Incentive Stock Plan Stock Option Agreement (Non-Qualified) - Hewlett-Packard Co. and Carleton S. Fiorina
INCENTIVE STOCK PLAN STOCK OPTION AGREEMENT (NON-QUALIFIED)
THIS AGREEMENT, dated July 17, 1999 ('Grant Date') by and between HEWLETT-
PACKARD COMPANY, a Delaware corporation ('Company'), and 00547500 Carleton S.
Fiorina ('Employee'), is entered into as follows:
WHEREAS, the Company has established the Hewlett-Packard Company 1995
Incentive Stock Plan ('Plan'), a copy of which can be found on the Stock Options
Web Site at: http://hpweb.corp.hp.com/publish/hwp/stock/stok_opt.htm or by
written or telephonic request to the Company Secretary, and which Plan made a
part hereof; and
WHEREAS, the Compensation Committee of the Board of Directors of the Company
('Committee') determined that the Employee be granted an option under the Plan
as reflected in the terms and conditions contained in the Employment Agreement
by and between the Employee and the Company made as of July 17, 1999 (the
'Employment Agreement') and as hereinafter set forth;
NOW THEREFORE, the parties hereby agree that in consideration of services to
be rendered, the Company grants the Employee an option ('Option') to purchase
600,000 shares of its $1.00 par value voting common stock of the Company
('Stock') upon the terms and conditions set forth herein.
1. This Option is granted under and pursuant to the Plan and is subject to each
and all of the provisions thereof.
2. The Option price shall be $113.03 per share of Stock.
3. Except as may be provided in this Paragraph 3, this Option is not
transferable by the Employee otherwise than by will or the laws of descent
and distribution, and is exercisable only by the Employee during her
lifetime. Except as may be provided in this Paragraph 3, this Option may not
be transferred, assigned, pledged or hypothecated by the Employee during her
lifetime, whether by operation of law or otherwise, and is not subject to
execution, attachment or similar process. The Employee may transfer this
Option (to the extent vested) consistent with the rules for transfers to
'family members' as defined in Form S-8 of the Securities Act of 1933, as
amended; provided, however, that any such transfer shall comply with all
procedural rules reasonably established by the Committee.
4. This Option shall become exercisable as to 25% of the Stock subject to such
Option on the first anniversary date of the Grant Date, and as to an
additional 25% on each succeeding anniversary date, so as to be 100% vested
on the fourth anniversary thereof, conditioned upon the Employee's continued
employment with the Company as of each vesting date. Notwithstanding the
foregoing, this Option shall become exercisable as to:
(a) 100% of the then unvested Stock subject to this Option upon the
termination of the Employee's employment due to a 'Disability
Termination' (as defined in the Employment Agreement), death or
retirement due to age or permanent and total disability;
(b) 50% of the then unvested Stock subject to this Option upon the Employee's
voluntary termination of employment for 'Good Reason' (as defined in the
Employment Agreement) or involuntary termination by the Company other
than for 'Cause' (as defined in the Employment Agreement); provided,
however, that if such termination takes place in contemplation of, at the
time of, or within two (2) years after a Change of Control (as defined in
the Employment Agreement), this Option shall become exercisable in full,
except that if such Change of Control occurs within one (1) year after
the Grant Date (i) such full vesting shall not occur, and (ii) the
additional vesting beyond that occurring upon the Change of Control under
sub-paragraph (c) below shall not occur if the termination is at the time
or within three (3) months after the Change of Control; or
(c) 50% of each vesting tranche of the then unvested Stock subject to this
Option in the event of a Change of Control.
Following such partial acceleration of this Option as provided in
Paragraphs 4(b) or (c), the remaining unvested Stock subject to this Option
shall continue to vest as otherwise provided in this Agreement.
5. This Option will expire ten (10) years from the date hereof, unless sooner
terminated or canceled in accordance with the provisions of the Plan and this
Agreement. This means that the Option must be exercised, if at all, on or
before July 16, 2009.
6. This Option may be exercised by delivering to the Secretary of the Company at
its head office a written notice stating the number of shares of Stock as to
which the Option is exercised; provided, however, that no such exercise shall
be with respect to fewer than twenty-five (25) shares or the remaining shares
covered by the Option if less than twenty-five. The written notice must be
accompanied by the payment of the full Option price of such shares. Payment
may be by:
(b) Shares of Stock owned for at least six (6) months;
(c) Delivery of the Employee's promissory note ('Note') in the form attached
hereto as Exhibit A bearing interest at the 'applicable federal
rate' prescribed under the Internal Revenue Code of 1986, as amended and
its regulations at time of purchase and secured by a pledge of the Stock
purchased by the Note pursuant to the Security Agreement attached hereto
as Exhibit B; or
(f)d Consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
(e) A combination thereof; provided, however, that any payment in Stock or
by delivery of a Note shall be in strict compliance with all procedural
rules established by the Committee.
7. All rights of the Employee in this Option, to the extent that it has not been
exercised, shall terminate upon the death of the Employee (except as
hereinafter provided) or termination of her employment for any reason other
than retirement due to age or permanent and total disability, a Disability
Termination, termination by the Company without Cause, or voluntary
termination by the Employee for Good Reason, except as provided in Paragraph
4(b) with regard to the contemplation of a Change of Control. In the event of
the Employee=s retirement due to age or permanent and total disability, the
Employee may exercise the Option within three (3) years after such
retirement. In the event of the Employee's termination of employment due to a
Disability Termination (other than due to a permanent and total disability),
termination by the Company without Cause, or voluntary termination by the
Employee for Good Reason, the Employee may exercise the Option within one (1)
year after such termination. In the event of the Employee's death, her legal
representative or designated beneficiary shall have the right to exercise all
or a portion of the Employee's right under this Option. The representative or
designee must exercise the Option within one (1) year after the death of the
Employee, and shall be bound by the provisions of the Plan. In all cases,
however, the Option will expire no later than the expiration date set forth
in Paragraph 5.
8. The Employee shall remit to the Company payment for all applicable
withholding taxes and required social security contributions at the time the
Employee exercises any portion of this Option. The Employee may elect to
satisfy such withholding tax obligation by having the Company retain Stock
having a fair market value equal to the Company's minimum withholding
9. Neither the Plan nor this Agreement nor any provision under either shall be
construed so as to grant the Employee any right to remain in the employ of
the Company, and it is expressly agreed and understood that employment is
terminable at the will of either party subject to the provisions of the
By /s/ Susan P. Orr
Susan P. Orr
Chairman of the Compensation Committee
By /s/ Ann Baskins
Associate General Counsel
RETAIN THIS AGREEMENT FOR YOUR RECORDS
FOR VALUE RECEIVED, _____________________ promises to pay to HEWLETT-
PACKARD COMPANY, a Delaware corporation (the 'Company'), or order, the principal
sum of _______________________ ($_____________), together with interest on the
unpaid principal hereof from the date hereof at the rate of _______________
percent (____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on _______________,
_____. Payment of principal and interest shall be made in lawful money of the
United States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Company's 1995 Incentive Stock
Plan, the Incentive Stock Plan Stock Option Agreement (Non-Qualified) between
the Company and the undersigned, dated as of July 17, 1999 and the Employment
Agreement between the Employee and the Company made as of July 17, 1999. This
Note is secured in part by a pledge of the Company's $1.00 par value voting
common stock ('Stock') under the terms of a Security Agreement of even date
herewith and is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee of the Company
for any reason, this Note shall, at the option of the Company, be accelerated,
and the whole unpaid balance on this Note of principal and accrued interest
shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
This Security Agreement is made as of __________, _____ between
HEWLETT-PACKARD COMPANY, a Delaware corporation ('Pledgee'), and
WHEREAS, pursuant to Pledgor's election to purchase shares of $1.00
par value voting common stock of the Company ('Stock') under the Option
Agreement dated July 17, 1999 (the 'Option Agreement'), between Pledgor and
Pledgee under Pledgee's 1995 Incentive Stock Plan, and Pledgor's election under
the terms of the Option Agreement to pay for such Stock with her promissory note
(the 'Note'), Pledgor has purchased _________ shares of Pledgee's Stock at a
price of $________ per share, for a total purchase price of $__________. The
Note and the obligations thereunder are as set forth in Exhibit A to the Option
NOW, THEREFORE, it is agreed as follows:
1 Creation and Description of Security Interest. In consideration of
the pursuant to the Delaware Commercial Code, hereby pledges all of such
Stock (herein sometimes referred to as the 'Collateral') represented by
certificate number ______, duly endorsed in blank or with executed stock
powers, and herewith delivers said certificate to the Secretary of
Pledgee ('Pledgeholder'), who shall hold said certificate subject to the
terms and conditions of this Security Agreement.
The pledged Stock (together with an executed blank stock assignment
for use in transferring all or a portion of the Stock to Pledgee if, as
and when required pursuant to this Security Agreement) shall be held by
the Pledgeholder as security for the repayment of the Note, and any
extensions or renewals thereof, to be executed by Pledgor pursuant to
the terms of the Option, and the Pledgeholder shall not encumber or
dispose of such Stock except in accordance with the provisions of this
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to
Pledgee, its successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum of the
Note secured hereby, together with interest thereon, at the time and
in the manner provided in the Note.
(b) Encumbrances. The Stock is free of all other encumbrances, defenses
and liens, and Pledgor will not further encumber the Stock without
the prior written consent of Pledgee.
(c) Margin Regulations. In the event that Pledgee's Stock is now or
later becomes margin-listed by the Federal Reserve Board and Pledgee
is classified as a 'lender' within the meaning of the regulations
under Part 207 of Title 12 of the Code of Federal Regulations
('Regulation G'), Pledgor agrees to cooperate with Pledgee in making
any amendments to the Note or providing any additional collateral as
may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the
terms of the Note, Pledgor shall have the right to vote all of the
shares of Stock pledged hereunder.
4. Stock Adjustments. In the event that during the term of the pledge any
stock dividend, reclassification, readjustment or other changes are
declared or made in the capital structure of Pledgee, all new,
substituted and additional shares or other securities issued by reason
of any such change shall be delivered to and held by the Pledgee under
the terms of this Security Agreement in the same manner as the Stock
originally pledged hereunder. In the event of substitution of such
securities, Pledgor, Pledgee and Pledgeholder shall cooperate and
execute such documents as are reasonable so as to provide for the
substitution of such Collateral
and, upon such substitution, references to 'Stock' in this Security
Agreement shall include the substituted shares of capital stock of
Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this pledge,
subscription options or other rights or options shall be issued in
connection with the pledged Stock, such subscription options or other
rights or options shall be the property of Pledgor and, if exercised by
Pledgor, all new stock or other securities so acquired by Pledgor as it
relates to the pledged Stock then held by Pledgeholder shall be
immediately delivered to Pledgeholder, to be held under the terms of
this Security Agreement in the same manner as the Stock pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
(a) Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
(b) Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10
days after written notice thereof from Pledgee.
In the case of an event of default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor,
and Pledgee shall thereafter be entitled to pursue its remedies under
the Delaware Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the
pledged Stock held by Pledgeholder hereunder upon payments of the
principal of the Note. The number of the pledged shares of Stock which
shall be released shall be that number of full shares which bears the
same proportion to the initial number of shares pledged hereunder as the
payment of principal bears to the initial full principal amount of the
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of
the Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Stock shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged
Stock shall be promptly delivered to Pledgor, subject to the provisions
for prior release of a portion of the Collateral as provided in
paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed
for the property of Pledgor, or if Pledgor makes an assignment for the
benefit of creditors, the entire amount unpaid on the Note shall become
immediately due and payable, and Pledgee may proceed as provided in the
case of default.
11. Pledgeholder Liability. In the absence of willful or gross negligence,
Pledgeholder shall not be liable to any party for any of his or her
acts, or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this
Security Agreement shall not render any other provision or provisions
herein contained unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the terms
of this Security Agreement shall be binding on their respective
successors and assigns, and that the term 'Pledgor' and the term
'Pledgee' as used herein shall be deemed to include, for all purposes,
the respective designees, successors, assigns, heirs, executors and
14. Governing Law. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law
rules, of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
a Delaware corporation
Title: Secretary of HEWLETT-PACKARD COMPANY