the prime rate as published
in the Wall Street Journal on the date of determination.

     Section 7.34  Record Date.  "Record Date" means the close of business on
the date to be determined by the Board of Directors of HP as the record date for
determining the stockholders of HP entitled to receive shares of common stock of
Agilent in the Distribution.

     Section 7.35  Retained Payables.  "Retained Payables" means (i) all
accounts payable and other obligations of payment for goods or services
purchased, leased or otherwise received in the 

                                      -22-

 
conduct of the Agilent Business that as of the Separation Date are payable to a
third Person by HP or any of HP's Subsidiaries, whether past due, due or to
become due, including any interest, sales or use taxes, finance charges, late or
returned check charges and other obligations of HP or any of HP's Subsidiaries
with respect thereto, and any obligations related to any of the foregoing and
(ii) all employee compensation Liabilities and other miscellaneous Liabilities
for which an adjustment is made in the Agilent Pro Forma Balance Sheet.

     Section 7.36  Retained Receivables.   "Retained Receivables" means (i) all
accounts receivable and other rights to payment for goods or services sold,
leased or otherwise provided in the conduct of the Agilent Business that as of
the Separation Date are payable by a third Person to HP or any of HP's
Subsidiaries, whether past due, due or to become due, including any interest,
sales or use taxes, finance charges, late or returned check charges and other
obligations of the account debtor with respect thereto, and any proceeds of any
of the foregoing and (ii) all other miscellaneous Assets for which an adjustment
is made in the Agilent Pro Forma Balance Sheet.

     Section 7.37  Separation.  "Separation" has the meaning set forth in the
Recitals hereof.

     Section 7.38  Separation Date.  "Separation Date" has the meaning set forth
in Section 1.1 hereof.

     Section 7.39  Subsidiary.  "Subsidiary" means with respect to any specified
Person, any corporation, any limited liability company, any partnership or other
legal entity of which such Person or its Subsidiaries owns, directly or
indirectly, more than 50% of the stock or other equity interest entitled to vote
on the election of the members of the board of directors or similar governing
body. Unless context otherwise requires, reference to HP and its Subsidiaries
shall not include the subsidiaries of HP that will be transferred to Agilent
after giving effect to the Separation, including the actions taken pursuant to
the Non-US Plan.

     Section 7.40  Underwriters.  "Underwriters" means the underwriters of the
IPO.

     Section 7.41  Underwriting Agreement.  "Underwriting Agreement" has the
meaning set forth in Section 3.1(a) hereof.

     Section 7.42  WSGR.  "WSGR" means Wilson Sonsini Goodrich & Rosati,
Professional Corporation.

                                      -23-

 
          WHEREFORE, the parties have signed this Master Separation and
Distribution Agreement effective as of the date first set forth above.

HEWLETT-PACKARD COMPANY               AGILENT TECHNOLOGIES, INC.

By: /s/ Robert Wayman                 By: /s/ Edward W. Barnholt            
   ----------------------------          -----------------------------------

Name: Robert P. Wayman                Name: Edward W. Barnholt              
     --------------------------            ---------------------------------

Title: Executive Vice President of    Title: President and Chief Executive   
       Finance and Administration,           Officer
       Chief Financial Officer              


 
                                Schedule 2.1(b)

      Subsidiaries and Other Holdings of HP to be Transferred to Agilent


Subsidiaries

Agilent Technologies World Trade, Inc.
Heartstream, Inc.
Pete, Inc.
Rockland Technologies Inc.
Scope Communications, Inc.
Telegra Corporation

Other Holdings

Candescent Technologies Corporation
Cascade Microtech Inc.
HP-Sci Tech Joint Software Development Center Co. Ltd.
i-Stat Corporation
Microelectrics & Computer Technology Group

 
                                Schedule 2.2(b)

                           Cash Held in Subsidiaries


China Hewlett-Packard Company Limited
Heartstream, Inc.
Hewlett-Packard Belgium SA/NV
Hewlett-Packard Coordination Center, S.C.
Hewlett-Packard Espanola, S.A.
Hewlett-Packard Japan, Ltd.
Hewlett-Packard Malaysia Sdn Bhd
Hewlett-Packard Microwave Products (M) Sdn Bhd
Hewlett-Packard Oy
Hewlett-Packard S.A.S.
Hewlett-Packard Taiwan Ltd.
Yokogawa Analytical Systems, Inc.

 
                               Schedule 7.1 (a)

           Affiliated Companies of HP to be Included in the HP Group

     Ericsson-HP Telecom (Sweden)

     Ericsson-HP Telecom (France)

     Hua-Pua

     Hugin Expert

     Idea LLC

     ImagineCard

     Intria-HP

     Intria-HP Potomac

     Liquidity Management Group

     PT Berka Services

     Putial Ome

     Sopura Systems

     Syc

 
                                Schedule 7.1(b)

      Affiliated Companies of Agilent to be Included in the Agilent Group

Chartered Semiconductor Partners Singapore

LumiLEDS