SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
HEWLETT-PACKARD COMPANY
.............................................................................
(Name of Registrant as Specified In Its Charter)
D. CRAIG NORDLUND
..............................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.......................................................................
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: _/
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4) Proposed maximum aggregate value of transaction:
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_/ Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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Notes:
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[HEWLETT-PACKARD LOGO]
3000 HANOVER STREET, PALO ALTO, CALIFORNIA 94304 (415) 857-1501
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS--FEBRUARY 22, 1994
To the Shareholders:
The annual meeting of the shareholders of Hewlett-Packard Company, a
California corporation (the "Company"), will be held, as provided in the
Company's Amended By-Laws, on Tuesday, February 22, 1994, at 2 o'clock in the
afternoon in the Oak Room of the Company's facility located at 19447 Pruneridge
Avenue, Cupertino, California, for the following purposes:
1. To elect a Board of 14 Directors to serve for the ensuing year.
2. To consider and act upon a proposal that the shareholders approve
amendments to the Company's Tax Saving Capital Accumulation Plan.
3. To consider and act upon a proposal that the shareholders approve the
appointment of Price Waterhouse as the Company's independent accountants
for the 1994 fiscal year.
4. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
Nominees for directors are set forth in the enclosed Proxy Statement.
Only shareholders of record at the close of business on Monday, December 27,
1993, will be entitled to vote at this meeting. The meeting will begin promptly
at 2 o'clock. Shareholders who arrive after the meeting has begun will not be
admitted to the Oak Room, but may view the televised proceedings in a nearby
auditorium.
By Order of the Board of Directors
/s/ D. Craig Nordlund
----------------------
D. Craig Nordlund
Associate General Counsel and Secretary
Palo Alto, California
January 20, 1994
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PROXY STATEMENT
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SOLICITATION OF PROXY, REVOCABILITY AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Hewlett-Packard Company, a California corporation (the "Company" or "HP"), for
use at the 1994 annual meeting of shareholders to be held on February 22, 1994.
Only shareholders of record on December 27, 1993 will be entitled to vote at
that meeting. On December 27, 1993, the Company had approximately 252.5 million
shares of Common Stock issued and outstanding.
The Company's principal executive offices are located at 3000 Hanover Street,
Palo Alto, California 94304. The approximate date on which the Proxy Statement
and the accompanying proxy are first being sent to shareholders is January 20,
1994.
VOTING
Each share of Common Stock outstanding on the record date is entitled to one
vote. In addition, every shareholder, or his proxy, entitled to vote upon the
election of directors may cumulate his votes and give one candidate a number of
votes equal to the number of directors to be elected multiplied by the number
of votes to which his shares are entitled, or distribute his votes calculated
on the same principle among as many candidates as he thinks fit. No shareholder
or proxy, however, shall be entitled to cumulate votes unless such candidate or
candidates have been nominated prior to the voting and the shareholder has
given notice at the meeting, prior to the voting, of the shareholder's
intention to cumulate the shareholder's votes. If any one shareholder gives
such notice, all shareholders may cumulate their votes for candidates in
nomination. An affirmative vote of a majority of the shares present and voting
at the meeting is required for approval of all items being submitted to the
shareholders for their consideration. An automated system administered by the
Company's transfer agent tabulates the votes. Abstentions and broker non-votes
are each included in the determination of the number of shares present and
voting. Each is tabulated separately. Abstentions are counted in tabulations of
the votes cast on proposals presented to shareholders, whereas broker non-votes
are not counted for purposes of determining whether a proposal has been
approved.
REVOCABILITY OF PROXIES
Any person giving a proxy in the form accompanying this Proxy Statement has
the power to revoke it at any time before its exercise. It may be revoked by
filing with the Secretary of the Company an instrument of revocation or by the
presentation at the meeting of a duly executed proxy bearing a later date. It
also may be revoked by attendance at the meeting and election to vote in
person.
SOLICITATION
The Company will bear the entire cost of preparing, assembling, printing and
mailing this Proxy Statement, the accompanying proxy and any additional
material which may be furnished to shareholders. Copies of solicitation
material will be furnished to brokerage houses, fiduciaries and custodians to
forward to beneficial owners of stock held in the names of such nominees. The
solicitation of proxies will be made by the use of the mails and through direct
communication with certain shareholders or their representatives by officers,
directors and employees of the Company, who will receive no additional
compensation therefor. The Company has engaged Corporate Investor
Communications, Inc. ("CIC") to solicit proxies and distribute materials to
brokerage houses, banks, custodians and other nominee holders. The Company will
pay CIC $6,000 for these services.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD
COMPENSATION OF DIRECTORS--STANDARD ARRANGEMENTS. Directors who were not
otherwise employed by the Company were paid an annual retainer of $26,000
during fiscal 1993 and received an additional fee of $1,200 for attendance at
each meeting of the Board of Directors, as well as $900 for attendance at each
meeting of a committee of the Board. Directors who are employed by the Company
receive a fee of $1,200 for attendance at each meeting of the Board of
Directors but are not compensated for attendance at meetings of committees of
the Board. A non-employee director serving as a committee chairman receives an
additional $3,000 per year. Non-employee directors may elect to receive stock
options in place of the $26,000 annual retainer fee pursuant to the Company's
1987 Director Option Plan. Directors are reimbursed for any expenses attendant
to Board membership.
COMPENSATION OF DIRECTORS--OTHER ARRANGEMENTS. In addition to the standard
arrangements described above, each non-employee director receives $5,000 per
year in deferred compensation under the Company's Independent Director Deferred
Compensation Program (the "Independent Director Program"). The purpose of the
Independent Director Program is to encourage independent directors of the
Company to continue to provide services that are considered essential to the
Company's progress and thus give them further incentive to continue as
directors of the Company. Directors of the Company who are not employees of the
Company or any subsidiary of the Company are eligible to participate in the
Independent Director Program. On March 1 of each year until an independent
director terminates his services with the Company for any reason, the Company
credits $5,000 to a reserve fund to provide deferred compensation for the
director. The money allocated is credited with interest compounded semi-
annually. Upon termination of the independent director's services with the
Company, the entire amount then allocated to the reserve fund for such
director, including all accrued interest, will be paid in a lump sum to the
director, or a designated beneficiary if termination of services is due to
death. If a director terminates services before the last day of February of any
year, the amount of deferred compensation and interest payable to the director
will be prorated to reflect the number of whole months of service performed by
the director in that year.
2
BOARD OF DIRECTORS--During fiscal 1993 there were six meetings of the Board
of Directors.
AUDIT COMMITTEE--The Company's Audit Committee consisted of four non-employee
directors in fiscal 1993: Shirley M. Hufstedler (Chair), Harold J. Haynes,
Donald E. Petersen and T.A. Wilson. The Audit Committee met three times in
fiscal 1993. The Audit Committee meets independently with the internal auditing
staff, with representatives of the Company's independent accountants and with
representatives of senior management. The committee reviews the general scope
of the Company's annual audit, matters relating to internal control systems and
the fee charged by the independent accountants. In addition, the Audit
Committee is responsible for reviewing and monitoring the performance of non-
audit services by the Company's auditors and for recommending the engagement or
discharge of the Company's independent accountants. The committee is also
responsible for monitoring the Company's compliance with the principles of the
Defense Industry Initiative.
EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE--In fiscal 1993, the
Company had an Executive Compensation and Stock Option Committee consisting of
five non-employee directors: Harold J. Haynes (Chair), John B. Fery, Donald E.
Petersen, Hicks B. Waldron and T.A. Wilson. The committee met five times in
fiscal 1993. The committee is responsible for approving and reporting to the
Board on the annual compensation for all officers, including salary, stock
options and stock appreciation rights. The committee is also responsible for
granting stock awards, stock options, stock appreciation rights and other
awards to be made under the Company's existing incentive compensation plans.
NOMINATING COMMITTEE--In fiscal 1993, the Company's Nominating Committee
consisted of six directors: Harold J. Haynes (Chair), John B. Fery, Shirley M.
Hufstedler, Paul F. Miller, Jr., David Packard and Lewis E. Platt. Mr. Packard
retired from the Board in September 1993. The Committee met once in fiscal
1993. The committee is responsible for proposing a slate of directors for
election by the shareholders at each annual meeting and for proposing
candidates to fill any vacancies on the Board. The committee will consider
candidates for Board membership proposed by shareholders who have complied with
the procedures described beginning on page 4. Any shareholder wishing to
nominate a candidate for director must follow such procedures.
EXECUTIVE COMMITTEE--The Company also has an Executive Committee, which in
fiscal 1993 consisted of three directors: Lewis E. Platt (Chair), Richard A.
Hackborn and William E. Terry. Pursuant to the Company's Amended By-Laws, the
Executive Committee has all the powers and authority of the Board of Directors
in the management of the business and affairs of the Company, except those
powers that, by law, cannot be delegated by the Board of Directors. The
Executive Committee met fourteen times during fiscal 1993.
3
EMPLOYEE BENEFITS COMMITTEE--In fiscal 1993, the Company's Employee Benefits
Committee consisted of seven directors: John B. Fery (Chair), Thomas E.
Everhart, Richard A. Hackborn, Walter B. Hewlett, George A. Keyworth II,
Condoleezza Rice and William E. Terry. Ms. Rice resigned from the Board in
September 1993. This committee met twice in fiscal 1993 and is generally
responsible for the supervision and management of the Company's employee
benefit plans.
INVESTMENT COMMITTEE--The Company's Investment Committee was composed of five
directors in fiscal 1993: Paul F. Miller, Jr. (Chair), David W. Packard,
Condoleezza Rice, Hicks B. Waldron and T.A. Wilson. Ms. Rice resigned from the
Board in September 1993. The Investment Committee, which met three times in
fiscal 1993, is responsible for the supervision of the investment of all assets
held by the Company's Deferred Profit-Sharing Plan, Supplemental Pension Plan
and other employee benefit funds.
BOARD REVIEW COMMITTEE--The Company's Board Review Committee consisted of ten
members in fiscal 1993, which included directors T. A. Wilson (Chair), Thomas
E. Everhart, Richard A. Hackborn, Harold J. Haynes, Walter B. Hewlett, George
A. Keyworth II, Paul F. Miller, Jr., David Packard, David W. Packard and Lewis
E. Platt. David Packard retired from the Board in September 1993. The committee
met three times in fiscal 1993 for the purpose of reviewing Board activities,
identifying means of making the Board more effective and revising the Board
committee structure. Having completed its mission, the committee was disbanded
in September 1993.
In fiscal 1993, all directors attended at least 75% of the meetings of the
Board and all committees of the Board of which they were members.
ELECTION OF DIRECTORS
The directors of the Company are elected annually to serve until the next
annual meeting of the shareholders and until their respective successors are
elected. All of the nominees, except Dr. Jean- Paul G. Gimon, Ms. Susan P. Orr
and Mr. Robert P. Wayman have served as directors since the last annual
meeting. Dr. Gimon and Ms. Orr have served as directors since September 1993.
Mr. Wayman has been a director since December 1, 1993. Proxies may be voted for
14 directors.
In the event a shareholder entitled to vote for the election of directors at
a meeting wishes to propose a candidate for consideration by the Nominating
Committee as a possible nominee for management's proposed slate of directors,
or such shareholder wishes to make a director nomination at a shareholder
meeting, then written notice of such shareholder's intent to make such
nomination must be given, either by personal delivery or by United States mail,
postage prepaid, to D. Craig Nordlund, Secretary, Hewlett-Packard Company, 3000
Hanover Street, Palo Alto, California 94304, not later than: (i) with respect
to the election to be held at an annual meeting of shareholders, 90 days in
advance of such meeting, and (ii) with respect to any election to be held at a
special meeting
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of shareholders for the election of directors, the close of business on the
seventh day following the date on which notice of such meeting is first given
to shareholders. Each such notice must set forth: (a) the name and address of
the shareholder who intends to make the nomination and of the person or persons
to be nominated, (b) a representation that such shareholder is a holder of
record of stock of the Company entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice, (c) a description of all arrangements or
understandings between such shareholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such shareholder, (d) such other information
regarding each nominee proposed by such shareholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission (the "Commission") if such nominee had been
nominated, or intended to be nominated by the Board of Directors, and (e) the
consent of each nominee to serve as a director of the Company if elected. The
chairman of a shareholder meeting may refuse to acknowledge the nomination of
any person not made in compliance with the foregoing procedure.
Biographical summaries and ages as of December 27, 1993 of individuals
nominated by the Board of Directors for election as directors appear on pages 5
through 8 of this Proxy Statement. Data with respect to the number of shares of
the Company's Common Stock beneficially owned by each of them, directly or
indirectly, as of that date, appears on pages 8 through 11 of this Proxy
Statement.
THOMAS E. EVERHART; AGE 61; PRESIDENT, CALIFORNIA INSTITUTE OF TECHNOLOGY
Dr. Everhart was elected a director of the Company in 1991. He has been
President of the California Institute of Technology since 1987. Dr.
Everhart is a director of General Motors Corporation. He also is a director
of KCET, a public television station in Los Angeles, and the Corporation
for National Research Initiatives.
JOHN B. FERY; AGE 63; CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, BOISE
CASCADE CORPORATION
Mr. Fery was elected a director of the Company in 1982. He assumed his
current post with Boise Cascade Corporation in 1978. Mr. Fery currently
serves as a director of Albertson's Inc., West One Bancorp and The Boeing
Company.
JEAN-PAUL G. GIMON; AGE 57; GENERAL REPRESENTATIVE IN NORTH AMERICA, CREDIT
LYONNAIS S.A.
Dr. Gimon was elected a director of the Company in September 1993. He has
been the General Representative in North America with Credit Lyonnais S.A.,
a major global banking institution based in France, since 1984. Dr. Gimon
is the son-in-law of Company co-founder William R. Hewlett and is a
brother-in-law of director Walter B. Hewlett. Dr. Gimon also serves on the
Board of Directors of the Belle Haven Land Company.
5
RICHARD A. HACKBORN; AGE 56; RETIRED EXECUTIVE VICE PRESIDENT, HEWLETT-PACKARD
COMPANY
Mr. Hackborn has been a director of the Company since November 1992. He
retired as a Company Officer on November 30, 1993. He had been Executive
Vice President, Computer Products Organization, since 1990 and was Vice
President and General Manager, Peripherals Group from 1984 until 1990.
HAROLD J. HAYNES; AGE 68; RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER, CHEVRON CORPORATION
Mr. Haynes was elected a director of the Company in 1981. He was Chairman
of the Board and Chief Executive Officer of Chevron Corporation from 1974
until his retirement in 1981. Mr. Haynes is currently a director of PACCAR,
Inc., Bechtel Group, Inc., Citicorp, Citibank, N.A. and The Boeing Company.
WALTER B. HEWLETT; AGE 49; SOFTWARE DEVELOPER
Mr. Hewlett was elected a director of the Company in 1987. He is an
independent software developer involved with computer applications in the
humanities. In 1990 Mr. Hewlett founded Merit Software Corporation, of
which he is President and a director. Merit Software is developing software
for research in the humanities. In 1984, he founded the Center for Computer
Assisted Research in the Humanities, for which he serves as Director. Mr.
Hewlett has been a trustee of The William and Flora Hewlett Foundation
since its founding in 1966 and is currently its Vice Chairman. Mr. Hewlett
is the son of Company co-founder William R. Hewlett and is a brother-in-law
of director Jean-Paul G. Gimon.
SHIRLEY M. HUFSTEDLER; AGE 68; PARTNER, HUFSTEDLER, KAUS & ETTINGER (ATTORNEYS)
Ms. Hufstedler became a director of the Company in 1982. She served as U.S.
Secretary of Education from 1979 to 1981 and was a judge on the U.S. Court
of Appeals, 9th Circuit, from 1968 to 1979. Ms. Hufstedler is a trustee of
the California Institute of Technology, the Aspen Institute and the
Carnegie Endowment for International Peace, and is a trustee emeritus of
the 9th Circuit Historical Society. She is a director of the MacArthur
Foundation, U S WEST, Inc. and Harman International Industries, Inc.
GEORGE A. KEYWORTH II; AGE 54; DISTINGUISHED FELLOW, HUDSON INSTITUTE (PUBLIC
POLICY RESEARCH INSTITUTE)
Dr. Keyworth became a director of the Company in 1986. Prior to assuming
his current position, he was Science Advisor to the President and Director
of the White House Office of Science and Technology Policy from 1981
through 1985. Prior to that time he was the Director
6
of the Experimental Physics Division at the Los Alamos Scientific
Laboratory. He also served as a member of the President's Commission on
Industrial Competitiveness from 1984 to 1985 and the National Commission on
Superconductivity from 1989 to 1990. Dr. Keyworth is also a director of
e.on Corporation, North Texas Research and Development Corp. and Novalink
Technologies, Inc. He holds various honorary degrees and is an honorary
professor at Fudan University in Shanghai, People's Republic of China.
PAUL F. MILLER, JR.; AGE 66; FOUNDING, NOW LIMITED PARTNER, MILLER, ANDERSON &
SHERRERD (INVESTMENT MANAGEMENT FIRM)
Mr. Miller was elected a director in 1984. He has been in his current
position with Miller, Anderson & Sherrerd since 1991. He was a general
partner of Miller, Anderson & Sherrerd from 1969 to 1991. Mr. Miller is a
director of The Mead Corporation, Rohm and Haas Company, SPS Technologies
and LTCB-MAS, a joint venture of Miller, Anderson & Sherrerd and Long-Term
Credit Bank of Japan. He also serves as a trustee of the University of
Pennsylvania, a member of the Board of Overseers of the Wharton School, a
trustee of The Ford Foundation, a trustee of the Colonial Williamsburg
Foundation and a director of the World Wildlife Fund.
SUSAN P. ORR; AGE 47; PRESIDENT, TECHNOLOGY RESOURCE ASSISTANCE CENTER
Ms. Orr became a director of the Company in September 1993. Since 1986 she
has been President and owner of the Technology Resource Assistance Center,
which provides computer consulting and software development services to
non-profit organizations. She was formerly an economist at the National
Institutes of Health and a senior programmer and project leader in Health
Computer Services at the University of Minnesota. Ms. Orr also serves as
President and a director of The David and Lucile Packard Foundation, and as
Vice President and director of The Packard Humanities Institute. She is the
daughter of Chairman Emeritus David Packard and is the sister of director
David W. Packard.
DAVID WOODLEY PACKARD; AGE 53; PRESIDENT, THE PACKARD HUMANITIES INSTITUTE AND
THE STANFORD THEATER FOUNDATION
Dr. Packard became a director of the Company in 1987. He also founded The
Packard Humanities Institute in that year for the development of technology
to support basic research in the humanities. In 1984, Dr. Packard founded
the Ibycus Corporation, which sells computer systems specially designed for
work with ancient languages, and has served as its Chairman and President
since its inception. Prior to founding Ibycus, he was a professor of
ancient Greek. He also serves on the boards of other non-profit
organizations, including The David and Lucile Packard Foundation. Dr.
Packard is the son of Chairman Emeritus David Packard and is the brother of
director Susan P. Orr.
7
DONALD E. PETERSEN; AGE 67; RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER, FORD MOTOR COMPANY
Mr. Petersen has served as a director of the Company since 1987. He was
Chairman of the Board of Directors and Chief Executive Officer of Ford
Motor Company from 1985 until his retirement in 1990. He served in a number
of capacities at Ford between 1949 and 1990. Mr. Petersen is also a member
of the Board of Directors of Dow Jones & Company, Inc. and The Boeing
Company. He is a member of the National Academy of Engineering, the
National Research Council Industry Advisory Board and the Science,
Technology and Economic Policy Board. He is also active in education
programs at Stanford University and the University of Washington in
engineering and manufacturing management.
LEWIS E. PLATT; AGE 52; CHAIRMAN OF THE BOARD, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND CHAIRMAN OF THE EXECUTIVE COMMITTEE OF THE COMPANY
Mr. Platt has served as a director of the Company, President and Chief
Executive Officer since November 1, 1992. The Board elected Mr. Platt to
succeed David Packard as Chairman on September 17, 1993. He was an
Executive Vice President from 1987 to 1992. Mr. Platt held a number of
management positions in the Company prior to becoming its President,
including managing the Computer Systems Organization from 1990 to 1992 and
the Computer Products sector from 1988 to 1990. He is a director of Molex
Inc. He also serves on the Cornell University Council and the Wharton
School Board of Overseers.
ROBERT P. WAYMAN; AGE 48; EXECUTIVE VICE PRESIDENT, FINANCE AND ADMINISTRATION
AND CHIEF FINANCIAL OFFICER OF THE COMPANY
Mr. Wayman was elected a director of the Company effective December 1,
1993. He has been an Executive Vice President since 1992, at which time he
assumed responsibility for administration. He has held a number of
financial management positions in the Company and was elected Vice
President and Chief Financial Officer in 1984. He serves as a member of the
Board of the Private Sector Council and of the Kellogg Advisory Board,
Northwestern University.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The Company is not aware of any person who, on December 27, 1993, was the
beneficial owner of 5% or more of the Company's outstanding Common Stock,
except for David Packard and William R. Hewlett. The following table sets forth
information concerning such ownership as of December 27, 1993. The table also
shows information concerning beneficial ownership by all directors, by each of
the executive officers named in the Summary Compensation Table beginning on
page 12 (the "Summary Compensation Table") and by all directors and executive
officers as a group. The number of shares beneficially owned by each director
or executive officer is determined under rules of the Securities and Exchange
Commission, and the information is not necessarily indicative of beneficial
8
ownership for any other purpose. Under such rules, beneficial ownership
includes any shares as to which the individual has the sole or shared voting
power or investment power and also any shares which the individual has the
right to acquire within 60 days of December 27, 1993 through the exercise of
any stock option or other right. Unless otherwise indicated, each person has
sole investment and voting power (or shares such powers with his or her spouse)
with respect to the shares set forth in the following table.
PERCENT
AMOUNT AND NATURE OF OF
BENEFICIAL OWNERSHIP(/1/) CLASS
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David Packard.............................. 37,034,242(/2/) 14.7%
1501 Page Mill Rd.
Palo Alto, CA 94304
William R. Hewlett......................... 22,164,938(/3/)(/4/) 8.8%
1501 Page Mill Rd.
Palo Alto, CA 94304
Thomas E. Everhart......................... 956(/5/) *
John B. Fery............................... 3,741(/6/) *
Jean-Paul G. Gimon......................... 50 Direct
3,156,098(/7/) Indirect 1.3%
Richard A. Hackborn........................ 114,201(/8/) *
Harold J. Haynes........................... 3,000 *
Walter B. Hewlett.......................... 152,890 Direct
2,844,590 Indirect(/9/) 1.2%
Shirley M. Hufstedler...................... 4,841(/1//0/) *
George A. Keyworth II...................... 1,010 Direct
1,000 Indirect(/1//1/) *
Paul F. Miller, Jr......................... 18,441(/1//2/) *
Susan P. Orr............................... 607,384 Direct
13,380,125 Indirect(/1//3/) 5.5%
David Woodley Packard...................... 413,494 Direct
13,401,245 Indirect(/1//4/) 5.5%
Donald E. Petersen......................... 3,046(/1//5/) *
Lewis E. Platt............................. 104,904(/1//6/) *
Willem P. Roelandts........................ 66,207 Direct(/1//7/) *
500 Indirect(/1//8/) *
William E. Terry........................... 172,828(/1//9/) *
Hicks B. Waldron........................... 6,845 *
T.A. Wilson................................ 2,441(/2//0/) *
Robert P. Wayman........................... 77,295(/2//1/) *
All Directors and Executive Officers as a
Group (29 persons)........................ 18,662,847(/2//2/)(/2//3/) 7.4%
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*Represents holdings of less than one percent.
(/1/Except)for Mr. Walter B. Hewlett, Dr. Jean-Paul G. Gimon, Ms. Susan P. Orr
and Dr. David W. Packard, who beneficially own 1.2%, 1.3%, 5.5% and 5.5%,
respectively, no current director beneficially owns more than 1% of the
Company's outstanding shares.
9
(/2/Includes)13,235,200 shares held by The David and Lucile Packard Foundation,
of which Ms. Susan P. Orr, Mr. David Packard and Dr. David W. Packard are
directors. As directors of the Foundation, they share voting and investment
power over these shares with the other Foundation directors. Ms. Orr, Mr.
Packard and Dr. Packard disclaim any beneficial interest in all shares
owned by the Foundation.
(/3/Includes)2,842,000 shares held by The William and Flora Hewlett Foundation,
of which Mr. William R. Hewlett, Mr. Walter B. Hewlett and the wife of Dr.
Jean-Paul G. Gimon are directors. As directors of the Foundation, they
share voting and investment power over these shares with the other
Foundation directors. Dr. Gimon and Messrs. William R. Hewlett and Walter
B. Hewlett disclaim any beneficial interest in all shares owned by the
Foundation.
(/4/Includes)385,080 shares held in a trust for Mr. William R. Hewlett's
grandchildren, of which Mr. Hewlett is a co-trustee. Mr. Hewlett disclaims
any beneficial interest in all shares owned by the trust.
(/5/Includes)356 shares which Dr. Everhart has the right to acquire within 60
days of December 27, 1993 through the exercise of options.
(/6/Includes)2,741 shares which Mr. Fery has the right to acquire within 60
days of December 27, 1993 through the exercise of options.
(/7/Includes)309,758 shares held by Dr. Gimon's wife, 4,340 shares held by his
children and 2,842,000 shares held by The William and Flora Hewlett
Foundation, of which Dr. Gimon's wife is a director. Dr. Gimon disclaims
any beneficial interest in all shares held by the Foundation.
(/8/Includes)101,320 shares which Mr. Hackborn has the right to acquire within
60 days of December 27, 1993 through the exercise of options.
(/9/Includes)2,270 shares held by Mr. Walter B. Hewlett as a custodian for his
children, 320 shares held by his wife, Esther B. Hewlett, and 2,842,000
shares held by The William and Flora Hewlett Foundation, of which Mr.
Hewlett is a director. Mr. Hewlett disclaims any beneficial interest in all
shares held by him as custodian, by his wife and by the Foundation.
(/1//Includes02,291/shares)which Ms. Hufstedler has the right to acquire within
60 days of December 27, 1993 through the exercise of options.
(/1//Includes11,000/shares)held by Dr. Keyworth's wife.
(/1//Includes22,741/shares)which Mr. Miller has the right to acquire within 60
days of December 27, 1993 through the exercise of options and an aggregate
of 700 shares held indirectly in trusts. Mr. Miller disclaims any
beneficial interest in all shares held by the trusts.
(/1//Includes3294/shares)held by Ms. Orr's son, 1,954 shares held by Ms. Orr as
custodian for her daughter, 5,500 shares held by her husband, 8,081 shares
held in a family trust, 129,296 shares held in a trust for her children,
of which trusts she is a trustee, and 13,235,200 shares held by the David
and Lucille Packard Foundation of which Ms. Orr is a director. She
disclaims any beneficial interest in all shares held by the Foundation.
10
(/1//Includes423,994/shares)held by Dr. Packard's wife, 4,674 shares owned by
his minor children, 129,296 shares held in trust for his children and
8,081 shares held in trust for his family. Also includes 13,235,200 shares
held by The David and Lucile Packard Foundation, of which Dr. Packard is a
director. Dr. Packard disclaims any beneficial interest in all of these
shares.
(/1//Includes5356/shares)which Mr. Petersen has the right to acquire within 60
days of December 27, 1993 through the exercise of options.
(/1//Includes667,000/shares)which Mr. Platt has the right to acquire within 60
days of December 27, 1993 through the exercise of options.
(/1//Includes744,100/shares)which Mr. Roelandts has the right to acquire within
60 days of December 27, 1993 through the exercise of options. Also
includes 10,000 shares which are restricted against transfer.
(/1//Includes8500/shares)held by Mr. Roelandts' children.
(/1//Includes9112,677/shares)which Mr. Terry has the right to acquire within 60
days of December 27, 1993 through the exercise of options.
(/2//Includes0441/shares)which Mr. Wilson has the right to acquire within 60
days of December 27, 1993 through the exercise of options.
(/2//Includes157,750/shares)which Mr. Wayman has the right to acquire within 60
days of December 27, 1993 through the exercise of options.
(/2//Includes2an/aggregate)of 525,144 shares which the executive officers and
directors have the right to acquire within 60 days of December 27, 1993
through the exercise of options. Also includes an aggregate of 48,000
shares which are restricted against transfer.
(/2//Includes3an/aggregate)of 16,361,552 shares held by executive officers and
directors in fiduciary capacities.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock to file with the
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. The Company believes
that during the fiscal year ended October 31, 1993, its officers, directors and
holders of more than 10% of the Company's Common Stock complied with all
Section 16(a) filing requirements, with the following exceptions. Alan D.
Bickell, a senior vice president of the Company, reported on a Form 5 two late
transactions from prior years. William R. Hewlett, director emeritus, had late
reports covering two transactions by a trust for his grandchildren for which he
serves as a trustee. The transactions were reported on Form 5. George A.
Keyworth II, director, has one late report covering a single transaction, which
was reported on Form 4. Hicks B. Waldron, director, reported one late
transaction on a subsequently filed Form 4. In making these statements, the
Company has relied upon the written representations of its directors and
officers.
11
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received by the Company's Chief
Executive Officer and the four remaining most highly paid executive officers
for the three fiscal years ended October 31, 1993.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS
----------------------- ---------------------
(A) (B) (C) (D) (E) (F) (G)
--- ---- --------- ------------- ---------- ---------- ------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL AWARD(S) OPTIONS/ COMPENSATION
POSITION YEAR SALARY($) BONUS($)(/1/) ($)(/2/) SARS(#) ($)(/3/)
------------------ ---- --------- ------------- ---------- ---------- ------------
Lewis E. Platt 1993 818,750 53,988 44,612 50,000 32,169
Chairman, President, Chief 1992 535,000 28,314 28,073 28,482 18,271
Executive Officer and 1991 480,000 22,407 -- 15,000 12,176
Chairman of the Executive
Committee
Richard A. Hackborn(/4/) 1993 695,833 45,937 37,817 35,000 27,810
Executive Vice President 1992 527,500 27,745 27,697 26,820 18,056
and Director 1991 447,500 20,872 -- 17,500 11,558
Robert P. Wayman 1993 550,000 36,401 28,911 20,000 22,592
Executive Vice President 1992 491,250 25,999 20,030 23,812 16,955
and 1991 442,500 20,666 -- 12,500 11,436
Chief Financial Officer
William E. Terry(/5/) 1993 543,750 36,024 28,522 10,000 22,419
Executive Vice President 1992 518,750 27,639 21,126 21,600 17,770
and Director 1991 500,000 23,400 -- 12,500 12,580
Willem P. Roelandts 1993 433,750 28,731 16,392 10,000 19,307
Senior Vice President 1992 405,000 21,464 10,112 12,122 14,492
1991 363,750 16,959 273,100 8,000 9,907
(See footnotes on following page)
12
FOOTNOTES TO SUMMARY COMPENSATION TABLE
(/1/The)amounts shown in this column reflect payments under the Company's cash
profit-sharing plan in which all employees of the Company participate.
(/2/The)amounts disclosed in this column represent the dollar values of the
Company's Common Stock that HP contributed in 1993 and 1992 under its
Employee Stock Purchase Plan (the "Stock Purchase Plan") as a match for
every two shares purchased by the named executive officers. The Stock
Purchase Plan is a broad-based plan that is available to all regular full-
time or part-time employees after one year of Company service. The matching
shares vest two years after the date of the Company's contributions, which
occur on a rolling fiscal quarter basis, and are subject to forfeiture
during the two-year period in the event of termination or certain other
events. The named officers receive non-preferential dividends on these
restricted shares. Restricted shares were not issued under the Stock
Purchase Plan in fiscal 1991.
At October 31, 1993, of the named executive officers only Mr. Roelandts
held restricted stock other than the 1993 and 1992 Stock Purchase Plan
shares described above. Mr. Roelandts held 10,000 shares with a value of
$736,300, based on the October 31, 1993 closing price of $73.63 per share.
He receives non-preferential dividends on such shares. The 10,000 shares
will vest in November 1995.
(/3/The)amounts disclosed in this column include:
(a) Company contributions of $8,146 in fiscal year 1993, $6,346 in fiscal
1992 and $4,063 in fiscal 1991, under HP's Deferred Profit Sharing
Plan, a defined contribution plan, on behalf of each of the named
executive officers.
(b) Company contributions of $2,998 in fiscal 1993, $2,909 in fiscal 1992
and $2,825 in fiscal 1991 under HP's Tax Saving Capital Accumulation
Plan, a defined contribution plan, on behalf of each of the named
executive officers.
(c) Company contributions of the following amounts in fiscal 1993, 1992 and
1991, respectively, under HP's Excess Benefit Retirement Plan, a
defined contribution plan; on behalf of Mr. Platt $20,996, $8,933 and
$5,259; Mr. Hackborn $16,621, $8,718 and $4,627; Mr. Wayman $11,431,
$7,683 and $4,531; Mr. Terry $11,208, $8,470 and $5,647; and Mr.
Roelandts $8,146, $5,220 and $3,002.
(d) Payment by the Company in fiscal 1993, 1992 and 1991, of premiums for
term life insurance on behalf of each of the named officers as follows:
Mr. Platt $29 in 1993, $83 in 1992 and $29 in 1991; Mr. Hackborn $45 in
1993, $83 in 1992 and $43 in 1991; Mr. Wayman $17 in each year; Mr.
Terry $67 in 1993, $45 in each of 1992 and 1991; and Mr. Roelandts $17
in each year.
(/4/Mr.)Hackborn retired on November 30, 1993.
(/5/)Mr. Terry retired on November 30, 1993.
13
OPTION/SAR GRANTS IN LAST FISCAL YEAR (/1/)
The following table provides information on option grants in fiscal 1993 to
the named executive officers.
GRANT DATE
INDIVIDUAL GRANTS VALUE
- -------------------------------------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES IN MARKET GRANT DATE
OPTIONS/SARS FISCAL EXERCISE PRICE EXPIRATION VALUE ON PRESENT
NAME GRANTED (#)(/2/) YEAR(/3/) ($/SHARE)(/4/) DATE GRANT DATE VALUE(/5/)
- ---- ----------------- ------------ -------------- ---------- ---------- ----------
Lewis E. Platt.......... 50,000 2.0% $44.06 Nov. 2002 $58.75 $1,349,000
Richard A. Hackborn..... 35,000 1.4% $44.06 Nov. 1996 $58.75 $ 844,550
Robert P. Wayman........ 20,000 0.8% $44.06 Nov. 2002 $58.75 $ 539,600
William E. Terry........ 10,000 0.4% $44.06 Nov. 1996 $58.75 $ 241,300
Willem P. Roelandts..... 10,000 0.4% $44.06 Nov. 2002 $58.75 $ 269,800
FOOTNOTES TO OPTION TABLE
(/1/No)stock appreciation rights were granted to executive officers in fiscal
1993.
(/2/These)shares become fully exercisable after five years. No portion is
exercisable before five years, except as described in footnote (5) below.
(/3/The)Company granted options representing 2,460,000 shares to employees in
fiscal 1993.
(/4/The)exercise price may be paid by delivery of already-owned shares, and the
withholding obligations related to exercise may be paid by offset of the
underlying shares, subject to certain conditions.
(/5/The)Company used a modified Black-Scholes model of option valuation to
determine grant date present value. The Company does not advocate or
necessarily agree that the Black-Scholes model can properly determine the
value of an option. The present value calculations for Mr. Hackborn and Mr.
Terry are based on a four-year option term due to their retirements on
November 30, 1993. Under the Company's 1990 Incentive Stock Plan, they have
three years from retirement to exercise their existing options.
Calculations for the other named executive officers are all based on a six-
year option term, which reflects the Company's experience that its options,
on average, are exercised within six years of grant. The terms of most
options, including those disclosed in the table, have a ten-year term.
Other assumptions used for the valuations are: interest rates of 4.8
percent for Mr. Hackborn and Mr. Terry and 5.1 percent for Mr. Platt, Mr.
Wayman and Mr. Roelandts; annual dividend yield of 1.5 percent; and
volatility of 35 percent. The resulting values are reduced by 12.5 percent
to reflect the Company's experience with forfeitures prior to exercise.
14
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES (/1/)
The following table provides information on option/SAR exercises in fiscal
1993 by the named executive officers and the values of such officers'
unexercised options/SARs at October 31, 1993.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT FISCAL THE-MONEY OPTIONS/SARS AT
SHARES YEAR-END FISCAL YEAR-END ($)(/2/)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
Lewis E. Platt.......... 14,246 462,527 63,250 89,732 4,688,723 6,651,833
Richard A. Hackborn..... 0 0 42,250 73,570 3,131,993 5,453,744
Robert P. Wayman........ 13,606 501,824 54,625 53,187 4,049,351 3,942,752
William E. Terry........ 24,923 1,100,503 71,702 40,975 5,315,269 3,037,477
Willem P. Roelandts..... 2,200 56,180 40,100 25,822 2,972,613 1,914,185
- ---------
(/1/No)SARs were held by any of the named executive officers during fiscal
1993.
(/2/Based)on fair market value of $74.13 on October 31, 1993.
PENSION PLANS
The table that follows shows the estimated annual benefits payable upon
retirement to Company employees in the United States under the Company's
Deferred Profit-Sharing Plan (the "Deferred Plan") and the Company's Retirement
Plan (the "Retirement Plan"), as well as the Company's Excess Benefit
Retirement Plan (the "Excess Benefit Plan").
ESTIMATED ANNUAL RETIREMENT BENEFITS(/1/)(/2/)
15 20 25 30
YEARS OF YEARS OF YEARS OF YEARS OF
HIGHEST FIVE YEAR AVERAGE COMPENSATION SERVICE SERVICE SERVICE SERVICE
- -------------------------------------- -------- -------- -------- --------
$ 400,000.................................. $ 87,961 $117,281 $146,602 $175,922
500,000.................................. 110,461 147,281 184,102 220,922
600,000.................................. 132,961 177,281 221,602 265,922
700,000.................................. 155,461 207,281 259,102 310,922
800,000.................................. 177,961 237,281 296,602 355,922
900,000.................................. 200,461 267,281 334,102 400,922
1,000,000.................................. 222,961 297,281 371,602 445,922
- ---------
(/1/Amounts)exceeding $115,641 would be paid pursuant to the Excess Benefit
Plan.
(/2/Effective)November 1, 1989, no more than $200,000 (as adjusted from time to
time by the Internal Revenue Service) of cash compensation may be taken
into account in calculating contributions under the Deferred Plan or in
calculating benefits payable under the Retirement Plan.
15
The compensation covered by the plans whose benefits are summarized in the
preceding table equals base pay. The covered compensation for each of the
executive officers named in the Summary Compensation Table is the highest five-
year average of the amounts shown in the "Salary" column of that table. For
each of these named executive officers, the current compensation covered by the
plan is at least 10% less than the aggregate compensation set forth in the
Summary Compensation Table.
Officers named in the Summary Compensation Table have been credited with the
following years of service as of October 31, 1993: Mr. Platt, 27 years; Mr.
Hackborn, 33 years; Mr. Wayman, 24 years; Mr. Terry, 36 years; and Mr.
Roelandts, 10 years. Mr. Roelandts has a total of 26 years of service to the
Company and its subsidiaries, and earned retirement benefits while an employee
of the Company's French and Belgian subsidiaries. The Company expects that,
under its policy governing international transfers, Mr. Roelandts' ultimate
retirement benefit will be determined in accordance with the U.S. plans whose
benefits are summarized in the table.
Retirement benefits shown are payable at age 65 in the form of a single life
annuity to the employee using the maximum offset allowance currently in effect
under Section 401 (1) of the Internal Revenue Code of 1986, as amended, to
compute the offset for such benefits under the plans. For purposes of
calculating the benefit, an employee may not be credited with more than 30
years of service.
OFFICERS EARLY RETIREMENT PLAN(/1/)
The following table shows the estimated annual benefits payable upon
retirement to HP officers in the United States under the Company's Officers
Early Retirement Plan.
15 20 25 30 35
YEARS OF YEARS OF YEARS OF YEARS OF YEARS OF
FINAL COMPENSATION SERVICE SERVICE SERVICE SERVICE SERVICE
- ------------------ -------- -------- -------- -------- --------
$ 400,000......................... $120,000 $140,000 $160,000 $180,000 $200,000
500,000......................... 150,000 175,000 200,000 225,000 250,000
600,000......................... 180,000 210,000 240,000 270,000 300,000
700,000......................... 210,000 245,000 280,000 315,000 350,000
800,000......................... 240,000 280,000 320,000 360,000 400,000
900,000......................... 270,000 315,000 360,000 405,000 450,000
1,000,000......................... 300,000 350,000 400,000 450,000 500,000
- ---------
(/1/Benefits)start no earlier than age 60, unless earlier benefits are approved
by the Board, and end upon reaching age 65. Annual benefits shown in the
table assume retirement at age 60.
16
Under the Officers Early Retirement Plan (the "Officers Plan"), officers may
retire at age 60, or earlier if approved by the Company's Board of Directors.
Under the Officers Plan, retiring officer receives a percentage of his annual
salary at retirement until age 65, at which time any benefits under the
Officers Plan terminate and standard retirement benefits begin. The percentage
of salary received by an officer retiring before age 65 is based on a formula
that includes age and years of service as factors.
The compensation covered by the Officers Plan is the final base rate of pay
(the "Final Base Rate") in effect on the retiring officer's last day of active
employment with the Company. The Final Base Rate for a retiring officer would
equal the rate used to determine the amount in the "Salary" column of the
Company's Summary Compensation Table. The compensation covered by the Officers
Plan for all of the named executive officers is at least 10% less than the
aggregate applicable compensation set forth in the Summary Compensation Table
for such officers.
The estimated credited years of service for each of the named executive
officers as of October 31, 1993, are as follows: Mr. Platt, 27 years; Mr.
Hackborn, 33 years; Mr. Wayman, 24 years; Mr. Terry, 36 years; and Mr.
Roelandts, 26 years.
Benefits shown are based upon retirement at age 60 and are computed on the
basis of annual payments ending when the individual reaches age 65. The
benefits are not subject to deduction for any offset amounts.
REPORT OF THE EXECUTIVE COMPENSATION
AND STOCK OPTION COMMITTEE
The Company applies a consistent philosophy to compensation for all
employees, including senior management. This philosophy is based on the premise
that the achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives. The Company strives to achieve
those objectives through teamwork that is focused on meeting the expectations
of customers and shareholders.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with business
objectives and performance, and to enable the Company to attract, retain and
reward executive officers whose contributions are critical to the long-term
success of the Company. The Company's compensation program for executive
officers is based on the same four principles that are applied worldwide to
compensation decisions for all employees of the Company:
. The Company pays competitively.
The Company is committed to maintaining a pay program that helps
attract and retain the best people in the industry. To ensure that pay
is competitive, the Company regularly compares its pay practices with
those of other leading companies and sets its pay parameters based on
this review.
17
. The Company pays for sustained performance.
Executive officers are rewarded based upon corporate performance,
business unit performance and individual performance. Corporate
performance and business unit performance are evaluated by reviewing
the extent to which strategic and business plan goals are met,
including such factors as profitability, performance relative to
competitors and timely new product introductions. Individual
performance is evaluated by reviewing organizational and management
development progress against set objectives and the degree to which
teamwork and Company values are fostered.
. The Company strives for fairness in the administration of pay.
The Company strives to compensate a particular individual equitably
compared to other executives at similar levels both inside the Company
and at comparable companies.
. The Company believes that employees should understand the performance
evaluation and pay administration process.
The process of assessing performance is as follows:
1. At the beginning of the performance cycle, the employee's direct
supervisor (the "evaluating manager") and the employee set and
agree upon objectives and key goals.
2. The evaluating manager gives the employee ongoing feedback on
performance.
3. At the end of the performance cycle, the manager evaluates the
accomplishment of objectives/key goals.
4. The manager compares the results to the results of peers within
the Company.
5. The evaluating manager communicates the comparative results to
the employee.
6. The comparative results affect decisions on salary and, if
applicable, stock options.
COMPENSATION VEHICLES
The Company has had a long and successful history of using a simple total
compensation program that consists of cash- and equity-based compensation.
Having a compensation program that allows the Company to successfully attract
and retain key employees permits it to provide useful products and services to
customers, enhance shareholder value, stimulate technological innovation,
foster teamwork, and adequately reward employees. The vehicles are:
CASH-BASED COMPENSATION
Salary
The Company establishes salary ranges for employees by reviewing the
aggregate of base salary and annual bonus for competitive positions in the
market. The Company surveys
18
approximately fifty companies, 50% of which are in the S&P High Technology
Composite Index (the "S&P High Tech Index"). The remaining 50% are other
"Fortune 100" companies which are included within the S&P 500 Index. These
companies are generally selected because they are similar to the Company in
one or more areas, such as having significant revenues derived from
manufacturing, a significant international presence or comparable
resources. Generally, the Company sets its competitive salary midpoint for
an executive officer position at the median level compared to those
companies which it surveys. The Company then creates a salary range based
on this midpoint. The range is designed to place an executive officer above
or below the midpoint, according to that officer's overall individual
performance. As described above, overall individual performance is measured
against the following factors: long-term strategic goals, short-term
business goals, profitability, the development of employees and the
fostering of teamwork and other Company values. Such long- and short-term
goals include market customer satisfaction, employee motivation and expense
management. Profitability measures used include earnings per share and
profit as a percent of revenue. In both setting goals and measuring the
performance of an executive officer, including the CEO and the other named
executive officers, against those goals, the Company takes into account the
performance of its competitors and general economic and market conditions.
None of the factors included in the Company's strategic and business goals
is assigned a specific weight. Instead, the Company recognizes that these
factors may change in order to adapt to specific business challenges that
may arise and changing economic and marketplace conditions.
The Company does not have an annual bonus plan.
Cash Profit-Sharing
The Company has a worldwide profit-sharing plan under which it
distributes to all employees, including executive officers, who have been
employed continuously for at least six months, twelve percent of its
profits before taxes and other adjustments. The Company believes that all
employees share the responsibility of achieving profits. Accordingly, it
shares a portion of these profits with all employees. The same profit-
sharing percentage applies to each employee worldwide, with the payment
determined by applying this percentage to the individual's salary level.
EQUITY-BASED COMPENSATION
Stock Option Program
The purpose of this program is to provide additional incentives to
employees to work to maximize shareholder value. The Company also
recognizes that a stock option program is a necessary element of a
competitive compensation package for its employees. The program utilizes
vesting periods to encourage key employees to continue in the employ of the
Company and encourages maintenance of a medium-term perspective. The
Company grants stock options annually to a broad-based population
representing approximately twelve percent of the total employee pool.
19
In determining the size of an option award for an executive officer, the
Committee primarily considers the "grant value" of the award and the
performance of the officer measured against the same performance criteria
used to determine salaries and, secondarily, the number of outstanding
unvested options held and the size of previous option awards. Options that
vest over time act as a retention device for key employees. The Company
does not assign specific weights to these items. The Company does not have
a policy that requires or encourages the Committee to qualify stock options
or restricted stock awarded to executive officers for deductibility under
Section 162(m) of the Internal Revenue Code of 1986, as amended. However,
the Committee does consider the net cost to the Company in making all
compensation decisions.
To determine its grant value guidelines for option awards, the Company
surveys the same group of companies that it surveys for salary purposes.
The Company compares an option's market value, as determined annually by
calculating a three-year rolling average of the Company's stock price, to
the cash component of compensation for a given executive position. Because
the Company does not have a bonus plan, it compares salary to a combination
of salary and bonus for its competitors. Based upon a survey of the cash
and equity components of compensation for comparable positions in the
market, the Company then determines what percentage of this competitive
compensation it believes should be represented by the value of an option
grant. In fiscal 1993, the Company used discounted options to achieve the
competitive compensation levels it determined to be necessary for a number
of key employees, including the executive officers named in the Summary
Compensation Table. These options do not vest for five years, and
accordingly are a form of medium-term compensation.
CEO COMPENSATION
Lewis E. Platt became President and Chief Executive Officer ("CEO") of the
Company on November 1, 1992, the beginning of the 1993 fiscal year. The Company
based Mr. Platt's 1993 compensation on the policies described above.
During the first ten months of fiscal 1993, and at all times when decisions
on salary and stock options for Mr. Platt were made, then-Chairman David
Packard was Mr. Platt's evaluating manager. Mr. Platt was the evaluating
manager for the other executive officers named in the Summary Compensation
Table on page 12 during fiscal 1993. Mr. Packard and Mr. Platt each discussed
with the Committee the performance of the executive officers who reported to
him, and made recommendations regarding salary and stock options.
In setting both the cash-based and the equity-based elements of Mr. Platt's
compensation, the Committee made an overall assessment of Mr. Platt's
leadership in achieving the Company's long-term strategic and business goals.
SALARY
Mr. Platt's base salary reflects a consideration of both competitive
forces and the Company's performance. The Company does not assign specific
weights to these categories.
20
Competitive Forces
The Company surveys total cash compensation for chief executive officers
at the same group of companies described under "Cash-based Compensation"
above. When setting CEO compensation, the Company believes that it is
especially relevant to survey additional companies that are not a part of
the S&P High Tech Index because of the possibility of a company outside one
industry recruiting a CEO from another industry. Based upon its survey, the
Company then determines a median around which it builds a competitive range
of compensation for the CEO. Applying this practice to Mr. Platt, given his
newness to the CEO position, the Committee set his initial salary as CEO
below the range for CEOs in the competitive market.
Performance
Subsequently, the Committee reviewed the Company's interim financial
results as compared to the results of some of its largest competitors
within the S&P High Tech Index. The results showed that the Company had
outperformed some of its largest competitors in terms of profitability and
percentage change in net revenue and net profit margin. Based upon this
review and the fact that Mr. Platt's salary level was below the competitive
market, the Company increased his annual salary to an amount within the low
end of the competitive market for CEOs.
STOCK OPTIONS
The Company follows the same policy described above to determine Mr.
Platt's option awards as it does for other executive officers. Stock
options are granted to encourage and facilitate personal stock ownership by
the executive officers and thus strengthen both their personal commitment
to the Company and a longer term perspective to their managerial
responsibilities. This component of an executive officer's compensation
directly links the officer's interests with those of the Company's other
shareholders.
In granting Mr. Platt a 50,000-share discounted option, the Committee
reviewed the grant value guidelines, evaluated his performance against the
criteria described above, considered his holdings of unvested option shares
and took into account the size of previous option awards to Mr. Platt and
to the Company's former CEO. This award was commensurate with option awards
to other CEOs at the companies surveyed. Furthermore, the vesting schedule,
under which no portion of the option will vest until five years from the
grant date, when it will vest in full, serves as an important retention
device.
COMPENSATION COMMITTEE
Harold J. Haynes, Chair
John B. Fery
Donald E. Petersen
Hicks B. Waldron
T.A. Wilson
21
PERFORMANCE GRAPH
Note: The stock price performance shown on the graph below is not necessarily
indicative of future price performance.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG HEWLETT-PACKARD COMPANY, THE S & P 500 INDEX
AND THE S & P HIGH TECH COMPOSITE INDEX
Measurement Period S&P S&P HIGH TECH
(Fiscal Year Covered) HEWLETT-PACKARD 500 INDEX COMPOSITE INDEX
- ------------------- --------------- --------- ---------------
Measurement Pt-
10/88 $100 $100 $100
FYE 10/89 $ 95 $126 $102
FYE 10/90 $ 52 $117 $ 90
FYE 10/91 $103 $156 $113
FYE 10/92 $117 $172 $114
FYE 10/93 $154 $197 $142
* $100 INVESTED ON 10/31/88 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING OCTOBER 31.
22
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following non-employee directors served on the Executive Compensation and
Stock Option Committee (the "Compensation Committee") of the Company's Board of
Directors during 1993: Harold J. Haynes (Chair), John B. Fery, Donald E.
Petersen, Hicks B. Waldron and T.A. Wilson. David Packard, who retired as
Chairman of the Board of Directors in September 1993, was an ex officio member
of all committees of the board to which he was not officially assigned,
including the Compensation Committee. Mr. Packard's ex officio status did not
entitle him to vote on matters submitted to committees on which he was only an
ex officio participant.
TRANSACTIONS WITH MANAGEMENT
During fiscal 1993 there were a number of transactions that occurred between
the Company and certain officers and directors. These are reported below. With
respect to each transaction, the Company has determined that the terms of each
arrangement were as fair as could have been obtained from unaffiliated persons.
BANKING TRANSACTIONS. The Company and certain of its wholly owned
subsidiaries and affiliates conduct normal banking transactions in the usual
course of business throughout the world with more than 100 banks and financial
institutions. These banking transactions included some or all of the following:
lines and letters of credit, borrowings, sales or purchases of commercial
paper, interest rate swaps and investment services for trusts maintained by
some of the Company's retirement plans. Included among the companies used by HP
are Citibank, N.A. and Credit Lyonnais. Mr. Haynes is a director of Citibank,
N.A., and Dr. Gimon is an officer of Credit Lyonnais. In the Company's opinion,
charges for services rendered by these institutions are commensurate with the
costs charged by other financial institutions. The Company may continue to use
both of these companies for certain services in fiscal 1994.
TRANSACTIONS WITH MONTEREY BAY AQUARIUM RESEARCH INSTITUTE. In fiscal 1987
the Company entered into a research contract with the Monterey Bay Aquarium
Research Institute (the "Institute"), a not-for-profit organization. The
Company provides equipment and services at a discount to the Institute in
connection with certain research being conducted by the Institute. In exchange,
the Company receives certain rights to the technology developed and access to
ongoing research projects. Chairman Emeritus David Packard is a director and
President of the Institute, as well as Chairman of the Monterey Bay Aquarium
Foundation. During fiscal 1993, the Institute purchased approximately $115,000
worth of equipment from the Company at discounts ranging from 30-50%. The
Institute may make additional purchases during fiscal 1994.
EQUIPMENT LOANS TO DIRECTORS. The Company has a program under which non-
employee directors of the Company may borrow certain HP personal computer
products for their own use.
23
Several directors participated in this program in fiscal 1993. The aggregate
fair rental value of equipment loaned to directors under this program in fiscal
1993 was approximately $133,000.
STOCK OPTION LOANS. Under the Company's stock option program, the Company
may, at its discretion, lend to an employee holding an option the funds to
exercise the option. Any such loans will bear interest at a rate adequate to
avoid the imputation of income under Sections 483 and 7872 of the Internal
Revenue Code of 1986, as amended. The loans may not exceed a fifteen-month
term. Only options granted to officers contain loan provisions. During fiscal
1993, Alan Bickell, a senior vice president of the Company, repaid in full a
1992 loan of $63,572, plus all interest due on such loan.
PROPOSAL TO AMEND THE TAX SAVING CAPITAL ACCUMULATION PLAN
On November 15, 1993, the Executive Committee of the Board of Directors (the
"Board") voted to amend and restate the Tax Saving Capital Accumulation Plan
effective November 1, 1993 ("TAXCAP").
The full text of the amended TAXCAP, which is incorporated herein by
reference, is available without charge by oral or written request to the
Company Secretary, Hewlett-Packard Company, 3000 Hanover Street, Palo Alto, CA
94304, telephone (415) 857-1501. A copy of the TAXCAP document will be sent by
first class mail to the requesting party within one business day of the receipt
of the request by the Company Secretary. The following summary of the principal
features of TAXCAP and the proposed amendments thereto is qualified entirely by
such reference.
PRINCIPAL FEATURES OF THE PLAN
The Company established TAXCAP effective January 1, 1983 to provide a
convenient way for employees to share in the ownership, earnings and growth of
the Company, thereby offering employees an additional incentive to continue
their careers with the Company and to provide the employees an opportunity for
regular savings for their retirement to supplement benefits provided under the
Company's retirement programs. TAXCAP and the Trust established thereunder is
intended to qualify as a stock bonus plan under section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and as an individual account plan
that permits each participant to exercise control over certain assets of the
plan pursuant to section 404(c) of the Employee Retirement Income Security Act
of 1974, as amended. In 1991, the Company hired Fidelity Investments
(Fidelity), a group of affiliated financial service companies, to be the full-
service provider for TAXCAP.
All regular full-time or regular part-time employees on the U.S. payroll
except employees in Puerto Rico are eligible to join TAXCAP. An eligible
employee may join TAXCAP on the first November 1, February 1, May 1 or August 1
that is one year after his or her original hire date.
24
An employee may also join on the first of any following month after the
employee has satisfied the eligibility requirements. On October 31, 1993,
approximately 43,000 employees were participating in TAXCAP out of
approximately 54,000 who were eligible to participate.
Under TAXCAP as in effect prior to November 1, 1993, a participant could
elect to have the Company defer one to six percent of the participant's pay
into his or her TAXCAP account through payroll deductions. Non-highly
compensated employees as defined in the Code could elect to have the Company
defer one to twelve percent of pay. For every $3 of the participant's
deferrals, the Company contributed an additional $1 to the participant's
account. A participant chose how to invest TAXCAP deferred contributions among
five options: four mutual funds from the Fidelity family of funds: Fidelity
Retirement Money Market Portfolio, Fidelity Intermediate Bond Fund, Fidelity
U.S. Equity Index Portfolio, and Fidelity Magellan Fund, plus the HP Stock
Fund.
Participants are 100 percent vested in the value of all funds contributed to
their accounts from the moment such funds are placed in participant accounts.
This includes participants' deferrals, the Company's contributions, rollover
contributions, and gains or losses. The trustee holds the assets for the
participants' exclusive benefit and they cannot be used for any other purpose.
The full value of a participant's TAXCAP account is payable when the
participant leaves the Company or dies. However, exceptions are made under the
following circumstances: (1) a participant may request an in-service hardship
withdrawal, or (2) after reaching age 59 1/2, a participant can withdraw all or
part of his or her account.
Participants can also borrow from their TAXCAP accounts. The maximum amount
available is 50 percent of the account balance (including outstanding loan
amounts) on the date of valuation less any loan balance outstanding. The total
of all loans is limited to $50,000 minus the highest loan balance outstanding
during the prior 12-month period. Loans are subject to a $1,000 minimum. No
more than two loans can be outstanding at any time.
Saving in TAXCAP reduces a participant's current income taxes. This is
because deferrals to a participant's TAXCAP account are made before federal and
most state income taxes are calculated. In addition, a participant does not pay
any taxes on amounts in his or her account as long as they remain in TAXCAP.
TAXCAP provides that the Board shall have the power to modify, amend or
terminate TAXCAP at any time. No amendment of TAXCAP will reduce the benefits
that any participant has accumulated before the date the amendment is adopted,
except as allowed by law. Under present law, the Pension Benefit Guaranty
Corporation does not insure the adequacy of trusts such as TAXCAP. Therefore,
benefits under TAXCAP are not insured.
PROPOSED AMENDMENT TO THE PLAN
The proposed amendment to TAXCAP modifies the Company contribution. The first
one percent, two percent and three percent of a participant's pay contributed
to TAXCAP receive a one hundred percent Company match. The next two percent of
a participant's pay receive a fifty percent
25
Company match. Participants may contribute more than five percent of pay on an
unmatched basis. Individuals considered "highly compensated" under the Code may
defer a maximum of eight percent of pay under TAXCAP. Other employees may defer
up to twelve percent of pay.
Participation in TAXCAP affects an employee's permitted participation level
in the Company's Employee Stock Purchase Plan ("ESPP"). The first five percent
of pay contributed to TAXCAP reduces the maximum participation level of ten
percent of pay otherwise permitted under the ESPP. Effective November 1, 1993,
a participant will be able to contribute five percent to ESPP even if the
participant also makes the maximum contribution to TAXCAP.
The amendments also provide two new investment funds under TAXCAP. Effective
November 1, 1993, the Fidelity Growth & Income Portfolio and the Fidelity
Contrafund are available, bringing the total to six Fidelity mutual funds plus
the HP Stock Fund.
CURRENT CONTRIBUTIONS AND FUTURE FUNDING OBLIGATIONS
The aggregate contributions of the Company to TAXCAP for the year ended
October 31, 1993 were approximately $37.3 million. Future Company contributions
will depend on employee participation levels and on Internal Revenue Code
limitations on Company contributions to qualified plans. All executive officers
as a group received an aggregate of $33,000 in Company contributions in fiscal
1993. Contributions made for each of the five individuals named on page 12 for
fiscal 1993 were as follows: Mr. Platt, $2,998; Mr. Wayman, $2,998; Mr.
Hackborn, $2,998; Mr. Terry, $2,998 and Mr. Roelandts, $2,998.
The Company's funding obligation for the TAXCAP's trust fund is determined by
employee participation and current salary levels. Because each participant will
determine the extent of his or her participation within the limits prescribed
by TAXCAP, it is difficult to estimate the Company's potential funding
liability. If all eligible employees participate so as to maximize the
Company's liability under TAXCAP, the Company's annual additional funding
liability due to the amendment of TAXCAP would be approximately $25.5 million.
At the same maximized participation level, the total annual additional Company
funding required for all current executive officers as a group for that period
would be approximately $66,000. Subject to the same assumptions, the Company's
approximate annual additional funding obligation with respect to the
individuals named in the table on page 12 would be as follows: Mr. Platt,
$6,000; Mr. Wayman, $6,000; and Mr. Roelandts, $6,000. Mr. Terry and Mr.
Hackborn retired on November 30, 1933, and accordingly will not be eligible for
future TAXCAP Company contributions.
The following table summarizes the estimated TAXCAP benefits available to the
named officers and the identified groups, using the assumptions described
above.
26
ESTIMATED AMENDED PLAN BENEFITS
TAX SAVING CAPITAL ACCUMULATION PLAN
NAME AND POSITION DOLLAR VALUE ($)
----------------- ----------------
Lewis E. Platt, Chairman, President and CEO.................... 9,000
Richard A. Hackborn(/1/), Executive Vice President............. 0
Robert P. Wayman, Executive Vice President..................... 9,000
William E. Terry(/1/), Executive Vice President................ 0
William P. Roelandts, Senior Vice President.................... 9,000
All Executive Officers as a group.............................. 117,000
All Employees, Including Non-Executive Officers, as a group.... 62,800,000
- ---------
(/1/Mr.)Hackborn and Mr. Terry retired on November 30, 1993, and accordingly
are not eligible for continued plan benefits.
BOARD RECOMMENDATION
The Board believes that TAXCAP benefits all shareholders by fostering good
relations with Company employees. The Board believes the amendments would
better enable most employees to meet the objective of having a comfortable and
secure retirement. The Board therefore recommends a vote by the shareholders
FOR approval of the amendments to TAXCAP.
REQUIRED APPROVAL
The favorable vote of a majority of the shares present and voting at the
annual meeting is required for approval of the amendments to TAXCAP.
SHAREHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
From time to time the shareholders of the Company submit proposals that they
believe should be voted upon by the shareholders. The Commission has adopted
regulations that govern the inclusion of such proposals in the Company's annual
proxy materials. All such proposals must be submitted to the Secretary of the
Company no later than September 15, 1994 in order to be considered for
inclusion in the Company's 1995 proxy materials.
APPROVAL OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of the Company's current
Audit Committee consisting of four outside directors, Ms. Hufstedler, Mr.
Haynes, Mr. Hewlett and Mr. Waldron, has appointed Price Waterhouse as the
Company's independent accountants to audit the
27
consolidated financial statements of the Company for the 1994 fiscal year.
Price Waterhouse served as the Company's independent accountants for the fiscal
year ended October 31, 1993, and during the course of that fiscal year they
were also engaged by the Company to provide certain tax and consulting
services.
The Board of Directors recommends that the shareholders vote FOR approval of
the appointment of Price Waterhouse as the Company's independent accountants
for the succeeding year. If the appointment is not approved, the Board will
select other independent accountants. Representatives of Price Waterhouse will
be present at the meeting to respond to appropriate questions from the
shareholders and will be given the opportunity to make a statement should they
desire to do so.
MATTERS NOT DETERMINED AT THE TIME OF SOLICITATION
The Board is not aware of any matters to come before the meeting other than
the election of directors, the proposed amendment to TAXCAP and the proposal to
approve the appointment of Price Waterhouse as the Company's independent
accountants for the succeeding year. If any other matter should come before the
meeting, then the persons named in the enclosed form of proxy will have
discretionary authority to vote all proxies with respect thereto in accordance
with their judgment.
INCORPORATION BY REFERENCE
As stated on page 24, the Company's amended and restated Tax Saving Capital
Accumulation Plan is incorporated by reference into this proxy statement.
VOTE OF PROXIES
All shares represented by duly executed proxies will be voted for the
election of the nominees named above as directors unless authority to vote for
the proposed slate of directors or any individual director has been withheld.
If for any unforeseen reason any of such nominees should not be available as a
candidate for director, the proxies will be voted in accordance with the
authority conferred in the proxy for such other candidate or candidates as may
be nominated by the Board of Directors. With respect to the proposals to
approve the amendments to the Tax Saving Capital Accumulation Plan and the
appointment of Price Waterhouse as the Company's independent accountants, all
such shares will be voted for or against, or not voted, as specified on each
proxy. If no choice is indicated, a proxy will be voted for the proposal to
amend the Tax Saving Capital Accumulation Plan and to approve Price Waterhouse
as the Company's independent accountants.
By Order of the Board of Directors
D. Craig Nordlund
Associate General Counsel and Secretary
Dated: January 20, 1994
28
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[HEWLETT-PACKARD LOGO]
5962-7118E
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EXECUTION COPY
--------------
HEWLETT-PACKARD COMPANY
-----------------------
TAX SAVING CAPITAL
------------------
ACCUMULATION PLAN
-----------------
As Amended and
Restated
Effective
November 1,
1993
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN 1
SECTION 2. ELIGIBILITY AND PARTICIPATION................................ 1
(a) Eligibility and Commencement of Participation........... 2
(i) General Rule..................................... 2
(ii) Rehired Employees................................ 3
(iii) Special Rule..................................... 4
(iv) Apollo Service Recognition....................... 4
(v) AOT Service Recognition.......................... 4
(vi) Avantek Service Recognition...................... 4
(vii) CMS Service Recognition.......................... 4
(b) Suspension.............................................. 4
(c) Termination of Participation............................ 5
SECTION 3. DEFERRED CONTRIBUTIONS....................................... 5
(a) Rate of Contributions................................... 5
(b) Selection and Change of Rate............................ 6
(c) Suspension of Contributions............................. 8
(d) Withholding............................................. 9
(e) Refund of Excess Deferrals.............................. 10
SECTION 4. REGULAR COMPANY CONTRIBUTIONS................................ 10
(a) Amount, Time and Form................................... 10
(b) Allocation.............................................. 11
SECTION 5. LIMITATION ON CONTRIBUTIONS.................................. 11
(a) General Limitation ..................................... 11
(b) Effect of Limitation.................................... 12
(c) Excess Contributions.................................... 12
(d) Special Definitions .................................... 12
(e) Combined Limitation on Benefits and
Contributions .......................................... 14
SECTION 6. ACCOUNTS AND VALUATION....................................... 14
(a) Accounts................................................ 14
(b) Valuation of Accounts................................... 18
SECTION 7. INVESTMENT OF ACCOUNTS....................................... 18
(a) Investment Funds........................................ 18
(i) The Short Term Income Fund....................... 18
(ii) The Bond Fund.................................... 19
(iii) The Equity Index Fund............................ 19
(iv) The Growth and Income Fund....................... 19
(v) The Magellan Fund................................ 20
(vi) The Contrafund................................... 20
(vii) The Stock Fund................................... 20
(viii) The Loan Fund.................................... 21
(b) Investment Directions................................... 21
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Page
----
(c) Reinvestment Directions................................. 22
(d) No Investment Directions................................ 23
(e) Limitations on Telephone Instructions to the
Trustee Pursuant to Section 7(b)........................ 23
SECTION 8. VESTING...................................................... 23
SECTION 9. DISTRIBUTION OF PLAN BENEFITS................................ 23
(a) Amount and Form of Distribution......................... 23
(b) Time of Distribution.................................... 24
(c) Required Beginning Date................................. 25
SECTION 10. WITHDRAWALS.................................................. 26
(a) Age Fifty-Nine and One-Half............................. 26
(b) Hardship Withdrawals.................................... 27
SECTION 11. LOANS........................................................ 29
(a) Eligibility for Loans................................... 29
(b) Amount of Loans......................................... 30
(c) Terms of Loans.......................................... 30
(d) Source of Loans......................................... 31
(e) Withholding and Application of Loan Payments............ 33
(f) Security and Default.................................... 34
(g) Maximum Number of Loans................................. 34
SECTION 12. GENERAL PROVISIONS........................................... 35
(a) Participant Statement................................... 35
(b) No Assignment of Rights................................. 35
(c) Plan Mergers............................................ 37
(d) No Right in Trust Fund or to Employment................. 37
(e) Competency to Handle Benefits........................... 37
(f) False or Erroneous Statements........................... 38
(g) Effect of Re-Employment on Payment of Plan Benefit...... 38
(h) Effect of Subsequent Changes in Plan.................... 38
(i) Governing Law........................................... 39
(j) Beneficiary............................................. 39
(k) Lost Participant or Beneficiary......................... 40
(l) Rollover From Qualified Plan............................ 40
(m) Rollover From IRA....................................... 41
(n) Return of Contributions................................. 42
(o) Voting Rights........................................... 43
(p) Insider Trading Restrictions............................ 43
SECTION 13. FIDUCIARY RESPONSIBILITIES AND PLAN ADMINISTRATION........... 43
(a) Named Fiduciary for Plan Administration................. 43
(b) Named Fiduciary for Management of Plan Assets........... 44
(c) Service in Several Fiduciary Capacities................. 44
-2-
Page
----
(d) Duties and Responsibilities of the Plan
Administrator........................................... 44
(e) Delegation of Fiduciary Responsibilities................ 45
SECTION 14. FUNDING POLICY AND METHOD.................................... 45
(a) Contributions........................................... 45
(b) Expenses of the Plan.................................... 46
(c) Cash Requirements....................................... 46
(d) Independent Accountant.................................. 47
SECTION 15. CLAIMS PROCEDURE............................................. 47
(a) Claims for Benefits..................................... 47
(i) No Payment Without Claim......................... 47
(ii) Effect of Late Claim............................. 47
(iii) Prescribed Forms; Address...................... 48
(b) Denial of Claims........................................ 48
SECTION 16. REVIEW PROCEDURE............................................. 49
(a) Appointment of Review Panel............................. 49
(b) Right to Appeal......................................... 50
(c) Form of Request for Review.............................. 50
(d) Time for Review Panel Action............................ 50
(e) Review Panel Decision................................... 51
(f) Rules and Procedures.................................... 52
(g) Exhaustion of Remedies.................................. 52
SECTION 17. AMENDMENT AND TERMINATION OF THE PLAN........................ 52
(a) Future of the Plan...................................... 52
(b) Limitation on Amendments................................ 53
(c) Termination of the Plan................................. 53
(d) Obligations Upon Termination of the Plan................ 53
(e) Allocation of Trust Fund Upon Termination of the Plan... 54
SECTION 18. DEFINITIONS.................................................. 54
SECTION 19. EXECUTION.................................................... 61
APPENDIX A TOP-HEAVY PROVISIONS
APPENDIX B LIMITATIONS ON CONTRIBUTIONS
APPENDIX C AVANTEK PARTICIPATION
APPENDIX D AOT PARTICIPATION
APPENDIX E CMS PARTICIPATION
APPENDIX F DIRECT TRANSFER PROVISIONS
-3-
HEWLETT-PACKARD COMPANY TAX SAVING
------- ------- ------- --- ------
CAPITAL ACCUMULATION PLAN
------- ------------ ----
As Amended and Restated Effective November 1, 1993
-- ------- --- -------- --------- ----------------
SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN.
------- - ------------- --- ------- -- --- ----
The Hewlett-Packard Company Tax Saving Capital Accumulation Plan was
established effective January 1, 1983, and was last amended and restated
effective November 1, 1993 (unless otherwise noted herein), to read as set forth
herein. The purposes of the Plan are to provide a convenient way for Eligible
Employees to share in the ownership, earnings and growth of the Company, thereby
offering the Eligible Employees an additional incentive to continue their
careers with the Participating Companies and to provide the Eligible Employees
an opportunity for regular savings for their retirement to supplement benefits
provided under the Participating Companies' retirement programs. The Plan
together with the Trust established hereunder is intended to qualify as a stock
bonus plan under section 401(a) of the Code and as an individual account plan
which permits each Participant to exercise control over certain assets of the
Plan pursuant to section 404(c) of ERISA. The Plan is subject to change to meet
applicable rules and regulations of the Internal Revenue Service and the United
States Department of Labor. The Company retains the right, as provided in
Section 17, to amend or terminate the Plan at any time. Certain capitalized
terms used in the text of the Plan are defined in Section 18 in alphabetical
order. Certain rules
-1-
which will become effective only if the plan becomes a "topheavy plan" (as
defined in section 416 of the Code) are set forth in Appendix A to the Plan.
The rules regarding the administration of the discrimination tests under
sections 401(k) and 401(m) of the Code are set forth in Appendix B to the Plan.
Any special rules applicable to Accounts which, in whole or in part, derive from
the plan of an entity acquired by the Company may be set forth in Appendices to
the Plan adopted by the Company. The Appendices will indicate whether their
provisions are supplemental to or exclusive of the provisions of the Plan. Any
and all decisions involving the interpretation of the Plan's provisions,
including but not limited to, eligibility, contributions, vesting, investments,
valuations, distributions, withdrawals and loans, shall be made by the Company
in its sole discretion.
SECTION 2. ELIGIBILITY AND PARTICIPATION.
------- - ----------- --- -------------
(a) Eligibility and Commencement of Participation.
(i) General Rule. Any individual who was a Participant in
the Plan on October 31, 1993 and who is an Eligible Employee on
November 1, 1993 shall continue to participate in accordance with the
terms of the Plan. Each other Eligible Employee may commence
participation in the Plan on the later of:
(A) The November 1, February 1, May 1 or August 1 coinciding
with or next following the date which is one year after the date
(which shall be deemed to be the
-2-
first day of the Quarter if the actual date services are first
performed for Covered Compensation is the first business day of the
Quarter) he or she first performed any services for compensation for a
member of the Affiliated Group; or
(B) As soon as administratively practicable following the date
he or she becomes an Eligible Employee.
(ii) Rehired Employees. If a former Employee is reemployed by any
member of the Affiliated Group, he or she may commence or recommence
participation in the Plan on the later of:
(A) The November 1, February 1, May 1 or August 1 coinciding
with or next following the date which is one year after the date
(which shall be deemed to be the first day of the Quarter if the
actual date services are first performed for Covered Compensation is
the first business day of the Quarter) he or she first performed any
services for compensation for a member of the Affiliated Group; or
(B) As soon as administratively practicable following the date
he or she becomes an Eligible Employee following reemployment.
-3-
(iii) Special Rule. Solely for purposes of making a rollover to the
Plan pursuant to Section 12(l) or 12(m), an individual shall automatically
commence participation in the Plan on the date he or she becomes an
Eligible Employee.
(iv) Apollo Service Recognition. Service credited under the Apollo
Capital Accumulation Plan ("ACAP"), shall be recognized hereunder for
purposes of this Section 2(a).
(v) AOT Service Recognition. Service credited under the AOT 401(k)
Salary Savings Plan (the "AOT Plan") shall be recognized hereunder for
purposes of this Subsection 2(a).
(vi) Avantek Service Recognition. Service credited under the
Avantek, Inc. Profit-Sharing Investment Plan (the "Avantek Plan") shall be
recognized hereunder for purposes of this Subsection 2(a).
(vii) CMS Service Recognition. Service credited under the Colorado
Memory Systems, Inc. Profit Sharing 401(k) Plan, as in effect on March 31,
1993, (the "CMS Plan"), shall be recognized hereunder for purposes of this
Subsection 2(a).
(b) Suspension. A Participant's participation in the Plan shall be
suspended for any period during which he or she:
(i) Is on a formal leave of absence without pay authorized by the
Company;
-4-
(ii) Is on military leave, in accordance with the Company's policy
with respect to such leaves; or
(iii) Ceases to qualify as an Eligible Employee but remains an
Employee.
Participants shall also be suspended for at least twelve months after receipt of
a hardship distribution under Section 10(b) of the Plan.
Notwithstanding any other provision of the Plan to the contrary, a
Participant shall not make any Deferred Contributions nor receive any
allocation of Regular Company Contributions with respect to any period of
suspension. However, during any such period, the Participant's Accounts shall
continue to share in the income, gains, losses and expenses of the Trust Fund,
and such Participant may continue to make investment directions pursuant to
Section 7 hereof.
(c) Termination of Participation. An individual shall cease to be a
Participant as of the date he or she ceases to be an Employee, unless the
individual is entitled to benefits hereunder, in which event he or she shall
cease to be a Participant on the earlier of the date of his or her death or the
date no further amount is payable to the individual hereunder. However, such a
Participant shall cease to be eligible to make investment directions pursuant to
Section 7 hereof as of the date he or she ceases to be an Employee.
SECTION 3. DEFERRED CONTRIBUTIONS.
------- - -------- -------------
(a) Rate of Contributions. Each Participant whose participation is
not suspended may make Deferred Contributions
-5-
to the Plan at a rate equal to any whole percentage of the Participant's Covered
Compensation during such Plan Year not to exceed eight percent (8%); provided,
however, that at no time may the aggregate rate of the Participant's Deferred
Contributions to the Plan (which are eligible to receive Regular Company
Contributions pursuant to Section 4) and contributions to the Hewlett-Packard
Company Stock Purchase Plan exceed ten percent (10%) of the Participant's
Covered Compensation. The Company may increase the eight percent (8%) limit
(but not to exceed twelve percent (12%), and subject to the combined plan limit
of the immediately preceding sentence) for Participants who have Covered
Compensation not in excess of a dollar limit established by the Company with
reference to the dollar limit set forth in section 414(q)(1)(C) of the Code.
Participants will receive advance written notice of their maximum permissible
deferral percentage and the dollar limit, and the Company may increase or
decrease these factors with respect to future Deferred Contributions at any
time. All Deferred Contributions shall be deemed to be employer contributions
to the Plan and a Participant's election to commence making Deferred
Contributions shall constitute an election (for Federal tax purposes and,
wherever permitted, for state and local tax purposes) to have his or her taxable
compensation reduced by the amount of all Deferred Contributions.
(b) Selection and Change of Rate.
(i) Each Participant may elect to commence making Deferred
Contributions by providing information
-6-
to the Company through TABS. Such election shall take effect as of the
first day of a payroll period as soon as administratively practicable
following the date the information is provided; provided, however, that if
a former Participant is reemployed by a Participating Company as an
Eligible Employee or if an Employee is in a suspension status described in
Section 2(b) on the date he or she would otherwise commence participation
in the Plan, he or she may commence making Deferred Contributions as soon
as administratively practicable on or after the day he or she is rehired or
is no longer in suspension status, as applicable, provided he or she
provides the requisite information to the Company through TABS.
(ii) A Participant may change the rate of his or her Deferred
Contributions at any time. Any such change shall be effective as soon as
administratively practicable following the date the Participant provides
advance notice to the Company through TABS.
(iii) Notwithstanding the foregoing provisions of this Section 3, in
order to maintain the qualified status of the Plan under section 401(a) of
the Code, or to preserve the status of Deferred Contributions as employer
contributions under section 401(k) of the Code, at any time in a Plan Year
the Company may reduce the maximum whole percentage at which Deferred
Contributions will be made to the Plan by a Partici-
-7-
pant during the remainder of the Plan Year, or the Company may require that
such a Participant discontinue all Deferred Contributions for the
remainder of the Plan Year. Such a reduction or discontinuance of Deferred
Contributions may be applied selectively to individual Participants or to
particular classes of Participants, as the Company may determine. Upon the
close of each Plan Year, or on such earlier date as the Company may
determine, any reduction or discontinuance made pursuant to this Section
3(b)(iii) shall cease to apply to the Participant until the Company again
determines that a reduction or discontinuance of Deferred Contributions is
necessary or desirable for the Participant. In addition to requiring a
prospective reduction or discontinuance of Deferred Contributions, the
Company may distribute to any Participant such portion of the Deferred
Contributions that he or she has already contributed for the Plan Year,
plus any income or losses, as the Company determines to be necessary to
ensure that the actual deferral percentages meet one of the tests provided
in Appendix B.
(c) Suspension of Contributions.
(i) A Participant may suspend all Deferred Contributions at any time
by giving notice to the Company through TABS. Such suspension shall take
effect as of the end of a payroll period as soon as
-8-
administratively practicable following the date the notice is given.
(ii) A Participant who has voluntarily suspended Deferred
Contributions may resume such Deferred Contributions as of the first day of
the Quarter following the first Quarter such contributions are suspended
and as soon as administratively practicable following the date the
Participant provides advance notice to the Company through TABS.
(iii) A Participant's Deferred Contributions shall automatically
terminate upon the termination of the Participant's employment by the
Affiliated Group.
(d) Withholding. Deferred Contributions shall be withheld from the
Participant's Covered Compensation through regular payroll deductions.
Effective with respect to Deferred Contributions withheld on and after August 1,
1993, all Deferred Contributions shall be paid to the Trustee as soon as
reasonably practicable following the end of the payroll period in which they are
withheld and shall be invested pursuant to Section 7 at or about the end of the
payroll period in which they are withheld. The Participating Companies may
make Deferred Contributions in either cash or, in the case of Deferred
Contributions to be invested in the Stock Fund, Stock. In determining the
amount of Deferred Contributions for any Plan Year, Stock contributed for such
Plan Year shall be valued at the closing price of Stock as quoted on the New
York Stock Exchange on the Payday (or the next preceding trading day if the
Payday is not a
-9-
trading day) with respect to the payroll period for which the contribution is
made.
(e) Refund of Excess Deferrals. Excess deferrals (as defined in
section 402(g)(2)(A) of the Code) shall be handled in accordance with
Appendix B.
SECTION 4. REGULAR COMPANY CONTRIBUTIONS.
------- - ------- ------- -------------
(a) Amount, Time and Form. The Participating Companies shall make
Regular Company Contributions to the Plan for each Quarter, out of Profits,
in an amount equal to the sum of (i) one hundred percent (100%) of the
Deferred Contributions of each Participant made to the Plan for such Quarter,
up to the first three percent (3%) of Covered Compensation, by Participants
who are eligible for an allocation of Regular Company Contributions for such
Quarter, as determined under Section 4(b), plus (ii) fifty percent (50%) of
the Deferred Contributions of each Participant made to the Plan for such
Quarter, for the next two percent (2%) of Covered Compensation, by Participants
who are eligible for an allocation of Regular Company Contributions for such
Quarter, as determined under Section 4(b). The Regular Company Contributions
for each Quarter shall be paid to the Trustee as soon as reasonably practicable
at or about the end of such Quarter. Regular Company Contributions may be made
in either cash or, in the case of Regular Company Contributions to be invested
in the Stock Fund, Stock. In determining the amount of Regular Company
Contributions for any Plan Year, Stock contributed for such Plan Year shall be
valued at the closing price of Stock as quoted on the New York Stock Exchange
on the last
-10-
Payday (or the next preceding trading day if the Payday is not a trading day)
with respect to the Quarter for which the contribution is made.
(b) Allocation. The Regular Company Contributions for each Quarter
shall be allocated among the Company Contribution Accounts of all Participants
who are Employees on the Company's last business day of such Quarter in a manner
that is consistent with the matching rates established in Section 4(a);
provided, however, that a Participant who ceases to be an Employee during such
Quarter because of such Participant's death or termination of employment at or
after age fifty-five (55) with fifteen (15) or more years of service, as
determined under the Hewlett-Packard Company Retirement Plan, shall be entitled
to an allocation of Regular Company Contributions for such Quarter in a manner
that is consistent with the matching rates established in Section 4(a). The
Plan shall be administered in accordance with Appendix B which may result in the
refund of Regular Company Contributions and any income or losses attributable
thereto to certain Participants.
SECTION 5. LIMITATION ON CONTRIBUTIONS.
------- - ---------- -- -------------
(a) General Limitation. In no event shall the Annual Additions (as
defined in Section 5(d)(i) below) allocated to any Participant for any
Limitation Year (as defined in Section 5(d)(iii) below) exceed the lesser of:
(i) Thirty thousand dollars ($30,000) or, if greater, twenty-five
percent (25%) of the dollar
-11-
limitation in effect under section 415(b)(1)(A) of the Code; or
(ii) Twenty-five percent (25%) of the Participant's Total Compensation
(as defined in Section 5(d)(ii) below) for such Limitation Year.
(b) Effect of Limitation. If the limitations described in Section
5(a) above would be exceeded with respect to any Participant for any Limitation
Year, the Annual Additions allocated to the Participant for such Limitation Year
shall be reduced by reducing the components of such Annual Additions, as
necessary, in the order in which they are listed in the definition of Annual
Additions in Section 5(d)(i) below.
(c) Excess Contributions. The amount of any Deferred Contributions
and Regular Company Contributions for a Limitation Year which may not be
allocated to a Participant because of the limitations described above shall be
held unallocated for such Limitation Year and shall be allocated to the extent
permitted by such limitations to such Participant in the succeeding Limitation
Year. If such limitations would be exceeded with respect to the Participant in
the succeeding Limitation Year by the allocation of such amount, such amount
shall be held unallocated and allocated to the extent permitted by the
limitations to such Participant in succeeding Limitation Years.
(d) Special Definitions. For purposes of Section 5, the following
definitions shall apply:
(i) "Annual Additions" means the sum of the following:
-12-
(A) Deferred Contributions allocated to a Participant's Deferred
Contribution Accounts for a Limitation Year;
(B) Regular Company Contributions Allocated to a Participant's
Regular Company Contribution Accounts for a Limitation Year; plus
(C) Any employer contributions or forfeitures allocated to the
Participant for the Limitation Year under any other defined
contribution plan of the Company or a Subsidiary to which section 415
of the Code applies.
(ii) "Total Compensation" means, at the discretion of the Company, any
one of the definitions of compensation described in subparagraphs (i), (ii)
or (iii) of subsection 1(j) of Appendix B, received by the Participant from
the Company and each Subsidiary for the Limitation Year. Any definition of
Total Compensation shall be used consistently during each Limitation Year.
A Participant's Total Compensation shall not exceed the amount specified in
section 401(a)(17) of the Code.
(iii) "Limitation Year" means each consecutive twelve (12) month period
commencing November 1 and ending October 31.
-13-
(e) Combined Limitation on Benefits and Contributions. Except as
otherwise permitted under ERISA or the Tax Equity and Fiscal Responsibility Act
of 1982, the sum of a participant's defined benefit plan fraction and defined
contribution plan fraction shall not exceed one (1.0) with respect to any Plan
Year. For purposes of this Section 5(e) the terms "defined benefit plan
fraction" and "defined contribution plan fraction" shall have the meaning given
to those terms by section 415(e) of the Code and the regulations thereunder. If
a Participant would exceed the foregoing limitation, the Participant's benefits
under the Hewlett-Packard Company Retirement Plan or under any other qualified
defined benefit plan maintained by the Company or a Subsidiary shall be reduced
as necessary to allow the Participant's Annual Additions to equal the maximum
permitted by Section 5(a) above.
SECTION 6. ACCOUNTS AND VALUATION.
------- - -------- --- ---------
(a) Accounts. The following Accounts, as appropriate, shall be
maintained for a Participant:
(i) A "Regular Company Contribution Short Term Income Account"
consisting of each Participant's share of Regular Company Contributions
which the Participant has directed to be invested in the Short Term Income
Fund;
(ii) A "Regular Company Contribution Bond Account" consisting of each
Participant's share of Regular Company Contributions which the Participant
has directed to be invested in the Bond Fund;
-14-
(iii) A "Regular Company Contribution Equity Index Account" consisting
of each Participant's share of Regular Company Contributions which the
Participant has directed to be invested in the Equity Index Fund;
(iv) A "Regular Company Contribution Growth and Income Account"
consisting of each Participant's share of Regular Company Contributions
which the Participant has directed to be invested in the Growth and Income
Fund;
(v) A "Regular Company Contribution Magellan Account" consisting of
each Participant's share of Regular Company Contributions which the
Participant has directed to be invested in the Magellan Fund;
(vi) A "Regular Company Contribution Contrafund Account" consisting of
each Participant's share of Regular Company Contributions which the
Participant has directed to be invested in the Contrafund;
(vii) A "Regular Company Contribution Stock Account" consisting of each
Participant's share of Regular Company Contributions which the Participant
has directed to be invested in the Stock Fund;
(viii) A "Deferred Contribution Short Term Income Account" consisting of
each Participant's Deferred Contributions which the Participant has
directed to be invested in the Short Term Income Fund;
(ix) A "Deferred Contribution Bond Account" consisting of each
Participant's Deferred Contributions
-15-
which the Participant has directed to be invested in the Bond Fund;
(x) A "Deferred Contribution Equity Index Account" consisting of each
Participant's Deferred Contributions which the Participant has directed to
be invested in the Equity Index Fund;
(xi) A "Deferred Contribution Growth and Income Account" consisting of
each Participant's Deferred Contributions which the Participant has
directed to be invested in the Growth and Income Fund;
(xii) A "Deferred Contribution Magellan Account" consisting of each
Participant's Deferred Contributions which the Participant has directed to
be invested in the Magellan Fund;
(xiii) A "Deferred Contribution Contrafund Account" consisting of each
Participant's Deferred Contributions which the Participant has directed to
be invested in the Contrafund;
(xiv) A "Deferred Contribution Stock Account" consisting of each
Participant's Deferred Contributions which the Participant has directed to
be invested in the Stock Fund;
(xv) A "Rollover Short Term Income Account" consisting of each
Participant's rollover contributions which the Participant has directed to
be invested in the Short Term Income Fund;
-16-
(xvi) A "Rollover Bond Account" consisting of each Participant's
rollover contributions which the Participant has directed to be invested in
the Bond Fund;
(xvii) A "Rollover Equity Index Account" consisting of each
Participant's rollover contributions which the Participant has directed to
be invested in the Equity Index Fund;
(xviii) A "Rollover Growth and Income Account" consisting of each
Participant's rollover contributions which the Participant has directed to
be invested in the Growth and Income Fund;
(xix) A "Rollover Magellan Account" consisting of each Participant's
rollover contributions which the Participant has directed to be invested in
the Magellan Fund;
(xx) A "Rollover Contrafund Account" consisting of each Participant's
rollover contributions which the Participant has directed to be invested in
the Contrafund;
(xxi) A "Rollover Stock Account" consisting of each Participant's
rollover contributions which the Participant has directed to be invested in
the Stock Fund; and
(xxii) A "Loan Account" consisting of an amount equal to the outstanding
principal and accrued inter-
-17-
est under the Participant's promissory note(s) held in the Loan Fund.
(b) Valuation of Accounts. A Participant's interest in each Account
shall be represented by units of participation. Each Account (other than a Loan
Account) shall be adjusted as of each Valuation Date by the Trustee to reflect
any change in the unit value of the Account since the immediately preceding
Valuation Date. The unit value of the Account shall be based on the fair market
value of the Account, appropriately adjusted by the Trustee for any realized or
unrealized investment income, gains, losses and expenses. A Participant's
number of units shall be adjusted to reflect any withdrawals or loans pursuant
to Section 10 or 11, or the establishment of an account for an alternate payee
pursuant to Section 12(b), from the Participant's Accounts. The valuation of
units of participation will be based on values as of the close of business on
each Valuation Date, and all transactions under the Plan will be based on this
valuation.
SECTION 7. INVESTMENT OF ACCOUNTS.
------- - ---------- -- --------
(a) Investment Funds. The Trust Fund shall be composed of the "Short
Term Income Fund," the "Bond Fund," the "Equity Index Fund," the "Growth and
Income Fund," the "Magellan Fund," the "Contrafund," the "Stock Fund," and the
"Loan Fund." The Funds shall be invested and reinvested as follows:
(i) The Short Term Income Fund. The Short Term Income Fund is the
Fidelity Money Market Trust which seeks to obtain as high a level of
current income as
-18-
is consistent with the preservation of capital and liquidity, and is
invested in high quality money market instruments of all kinds. The Short
Term Income Fund is more fully described in the Fidelity Money Market Trust
prospectus, as updated from time to time.
(ii) The Bond Fund. The Bond Fund is the Fidelity Intermediate Bond
Fund which seeks a high level of current income and is primarily invested
in high and upper medium grade fixed income obligations. The Bond Fund is
more fully described in the Fidelity Intermediate Bond Fund prospectus, as
updated from time to time.
(iii) The Equity Index Fund. The Equity Index Fund is the Fidelity
U.S. Equity Index Portfolio which seeks to equal the total return
performance of common stock publicly traded in the United States, and is
invested in a portfolio that attempts to duplicate the composition of the
Standard & Poor's Stock Price Index of 500 Stocks. The Equity Index Fund
is more fully described in the Fidelity U.S. Equity Index Portfolio
prospectus, as updated from time to time.
(iv) The Growth and Income Fund. The Growth and Income Fund is the
Fidelity Growth and Income Portfolio which seeks long-term capital growth
and reasonable level of current income by generally investing in companies
which offer capital appreciation with
-19-
dividend payments. The Growth and Income Fund is more fully described in
the Fidelity Growth and Income Portfolio prospectus, as updated from time
to time.
(v) The Magellan Fund. The Magellan Fund is the Fidelity Magellan
Fund which seeks capital appreciation and is primarily invested in domestic
and international common stocks and securities convertible into common
stock. The Magellan Fund is more fully described in the Fidelity Magellan
Fund prospectus, as updated from time to time.
(vi) The Contrafund. The Contrafund is the Fidelity Contrafund which
seeks capital appreciation by generally investing in the common stocks and
convertible securities of undervalued companies undergoing positive
changes and turnarounds. The Contrafund is more fully described in the
Fidelity Contrafund Portfolio prospectus, as updated from time to time.
(vii) The Stock Fund. The Stock Fund shall be invested and reinvested
primarily in Stock, except that small amounts held in the Stock Fund may be
invested and reinvested in interest-bearing short-term debt obligations,
money market instruments, savings accounts or similar investments. The
Stock Fund shall consist of all Stock Fund investments held by the Trustee
and all cash held by the Trustee which is derived from dividends, interest
or other income from Stock Fund investments, Deferred Contributions,
-20-
Regular Company Contributions and contributions pursuant to Sections 12(l)
and 12(m) to be invested in the Stock Fund, and proceeds from the sale or
redemption of Stock Fund investments. The cash shall be invested as
provided in this Paragraph (vii).
In the absence of any direction by the Company pursuant to Section
13(b)(iii), the Trustee shall select the time, price, amount and manner of
a purchase of Stock for the Stock Fund and any broker, dealer or private
seller through or from which a purchase of Stock is made. The Trustee in
its discretion may purchase Stock that was distributed to a Participant or
Beneficiary at the closing price of Stock as quoted on the New York Stock
Exchange for the business day on which the Trustee receives a written offer
to sell. No commission shall be paid in connection with any such
purchase.
(viii) The Loan Fund. The Loan Fund shall be invested solely in
promissory notes which are the obligations of Participants pursuant to
Section 11. Cash transferred from other Funds pursuant to Section 11(d)
shall be applied to fund loans to Participants, and cash derived from
principal and interest payments shall be transferred to other Funds
pursuant to Section 11(e).
(b) Investment Directions. A Participant may direct the investment
of the Participant's combined Deferred Contribu-
-21-
tions, share of Regular Company Contributions and contributions pursuant to
Sections 12(l) and 12(m) among the Short Term Income Fund, the Bond Fund, the
Equity Index Fund, the Growth and Income Fund, the Magellan Fund, the Contrafund
and the Stock Fund, through TABS at the time of enrollment or reenrollment. The
Participant may change the Participant's investment directions for his or her
combined Deferred Contributions, Regular Company Contributions and contributions
pursuant to Sections 12(l) and 12(m) on a daily basis by direct telephonic
instructions to the Trustee. A Participant shall specify the percentage of
the Participant's combined Deferred Contributions, Regular Company Contributions
and contributions pursuant to Sections 12(l) and 12(m) to be invested in the
Short Term Income Fund, the Bond Fund, the Equity Index Fund, the Growth and
Income Fund, the Magellan Fund, the Contrafund and the Stock Fund. Investment
elections shall be in such minimum percentage amounts with respect to each Fund
as permitted by the Company.
(c) Reinvestment Directions. On a daily basis, by direct telephonic
instruction to the Trustee, a Participant may direct the reinvestment of the
Participant's combined Rollover Account, Deferred Contribution Account and
Regular Company Contribution Account among the Short Term Income Fund, the Bond
Fund, the Equity Index Fund, the Growth and Income Fund, the Magellan Fund, the
Contrafund and the Stock Fund. A Participant shall specify the reinvestment
amounts of the Participant's combined Rollover Account, Deferred Contribution
Account and Regular Company Contribution Account to be invested in the Short
-22-
Term Income Fund, the Bond Fund, the Equity Index Fund, the Magellan Fund, the
Growth and Income Fund, the Contrafund and the Stock Fund. Reinvestment
directions shall be in such minimum dollar or percentage amounts as permitted by
the Trustee.
(d) No Investment Directions. A Participant's combined Deferred
Contributions, share of Regular Company Contributions and contributions pursuant
to Sections 12(l) and 12(m) shall be invested in the Short Term Income Fund in
the event that the Participant fails to direct their investment.
(e) Limitations on Telephone Instructions to the Trustee Pursuant to
Section 7(b). Telephone instructions to the Trustee pursuant to Section 7(b)
will not be processed on each Payday and the Valuation Date immediately
preceding such Payday, and shall be subject to the terms and conditions of the
Trust Agreement and Schedule G thereof.
SECTION 8. VESTING.
------- - -------
A Participant's interest in his or her Accounts shall be one hundred
percent (100%) vested and nonforfeitable at all times.
SECTION 9. DISTRIBUTION OF PLAN BENEFITS.
------- - ------------ -- ---- --------
(a) Amount and Form of Distribution. A Participant's Plan Benefit
with respect to his or her Deferred Contribution Account, Regular Company
Contribution Account and Rollover Account, if any, shall consist of the cash and
equivalent shares of Stock credited to such Accounts on the first Valuation Date
immediately after the Payday following the date the Trustee
-23-
receives a claim from the Company pursuant to Section 15. In the event that the
Participant is deceased, distribution shall be made to his or her Beneficiary.
A Plan Benefit shall be paid in a lump sum distribution consisting of cash
except that a Participant may elect to have his or her Plan Benefit attributable
to the Stock Fund paid in whole shares of Stock, plus a check for any fractional
shares.
A Participant's or Beneficiary's election of a form of lump sum
distribution shall be filed with the Company at the time or after the
Participant ceases to be an Employee. If a Participant or Beneficiary fails to
elect a form of lump sum distribution at the time or after the Participant
ceases to be an Employee, the entire Plan Benefit shall be distributed in cash.
By written notice to the Company and with the Company's approval, a Participant
may also elect to have his or her entire Plan Benefit distributed in the form of
a direct transfer to an individual retirement account maintained by the Trustee,
subject to completion and submission of such written forms as required by the
Trustee.
(b) Time of Distribution.
(i) The following rules shall govern the time of distribution of the
Participant's lump sum distribution:
(A) If the amount of the Participant's Plan Benefit either does
not exceed $3,500 or exceeds $3,500 and the Participant has a loan
outstanding under Section 11 that has
-24-
not been repaid, the Participant's lump sum distribution shall be
distributed as soon as reasonably practicable following a Payday after
the Participant ceases to be an Employee;
(B) If the amount of the Participant's Plan Benefit exceeds
$3,500, and he or she does not have an outstanding loan under Section
11 that has not been repaid, the Participant's lump sum distribution
shall not be distributed until he or she has filed the prescribed form
with Company electing to receive the Plan Benefit. If the Participant
fails to file the prescribed form, the Participant's lump sum
distribution shall be distributed when the Participant attains age 65
(the "Normal Retirement Age").
(c) Required Beginning Date. Notwithstanding any other provision of
the Plan to the contrary, distribution of the Plan Benefit of a Participant
shall be made in cash not later than April 1 of the calendar year following the
calendar year in which the Participant attains age 70 1/2, whether or not the
Participant is an Employee at that time. The preceding sentence shall not apply
to any Participant who attains age 70 1/2 before January 1, 1988 and who is not
a "5-percent owner" (as defined in section 416 of the Code) at any time during
or after the Plan
-25-
Year ending within the calendar year in which the Participant attained age
66 1/2. If a Participant accrues an additional Plan Benefit after
distribution is made pursuant to this paragraph, the Plan Benefit that accrues
following the original distribution shall be distributed each year on or before
the following December 31 in the same form in which the original distribution
was paid.
SECTION 10. WITHDRAWALS.
------- -- -----------
(a) Age Fifty-Nine and One-Half. Upon giving notice to the Company
in the manner prescribed and satisfying the requirements of this Section 10(a),
a Participant may, with such frequency as may be established by the Company,
withdraw from his or her Regular Company Contribution Account, Deferred
Contribution Account and Rollover Account, if any (but not his or her Loan
Account), an amount in cash which is not more than the value of the
Participant's Accounts (other than his or her Loan Account) as of the date the
withdrawal was made, only if the Participant will have attained age fifty-nine
and one-half (59 1/2) at the time the withdrawal is to be made. All withdrawals
pursuant to this Section 10(a) shall be in a minimum amount of one thousand
dollars ($1,000.00) or, if less, the entire value (adjusted as provided in
Section 6(b)) of the Participant's Regular Company Contribution Account,
Deferred Contribution Account and Rollover Account as of the date the withdrawal
is made. The Participant's Accounts which funded the withdrawal shall be
adjusted to reflect the value of such Accounts as of
-26-
the date the Trustee liquidates such Accounts to fund the withdrawal.
(b) Hardship Withdrawals. Notwithstanding Subsection 10(a), a
Participant may in the event of a financial hardship, request a hardship
withdrawal. Such withdrawal shall not be less than one thousand dollars
($1,000) or one hundred percent (100%) of the limit in the immediately
succeeding sentence if less than one thousand dollars ($1,000). Hardship
withdrawals shall be limited to the value of the Participant's Deferred
Contribution Account, Regular Company Contribution Account and Rollover Account,
but shall not include, with respect to the period after December 31, 1988,
Regular Company Contributions or earnings on the Deferred Contribution Account
and Regular Company Contribution Account.
A distribution shall be on account of a financial hardship only if the
distribution is made on account of an immediate and heavy financial need and is
necessary to satisfy such financial need. The Company shall make its
determination regarding the propriety of specific hardship withdrawals based on
the Participant's written representations.
(i) The following shall constitute an immediate and heavy financial
need:
(A) Medical expenses described in Code section 213(d) incurred
by, or necessary to obtain medical care for, the Participant, the
Participant's spouse, or any dependents of the Participant (as defined
in Code section 152);
-27-
(B) Purchase or construction (excluding mortgage payments) of a
principal residence of the Participant;
(C) Payment of tuition and related educational fees for the next
12 months of post-secondary education for the Participant, his or her
spouse, children, or dependents;
(D) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence;
(E) The need to pay the funeral expenses of a family member;
(F) Anticipated federal and state income taxes and penalties
resulting from the hardship distribution. Any amounts necessary to
pay such taxes or penalties shall not exceed a uniform amount
determined by the Company in its sole discretion; or
(G) A financial need that has been identified as a deemed
immediate and heavy financial need in a ruling, notice or other
document of general applicability issued under the authority of the
Commissioner of Internal Revenue.
-28-
(ii) A distribution on account of an immediate and heavy financial
need shall be deemed necessary to satisfy such need only if:
(A) The amount withdrawn does not exceed the amount of the
immediate and heavy financial need;
(B) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently available
under all plans maintained by the Affiliated Group;
(C) The Participant's contributions to the Plan, and the
Company's Employee Stock Purchase Plan, will be suspended for at least
12 months after receipt of the hardship distribution; and
(D) The Participant may not make Deferred Contributions for the
Participant's taxable year immediately following the taxable year of
the hardship distribution in excess of the applicable limit under
section 402(g) of the Code for such next taxable year less the amount
of such employee's Deferred Contributions for the taxable year of the
hardship distribution.
SECTION 11. LOANS.
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(a) Eligibility for Loans. A Participant may elect to borrow from
his or her Regular Company Contribution Account, Deferred Contribution Account
and Rollover Account, if any;
-29-
provided, however, that a Participant shall not be eligible to elect to borrow
any amount under the Plan if he or she has an outstanding loan obligation under
the Plan that is in default or if he or she is (i) suspended pursuant to Section
2(b); (ii) an Employee who is eligible for and receiving benefits under the
Hewlett-Packard Company Employee Benefits Organization Income Protection Plan;
or (iii) an Employee not employed by a Participating Company on a regular basis.
(b) Amount of Loans. A Participant may elect to borrow from his
Accounts (other than his or her Loan Account) in the manner prescribed by the
Company. No loan shall be granted under the Plan to the extent that it would
cause the aggregate balance of all loans which a Participant has outstanding
under the Plan and under any other qualified plan maintained by a member of the
Affiliated Group to exceed an amount equal to the lesser of: (i) fifty thousand
dollars ($50,000.00), less the amount by which the highest aggregate balance has
been reduced by repayments during the 12-month period ending on the day before
the day on which the new loan is to be made, or (ii) fifty percent (50%) of the
value of all of the Participant's Accounts.
(c) Terms of Loans. All loans shall be on such terms and conditions
as the Company may determine, provided that all loans shall:
(i) Be made pursuant to a promissory note secured by fifty percent
(50%) of all of the Participant's Accounts;
-30-
(ii) Be amortized over twelve (12), twenty-four (24), thirty-six (36)
or forty-eight (48) months, as the Participant shall elect;
(iii) Bear interest at a rate equal to the prime interest rate as
published in the Western Edition of the Wall Street Journal, plus one-half
of one percent ( 1/2%), as of the last day of the month preceding the month
in which the loan is requested;
(iv) Provide for repayment in full on or before the date when
distribution of the Participant's Plan Benefit is to commence; and
(v) Be in an amount in cash of not less than one thousand dollars
($1,000).
(d) Source of Loans. The assets in a Participant's Accounts shall be
liquidated as necessary to fund the Participant's loan in the following order:
(i) The Rollover Short Term Income Account;
(ii) The Regular Company Contribution Short Term Income Account;
(iii) The Deferred Contribution Short Term Income Account;
(iv) The Rollover Bond Account;
(v) The Regular Company Contribution Bond Account;
(vi) The Deferred Contribution Bond Account;
(vii) The Rollover Equity Index Account;
-31-
(viii) The Regular Company Contribution Equity Index Account;
(ix) The Deferred Contribution Equity Index Account;
(x) The Rollover Growth and Income Account;
(xi) The Regular Company Contribution Growth and Income Account;
(xii) The Deferred Contribution Growth and Income Account;
(xiii) The Rollover Magellan Account;
(xiv) The Regular Company Contribution Magellan Account;
(xv) The Deferred Contribution Magellan Account;
(xvi) The Rollover Contrafund Account;
(xvii) The Regular Company Contribution Contrafund Account;
(xviii) The Deferred Contribution Contrafund Account;
(xix) The Rollover Stock Account;
(xx) The Regular Company Contribution Stock Account; and
(xxi) The Deferred Contribution Stock Account.
The Participant's Accounts which funded the loan shall be adjusted to reflect
the value of such Accounts as of the date the Trustee liquidates such Accounts
to fund the loan. The proceeds of the liquidation of the Participant's Accounts
shall be disbursed to the Participant.
-32-
(e) Withholding and Application of Loan Payments. Regular principal
and interest payments shall be made solely through irrevocable periodic payroll
deductions from the Participant's compensation from members of the Affiliated
Group. Principal and interest payments shall be made to the Trustee on each
Payday commencing approximately two weeks, but as soon as administratively
practicable, after the date a Participant receives his or her loan proceeds.
Prior to a period of suspension described in Section 2(b), the Company may
require a Participant to prepay principal and interest payments or may require
the Participant to deposit additional security acceptable to the Company with
the Plan in accordance with uniform and nondiscriminatory rules adopted by the
Company and incorporated herein by reference. Principal and interest payments
first shall be credited to the Participant's Loan Account (and any loss caused
by nonpayment of such loan shall be borne solely by such Account) and then shall
be transferred to the Participant's Rollover Account, Regular Company
Contribution Account and Deferred Contribution Account (in the reverse order in
which such Accounts provided funding for the loan) to be invested according to
the Participant's latest investment election under Section 7(b). A loan may be
prepaid in full effective as of the first Payday of the month following the
month in which payment is received by the Company in the form of a cashiers
check, money order or HP Credit Union Check or Draft. A prepayment check may be
returned to the Participant if it is received after the end of the month for
which the prepayment is
-33-
intended. No partial prepayments shall be permitted. A loan shall be deemed
repaid upon distribution of the Participant's Plan Benefit pursuant to Section
9.
(f) Security and Default. Prior to repayment, a promissory note
shall be considered in default in the event the borrower dies, terminates his or
her participation in the Plan, a payment is, or a series of payments are, not
made when due, the borrower files for relief under the United States Bankruptcy
Code, the loan becomes a deemed distribution under section 72(p) of the Code or
the Plan is terminated. In the event a default occurs and is not cured within
any grace period set forth in the promissory note, the full amount due under the
note shall become immediately due and payable. In such event, the Company, in
its sole discretion, shall take such actions as it deems necessary or
appropriate to cause the Plan to realize on its security for the loan. These
actions may include (without limitation) repaying the loan out of any Plan
Benefit then distributable or repaying the loan out of the proceeds of an
involuntary withdrawal from the Participant's Accounts, whether or not the
withdrawal would be permitted under Section 10 on a voluntary basis; provided
that an involuntary withdrawal from the Participant's Accounts shall be made
only in circumstances under which a withdrawal would not cause the Plan to
violate the requirements of sections 401(a) and 401(k) of the Code.
(g) Maximum Number of Loans. A Participant shall have no more than
two loans outstanding under the Plan at any time.
-34-
SECTION 12. GENERAL PROVISIONS.
------- -- ------- ----------
(a) Participant Statement. Each Participant who is an Eligible
Employee shall be given a general explanation of the Plan and, at least once in
each Plan Year, shall be furnished with a statement showing:
(i) The balance in his or her Accounts on the date as of which the
statement is provided;
(ii) The net change in the value of his or her Accounts since the
preceding statement date;
(iii) The amount of Deferred Contributions and Regular Company
Contributions allocated to his or her Accounts for the period for which the
statement is provided;
(iv) The cash value of his or her Accounts as of the first Payday
following the Quarter for which the statement is provided; and
(v) The status of his or her Loan Account, if applicable.
In the event that a statement is inaccurate because of a clerical error, the
Company shall have no responsibility to issue a corrected statement if the error
is discovered after the end of the Quarter in which the statement was issued.
(b) No Assignment of Rights. The interest and property rights of any
person in the Plan, in the Trust Fund or in any distribution to be made under
the Plan shall not be subject to option nor be assignable, either by voluntary
or involuntary assignment or by operation of law, including
-35-
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any act in violation hereof shall be void. Any payment pursuant to
a domestic relations order shall not constitute a violation of this section
12(b) if such order is determined to be a "qualified domestic relations order"
(as defined in section 414(p) of the Code). If the payment is made when the
Participant is no longer an Employee, the payment to the "alternate payee" (as
defined by section 414(p) of the Code) shall be valued pursuant to Section 9(a).
In addition, if requested, the Company shall make payment to an alternate payee
pursuant to a qualified domestic relations order even if the Participant has not
attained the "earliest retirement age" (within the meaning of section 414(p) of
the Code). Under these circumstances, the interest of an alternate payee in the
Participant's Plan Benefit shall be valued for purposes of distribution on the
first Valuation Date immediately after the Payday following the date the Trustee
receives notice of a claim for benefits from the Company pursuant to Section 15.
For all purposes under the Plan except Section 5, the value of a Participant's
Accounts shall not include the amount payable to an alternate payee pursuant to
a qualified domestic relations order. A separate account shall be established
for an alternate payee consistent with an approved qualified domestic relations
order at such time as the Company instructs the Trustee to establish such an
account, after which the alternate payee shall have reinvestment direction
rights provided in Section 7(c).
-36-
(c) Plan Mergers. Except as may be permitted under regulations
issued by the Secretary of the Treasury pursuant to sections 401(a)(12),
411(d)(6) and 414(l) of the Code, the Plan shall not merge or consolidate with,
nor transfer assets or liabilities to, any other plan unless each Participant
would receive a benefit under the Plan immediately after the merger,
consolidation or transfer (if the Plan then terminated) which is equal to or
greater than the benefit which he or she would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
terminated).
(d) No Right in Trust Fund or to Employment. No person shall have
any rights in or to the Trust Fund, or any part thereof, or under the Plan,
except as, and only to the extent, expressly provided for in the Plan. The
establishment of the Plan, the granting of benefits and any action of any member
of the Affiliated Group or any other person shall not be held or construed to
confer upon any person any right to be continued as an Employee nor, upon
dismissal, to confer any right or interest in the Trust Fund other than as
provided herein. No provision of the Plan shall restrict the right of any
member of the Affiliated Group to discharge any Employee at any time and for any
reason.
(e) Competency to Handle Benefits. If, in the opinion of the
Company, any person is unable to properly handle any property distributable to
such person under the Plan, the Company may make any reasonable arrangement for
the distribution of Plan benefits on such person's behalf that it determines
will
-37-
be beneficial to such person, including (without limitation) distribution to the
person's guardian, conservator, spouse, dependent or parent.
(f) False or Erroneous Statements. If any person makes any statement
which is false or erroneous, fails to state or furnish any material fact or
information or fails to correct any such information which has been previously
furnished to the Trustee, the Company or any other Participating Company, the
benefits payable with respect to such person shall be adjusted, if necessary,
upon the discovery of the accurate information. The amount of any payments
theretofore made in reliance on incorrect information shall be recalculated, if
necessary, and reasonable steps shall be taken to recover any overpayment, as
the Company may determine.
(g) Effect of Re-Employment on Payment of Plan Benefit. If a
Participant is re-employed by any member of the Affiliated Group before his or
her Plan Benefit has been distributed, distribution of his or her Plan Benefit
shall not be made prior to the termination of his or her employment following
re-employment.
(h) Effect of Subsequent Changes in Plan. All benefits to which any
Participant or Beneficiary may be entitled hereunder shall be determined under
the Plan as in effect when the Participant's employment terminates and shall not
be affected by any subsequent change in the provisions of the Plan, unless the
Participant is re-employed, in which case his or her benefit with respect to
employment following re-employment shall
-38-
be based on the provisions of the Plan in effect on the date his or her
employment by the Affiliated Group terminates following re-employment.
(i) Governing Law. This Plan shall be construed in accordance with
ERISA and, to the extent not preempted by ERISA, the laws of the State of
California.
(j) Beneficiary. By filing the prescribed form with the Company upon
commencement of participation, each Participant shall designate a person or
persons to be such Participant's "Beneficiary" to receive amounts payable under
the Plan in the event of the death of the Participant. Any designation by a
married Participant of a person other than his or her spouse as Beneficiary
shall be effective only if his or her spouse consents in writing to such
designation. Such consent shall acknowledge the effect of such designation and
shall be witnessed by a representative of the Company or a notary public. The
spouse may revoke such consent only in the event that the Participant changes
his or her Beneficiary designation. Subject to the foregoing, a Participant may
change his or her Beneficiary from time to time in accordance with procedures
established by the Company. If the Participant has not designated a
Beneficiary, or if the designated Beneficiary (or Beneficiaries) are not living
at the time any payment is to be made hereunder, then (i) the spouse of the
deceased Participant shall be his or her Beneficiary; or (ii) if the Participant
has no spouse living at the time of such payment, his or her then living
children shall be his or her Beneficiaries, in equal
-39-
shares; or (iii) if the Participant has neither a spouse nor children living at
the time of such payment, his or her then living parents shall be his or her
Beneficiaries, in equal shares; or (iv) if none of the individuals described in
(i) through (iii) are living at the time of such payment, his or her estate
shall be his or her Beneficiary.
(k) Lost Participant or Beneficiary. If the Company is unable to
locate a Participant or Beneficiary who is entitled to receive any property
which constitutes all or part of a Plan Benefit, then the Company may (but need
not) reallocate such property among other Participants. In the event that such
Participant or Beneficiary thereafter makes a claim for such property, the
Company shall reinstate such property (without income, gains or other
adjustment) by making a special contribution to the Plan as soon as reasonably
practicable after such claim is made. However, if any property which
constitutes all or part of a Plan Benefit would have been lost by reason of
escheat, then such property shall not be subject to reinstatement by the
Company.
(l) Rollover From Qualified Plan. With the consent of the Company an
Eligible Employee may contribute all or any part of an "eligible rollover
distribution" within the meaning of section 402(c)(4) of the Code to the Plan,
through a rollover in accordance with section 402(c) of the Code, including a
direct transfer in accordance with section 401(a)(31) of the Code and the
Regulations thereunder; provided, however, that such eligible rollover
distribution may be contributed to the
-40-
Plan only if (i) the contribution is paid entirely in the form and manner
prescribed by the Company, (ii) the Eligible Employee establishes to the
satisfaction of the Company that such distribution was an eligible rollover
distribution from a plan which, at the time of the distribution, met the
requirements of section 401 of the Code, and (iii) in the case of a rollover
that is not made in accordance with the direct transfer provisions of section
401(a)(31) of the Code, the contribution is made within sixty (60) days after
the Eligible Employee's receipt of the eligible rollover distribution. Any
amount contributed by an Eligible Employee pursuant to this Section 12(l) shall
be credited on a weekly basis to a separate account maintained for the Eligible
Employee, which shall be called a "Rollover Account."
(m) Rollover From IRA. With the consent of the Company an Eligible
Employee may, within sixty (60) days after the date of receipt of a distribution
from an individual retirement account which meets the requirements of section
408 and related sections of the Code, contribute all or any part of such
distribution to the Plan; provided, however, that all or any part of such
distribution may be contributed to the Plan only if (i) the distribution
represents the entire amount in such individual retirement account; (ii) no part
of the distribution is attributable to any source other than a "rollover
contribution," including a direct transfer made in accordance with the direct
transfer provisions of section 401(a)(31) of the Code, from an employees' trust
described in
-41-
section 401(a) of the Code which is exempt from tax under section 501(a) of such
Code; (iii) the contribution is paid entirely in the form and manner prescribed
by the Company; and (iv) the Eligible Employee establishes to the satisfaction
of the Company that the conditions set forth in (i), (ii) and (iii) above have
been met and such distribution was made from an individual retirement account
which, at the time of the distribution, met the requirements of section 408 and
related sections of the Code. Any amount contributed by an Eligible Employee
pursuant to this Section 12(m) shall be credited on a weekly basis to a separate
account maintained for the Eligible Employee, which shall be called a "Rollover
Account."
(n) Return of Contributions. Each contribution to the Plan by the
Participating Companies is expressly conditioned on its deductibility under Code
section 404. In the event a deduction for such contributions is disallowed in
whole or in part, the amount disallowed (reduced by any losses incurred with
respect to such amount) may be returned to the Participating Companies within
one (1) year after the disallowance of the deduction. In addition, if a
Participating Company makes any contribution because of a mistake of fact, then
the amount contributed because of the mistake (reduced by any losses incurred
with respect to such amount) may be returned to such Participating Company
within one (1) year after the contribution was made.
-42-
(o) Voting Rights. Voting rights of Participants with respect to
Stock shall be governed by the terms of the Trust Agreement.
(p) Insider Trading Restrictions. Notwithstanding any other
provision of the Plan to the contrary, any Participant who is also subject to
Section 16 of the Securities Exchange Act of 1934 shall not be allowed to direct
the investment of his or her Deferred Contributions, share of Regular Company
Contributions and contributions made pursuant to Sections 12(l) and 12(m) to the
Stock Fund until the Plan is approved by the Company's shareholders. Moreover,
any such Participant shall not be allowed to direct the reinvestment of his or
her combined Rollover Account, Deferred Contribution Account and Regular Company
Contribution Account into the Stock Fund until six months after the date the
Plan is approved by the Company's shareholders.
SECTION 13. FIDUCIARY RESPONSIBILITIES AND PLAN ADMINISTRATION.
------- -- --------- ---------------- --- ---- --------------
(a) Named Fiduciary for Plan Administration. The Company is the
named fiduciary which has the discretionary authority to control and manage the
operation and administration of the Plan, and is the "administrator" of the Plan
and the "plan sponsor" as such terms are used in ERISA. The Company shall make
such rules, regulations, interpretations and computations and shall take such
other action to administer the Plan as it may deem appropriate in its sole
discretion. In administering the Plan, the Company shall act in a
-43-
nondiscriminatory manner to the extent required by section 401 and related
sections of the Code and shall at all times discharge its duties with respect to
the Plan in accordance with the standards set forth in section 404(a)(1) of
ERISA.
(b) Named Fiduciary for Management of Plan Assets. The Company is
the named fiduciary with respect to the control and management of the assets of
the Plan only to the extent of (i) having the duty to appoint one (1) or more
trustees to hold the assets of the Plan in trust and to enter into a trust
agreement with each such trustee with respect to the assets held in trust
thereunder, (ii) having the authority to remove any trustee so appointed and to
appoint one (1) or more successor trustees, (iii) having the authority to select
any broker, dealer or private seller through or from which a purchase of Stock
is made, (iv) having the authority to appoint one or more Investment Managers
and to enter into a contract with each such Investment Manager with respect to
the management of such assets as are to be subject to the management of such
Investment Manager, and (v) having the duty to carry out the funding policy and
method as provided in Section 14.
(c) Service in Several Fiduciary Capacities. Nothing herein shall
prohibit any person or group of persons from serving in more than one fiduciary
capacity with respect to the Plan (including service both as Plan administrator
and trustee).
(d) Duties and Responsibilities of the Plan Administrator. The
duties and responsibilities of the Company under the Plan (which are not
delegated pursuant to Section 13(e))
-44-
shall be carried out on its behalf by its directors, officers, employees and
agents, acting in their capacities as directors, officers, employees, and agents
and not as individual fiduciaries. The Company may engage the services of such
persons or organizations to render advice or perform services with respect to
its duties and responsibilities under the Plan as it may determine to be
necessary or appropriate. Such persons or organizations may include, but shall
not be limited to, actuaries, attorneys, accountants, administrators and
consultants.
(e) Delegation of Fiduciary Responsibilities. In lieu of carrying
out any of its fiduciary responsibilities under the Plan (pursuant to Section
13(d)), the Company may delegate its fiduciary responsibilities (except "trustee
responsibilities" as defined in section 405(c)(3) of ERISA) to any person or
persons pursuant to a written contract with such other person which specifies
the fiduciary responsibilities so delegated. Except as provided in Section 16
(Review Procedure), however, the Company is specifically prohibited from
designating any of its directors, officers or employees as a fiduciary and from
delegating to any such individual any of the Company's fiduciary
responsibilities under the Plan.
SECTION 14. FUNDING POLICY AND METHOD.
------- -- ------- ------ --- ------
(a) Contributions. The Company shall cause the Participating
Companies to make Deferred Contributions and Regular Company Contributions
required pursuant to Sections 3 and 4.
-45-
(b) Expenses of the Plan. The Participating Companies shall pay all
expenses of the Plan, except such expenses as are paid out of the Trust Fund
pursuant to the Company's direction or the terms of the Trust Agreement. The
Company shall have complete and unfettered discretion to determine whether an
expense of the Plan or Trust shall be paid by the Participating Companies or out
of the Trust Fund, and this section 14(b) shall not be construed to require the
Participating Companies to pay any portion of the expenses of the Plan and Trust
that the Company has directed be paid from the Trust Fund. The Company's
discretion and authority to direct the Trust Fund to pay any reasonable expenses
of the Plan and Trust shall not be limited in any way by any prior decision or
act, whether repeated or sporadic, by the Company and other Participating
Companies to pay any or all expenses of the Plan and Trust.
(c) Cash Requirements. From time to time, the Company shall estimate
the benefits and administrative expenses to be paid out of the Trust Fund during
the period for which such estimate is made and shall also estimate the Deferred
Contributions and Regular Company Contributions to be made to the Plan during
such period by the Participating Companies. The Company shall inform the
Trustee of the estimated cash needs of the Plan during the period for which such
estimates are made. Such estimates shall be made on an annual, Quarterly,
monthly or other basis as the Company shall determine.
-46-
(d) Independent Accountant. The Company shall engage an independent
qualified public accountant to conduct such examinations and to render such
opinions as may be required by section 103(a)(3) of ERISA. The Company may
remove and discharge the person so engaged, but in such case it shall engage a
successor independent qualified public accountant to perform such examinations
and to render such opinions.
SECTION 15. CLAIMS PROCEDURE.
------- -- ------ ---------
(a) Claims for Benefits.
(i) No Payment Without Claim. Except for the cashout of Plan
Benefits pursuant to Sections 9(b) and (c), no Plan Benefit will be paid to
or on behalf of a Participant under the Plan until the Participant (or the
Participant's Beneficiary or an alternate payee) has filed a claim for
benefits with the Company which contains all information which the Company
may need to determine the amount of any payment due hereunder. If the
claim for benefits is in good form, the Company shall direct the Trustee to
distribute Plan Benefits as soon as administratively practicable after the
claim form is received.
(ii) Effect of Late Claim. If a properly completed claim for benefits
has not been filed at least ninety (90) days before the date as of which
payment of the Plan Benefit payable to or on behalf of a Participant is to
be made, the payment of such benefit may be delayed for administrative
reasons.
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(iii) Prescribed Forms; Address. All claims for benefits under the
Plan must be made in writing on the form(s) prescribed by the Company and
must be signed by the Participant or his or her Beneficiary, as
appropriate. All claims for (or inquiries concerning) benefits under the
Plan shall be submitted to the Company and shall be addressed as follows:
"Hewlett-Packard Company, Plan Administrator under the Hewlett-Packard
Company Tax Saving Capital Accumulation Plan, 3000 Hanover Street, Palo
Alto, CA 94304."
(b) Denial of Claims. In the event any claim for benefits or
application for a loan or withdrawal is denied, in whole or in part, the Company
shall notify the claimant of such denial in writing and shall advise the
claimant of his or her right to appeal the denial. Such written notice shall
set forth, in a manner calculated to be understood by the claimant, specific
reasons for the denial, specific references to the Plan provisions on which the
denial is based, a description of any information or material necessary for the
claimant to perfect his or her claim, an explanation of why such material is
necessary and an explanation of the Plan's review procedure. Such written
notice shall be given to the claimant within ninety (90) days after the Company
receives his or her claim, unless special circumstances require additional time
for processing. If additional time for processing is required, written notice
shall be furnished to the claimant prior to the termination of
-48-
the initial ninety (90) day period. Such notice shall indicate the special
circumstances requiring the extension of time and the date by which the Company
expects to render its decision on the claim for benefits or application for a
loan or withdrawal. If a claimant has not received written notice that
additional time is required for processing his or her claim or application
within ninety (90) days of the date it is received by the Company, the claim or
application shall be deemed to have been denied and the claimant shall be
permitted to appeal such denial in accordance with the review procedure
described in Section 16. If a claimant receives proper and timely notice that
additional time is required for processing his or her claim or application, but
does not receive written notice of the Company's decision with respect to the
claim or application within one hundred eighty (180) days after the date the
claim or application is received by the Company, the claim or application shall
be deemed to have been denied and the claimant shall be permitted to appeal such
denial in accordance with the review procedure described in Section 16.
SECTION 16. REVIEW PROCEDURE.
------- -- ------ ---------
(a) Appointment of Review Panel. The Company shall appoint a "Review
Panel" which shall consist of three (3) or more individuals who may (but need
not) be employees of the Company. The Review Panel shall be the named fiduciary
which shall have discretionary authority to act with respect to appeals from
denials of claims for benefits or applications for loans or withdrawals under
the Plan.
-49-
(b) Right to Appeal. Any person whose claim for benefits or
application for a loan or withdrawal is denied (or deemed denied), in whole or
in part, or such person's authorized representative, may appeal from the denial
by submitting a written request for review of the claim to the Review Panel
within sixty (60) days after receiving written notice of the denial from the
Company (or, in the case of a deemed denial, within sixty (60) days after the
date the claim or application is deemed denied). The Company shall give the
claimant (or the claimant's representative) an opportunity to review pertinent
documents in preparing a request for review.
(c) Form of Request for Review. A request for review must be made in
writing and shall be addressed as follows: "Review Panel under the
Hewlett-Packard Company Tax Saving Capital Accumulation Plan, 3000 Hanover
Street, Palo Alto, CA 94304." A request for review shall set forth all of the
grounds upon which it is based, all facts in support thereof and any other
matters which the claimant deems pertinent. The Review Panel may require the
claimant to submit such additional facts, documents or other material as it may
deem necessary or appropriate in making its review.
(d) Time for Review Panel Action. The Review Panel shall act upon
each request for review within sixty (60) days after receipt thereof, unless
special circumstances require additional time for review. If additional time
for review is required, written notice shall be furnished to the claimant prior
to the end of the initial sixty (60) day period,
-50-
indicating the date by which the Review Panel expects to render its decision on
his or her request for review. In no event shall the decision of the Review
Panel be rendered more than one hundred twenty (120) days after it receives a
claimant's request for review.
(e) Review Panel Decision. Within the time prescribed by Section
16(d), the Review Panel shall give written notice of its decision to the
claimant and the Company. In the event the Review Panel confirms the denial of
the claim for benefits or the application for a loan or withdrawal, in whole or
in part, such notice shall set forth, in a manner calculated to be understood by
the claimant, specific reasons for such denial and specific references to the
Plan provisions on which the decision was based. In the event that the Review
Panel determines that the claim for benefits or the application for a loan or
withdrawal should not have been denied, in whole or in part, the Company shall
take appropriate remedial action as soon as reasonably practicable after
receiving notice of the Review Panel's decision. If a claimant has not received
written notice that additional time is required for review within sixty (60)
days of the date his or her request for review is received by the Review Panel,
the claim or application shall be deemed to have been denied on review. If a
claimant receives proper and timely notice that additional time is required for
review, but does not receive written notice of the Review Panel's decision with
respect to his or her claim within one hundred twenty (120) days after the date
the Review Panel receives the request for
-51-
review, the claim or application shall be deemed to have been denied on review.
(f) Rules and Procedures. The Review Panel shall establish such
rules and procedures, consistent with the Plan and with ERISA, as it may deem
necessary or appropriate in carrying out its responsibilities under this Section
16. The Review Panel may require a claimant who wishes to submit additional
information in connection with an appeal from the denial of benefits to do so at
his or her own expense.
(g) Exhaustion of Remedies. No legal or equitable action for
benefits under the Plan shall be brought unless and until the claimant: (i) has
submitted a written claim for benefits or application for a loan or withdrawal
in accordance with Section 15; (ii) has been notified that the claim or
application is denied (or the claim or application is deemed denied) as provided
in Section 15(b); (iii) has filed a written request for a review of the claim or
application in accordance with this Section 16; and (iv) has been notified in
writing that the Review Panel has affirmed the denial of the claim or
application (or the claim or application is deemed to have been denied on
review) as provided in Section 16(e).
SECTION 17. AMENDMENT AND TERMINATION OF THE PLAN.
------- -- --------- --- ----------- -- --- ----
(a) Future of the Plan. Although the Company expects to continue the
Plan indefinitely, inasmuch as future conditions cannot be foreseen, the Company
reserves the right to amend or terminate the Plan at any time.
-52-
(b) Limitation on Amendments. No amendment of the Plan shall (i)
reduce the benefits of any Participant accrued under the Plan prior to the date
the amendment is adopted, except to the extent that a reduction in accrued
benefits may be permitted by ERISA nor (ii) divert any part of the assets of the
Trust Fund to purposes other than the exclusive purposes of providing benefits
to Participants and Beneficiaries who have an interest in the Plan and defraying
the reasonable expenses of administering the Plan.
(c) Termination of the Plan. Upon the termination of the Plan (or
upon the complete discontinuance of Deferred Contributions and Regular Company
Contributions to the Plan), no part of the Trust Fund shall revert to the
Participating Companies nor be used for or diverted to purposes other than the
exclusive purposes of providing benefits to Participants and Beneficiaries who
have an interest in the Plan and defraying the reasonable expenses of
administering the Plan. Upon the termination of the Plan (or upon the complete
discontinuance of Deferred Contributions and Regular Company Contributions to
the Plan), the Trust shall continue until the Trust Fund has been distributed to
the affected Participants as provided in Section 17(e).
(d) Obligations Upon Termination of the Plan. Notwithstanding any
other provision of the Plan to the contrary, the Participating Companies shall
have no obligation to continue making Deferred Contributions or Regular Company
Contributions to the Plan after the termination thereof. Except as otherwise
-53-
provided in ERISA, no Participating Company nor any other person shall have any
liability or obligation to provide benefits hereunder after such termination.
Upon the termination of the Plan, Participants and Beneficiaries shall obtain
benefits solely from the Trust Fund. Upon a partial termination of the Plan,
this Section 17(d) shall apply only with respect to those Participants and
Beneficiaries who are affected by such partial termination.
(e) Allocation of Trust Fund Upon Termination of the Plan. Upon the
termination of the Plan (or upon the complete discontinuance of Deferred
Contributions and Regular Company Contributions to the Plan), the Plan Benefit
of each Participant shall be distributed to the Participant or to his or her
Beneficiary at the time and in the manner provided in Section 9; provided,
however, that the assets of the Trust Fund shall be allocated in accordance with
section 403(d)(1) of ERISA. Upon a partial termination of the Plan, this
Section 17(e) shall apply only with respect to those Participants and
Beneficiaries who are affected by such partial termination.
SECTION 18. DEFINITIONS.
------- -- -----------
(a) "Accounts" means, to the extent applicable to a Participant, one
or more of the accounts set forth in Section 6(a).
(b) "Affiliate" means any entity (whether corporation, partnership,
joint venture or other entity) a substantial percentage of the equity interest
of which is owned by the Company, by one or more Subsidiaries, or by the Company
together
-54-
with one or more Subsidiaries and which has been designated by the Company as an
Affiliate for purposes of the Plan.
(c) "Affiliated Group" means the Company, each Subsidiary and each
Affiliate.
(d) "Beneficiary" means the person or persons described in Section
12(j).
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Company" means Hewlett-Packard Company, a California
corporation.
(g) "Covered Compensation" means the regular wage or salary received
by a Participant from a Participating Company, determined without regard to any
Deferred Contributions made pursuant to Section 3, and without regard to any
deferrals made pursuant to section 125 of the Code under the Hewlett-Packard
Company Cafeteria Plan, and shall include commissions and shift differentials,
pay for flexible time off, sick leave, vacation, jury duty, bereavement and
other approved paid time off, and other payments classified as Covered
Compensation pursuant to the Company's payroll practices. Covered Compensation
shall not include any compensation paid to a Participant for periods during
which he or she is not an Eligible Employee, nor any compensation paid for
periods after the last day of the month in which he or she ceases to be an
Employee, nor overtime or other premium pay, compensation for work in excess of
the regular work week, bonuses or incentive pay, severance pay, cash profit-
sharing payments, sick leave payments after termination
-55-
of employment, the Company contribution to the Hewlett-Packard Company Employee
Stock Purchase Plan, nor other special compensation of any kind. Covered
Compensation shall not exceed the amount specified in section 401(a)(17) of the
Code, as such amount may be adjusted by the Secretary of the Treasury from time
to time. Covered Compensation shall be determined in accordance with section
414(s) of the Code and the regulations thereunder for purposes of establishing
eligibility to make Deferred Contributions in excess of eight percent (8%)
pursuant to Section 3(a).
(h) "Deferred Contributions" means amounts contributed to the Plan
by the Company on behalf of Participants pursuant to Section 3.
(i) "Deferred Contribution Accounts" means, to the extent applicable
to a Participant, one or more of the Deferred Contribution Short Term Income
Account, the Deferred Contribution Bond Account, the Deferred Contribution
Equity Index Account, the Deferred Contribution Growth and Income Account, the
Deferred Contribution Magellan Account, the Deferred Contribution Contrafund
Account and the Deferred Contribution Stock Account, to which the Deferred
Contributions made on the Participant's behalf are credited.
(j) "Eligible Employee" means any Employee of a Participating
Company, other than: (i) an Employee whose employment is covered by a
collective-bargaining agreement (unless such agreement expressly provides for
participation in the Plan); (ii) an Employee who is eligible for and receiving
-56-
benefits under the Hewlett-Packard Company Employee Benefits Organization Income
Protection Plan on account of a period of disability in excess of ninety (90)
days; (iii) an Employee who is a nonresident alien with respect to the United
States and who derives no earned income from a United States source (unless such
Employee has been designated as an Eligible Employee by the Company); (iv) an
Employee who is a United States citizen working outside the United States,
unless he or she is on a United States payroll; (v) an Employee who is a
resident of Puerto Rico; (vi) an Employee who is deemed to be an employee of a
member of the Affiliated Group pursuant to section 414(n) of the Code but who is
not in fact a common-law employee of such member of the Affiliated Group; (vii)
an Employee who is "On-Call," "On-Contract," or on "Short Term Programs
Employment Status;" and (viii) any Employee or group of Employees designated by
the Executive Committee of the Board of Directors of the Company as ineligible
to participate in the Plan. An Eligible Employee shall be deemed to remain an
Eligible Employee throughout any period of military service, if such Employee
returns to active employment with a member of the Affiliated Group while his or
her reemployment rights are protected by law. An individual's status as an
Eligible Employee shall be determined by the Company in its sole discretion and
such determination shall be conclusive and binding on all persons.
(k) "Employee" means any individual employed by any member of the
Affiliated Group.
-57-
(l) "ERISA" means the Employee Retirement Income Security Act of
1974, as it may be amended from time to time.
(m) "Funds" means, to the extent applicable, one or more of the eight
investment funds described in Section 7(a).
(n) "Investment Manager" means a person who is appointed by the
Company to direct the investment and reinvestment of all or any part of the
Trust Fund pursuant to Section 13(b), whether or not such person is an
"investment manager" as such term is defined in section 3(38) of ERISA.
(o) "Loan Account" means the account established for a Participant
under Section 11(d) from which all loan amounts are disbursed to the Participant
and to which are credited all payments in satisfaction of the Participant's loan
obligations to the Plan.
(p) "Participant" means any individual who is accruing benefits under
the Plan or who is receiving or entitled to receive benefits under the Plan.
"Participant" shall also include an alternate payee for whom a separate account
is established.
(q) "Participating Company" means the Company and each member of the
Affiliated Group which has been designated as a Participating Company by the
Company and which has accepted such designation by action of its board of
directors.
(r) "Payday" means the sixth (6th) and twenty-first (21st) day of
each month or the Company's last business day immediately preceding such dates.
-58-
(s) "Plan" means the Hewlett-Packard Company Tax Saving Capital
Accumulation Plan, as set forth herein and as it may be amended from time to
time.
(t) "Plan Benefit" means the benefit payable to a Participant or
Beneficiary, determined under Section 9.
(u) "Plan Year" means each consecutive twelve (12) month period
commencing August 1 and ending July 31.
(v) "Profits" means (i) the consolidated earnings of the
Participating Companies for a fiscal year of the Company, before Federal and
foreign taxes but after state income and franchise taxes, plus (ii) the
accumulated earnings of the Participating Companies. For this purpose,
consolidated earnings shall be adjusted to not take into account:
(i) Cash dividends received from subsidiaries which are not
Participating Companies;
(ii) Earnings of subsidiaries which are not Participating Companies;
(iii) Extraordinary non-recurring or non-operating items, as defined by
management; and
(iv) Cash profit-sharing expenses of the Participating Companies.
(w) "Quarter" means a fiscal quarter ending January 31, April 30,
July 31 or October 31, as appropriate.
(x) "Regular Company Contributions" means amounts contributed to the
Plan on behalf of Participants pursuant to Section 4.
-59-
(y) "Regular Company Contribution Accounts" means, to the extent
applicable to a Participant, one or more of the Regular Company Contribution
Short Term Income Account, the Regular Company Contribution Bond Account, the
Regular Company Contribution Equity Index Account, the Regular Company
Contribution Growth and Income Account, the Regular Company Contribution
Magellan Account, the Regular Company Contribution Contrafund Account and the
Regular Company Contribution Stock Account, to which the Regular Company
Contributions made on the Participant's behalf are credited.
(z) "Rollover Accounts" means, to the extent applicable to a
Participant, one or more of the Rollover Short Term Income Account, the Rollover
Bond Account, the Rollover Equity Index Account, the Rollover Growth and Income
Account, the Rollover Magellan Account, the Rollover Contrafund Account and the
Rollover Stock Account established pursuant to Section 12(l) or 12(m), to which
the Participant's rollover or transfer contributions are credited.
(aa) "Stock" means the common stock of Hewlett-Packard Company, par
value one dollar ($1).
(ab) "Subsidiary" means any corporation with respect to which the
Company, one or more Subsidiaries, or the Company together with one or more
Subsidiaries own not less than eighty percent (80%) of the total combined voting
power of all classes of stock entitled to vote or not less than eighty percent
(80%) of the total value of all shares of all classes of stock. For purposes of
Section 5, the phrase "more than fifty percent
-60-
(50%)" shall be substituted for the phrase "not less than eighty percent (80%)"
wherever the latter phrase occurs in the preceding sentence.
(ac) "TABS" means the Company's telephone-activated benefits system.
To the extent an individual is unable to use TABS, as determined by the Company,
TABS shall refer to the method of communication prescribed by the Company.
(ad) "Trust Agreement" means that certain trust agreement made as of
August 1, 1991, by and between the Company and Fidelity Management Trust
Company, as it may be amended from time to time, providing for the receipt and
investment of contributions under the Plan, and any successor or additional
trust agreement between the Company and a Trustee or Trustees. To the extent
not inconsistent, the terms of the Trust Agreement are incorporated herein by
reference.
(ae) "Trustee" means Fidelity Management Trust Company, and any
successor or additional trustee or trustees appointed pursuant to the Trust
Agreement.
(af) "Trust Fund" means the trust fund established pursuant to the
Trust Agreement.
(ag) "Trust" means the trust established by the Trust Agreement.
(ah) "Valuation Date" means each business day the New York Stock
Exchange is open.
SECTION 19. EXECUTION.
------- -- ---------
To record the amendment and restatement of the Plan to read as set
forth herein, the Company has caused its authorized
-61-
officer to affix the Company's name and seal hereto this ____ day of ________,
1993 effective as of November 1, 1993 (unless otherwise noted herein).
HEWLETT-PACKARD COMPANY
By-------------------------------
Robert P. Wayman
Executive Vice President
Finance and Administration
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APPENDIX A
----------
TOP-HEAVY PROVISIONS
--------------------
(a) Determination of Top-Heavy Status. Notwithstand-ing any other
provisions of the Plan to the contrary, the following provisions shall become
effective for any Plan Year in which the Plan is a "Top-Heavy Plan." The Plan
shall be con-sidered a Top-Heavy Plan for a Plan Year if, as of the Determi-
nation Date for such Plan Year, the Top-Heavy Ratio for the Aggregation Group
exceeds 60 percent.
(b) Minimum Allocations. Notwithstanding any other provision of the
Plan to the contrary, for any Plan Year during which the Plan is a Top-Heavy
Plan, Regular Company Contributions allocated on behalf of any participant who
is employed on the last day of the Plan Year and who is not a Key Employee shall
not be less than a percentage of the Participant's Total Compensation (as
defined in Section 5 of the Plan) equal to the lesser of (A) three percent, or
(B) the percentage equal to the largest percentage that any Key Employee for
that Plan Year receives of Regular Company Contributions and Deferred
Contributions allocated on behalf of that Key Employee's Total Compensation for
that Plan Year as limited by (c) below.
(c) Compensation Limitation. For any Plan Year in which the Plan is
a Top-Heavy Plan, the compensation limitation described in section 401(a)(17) of
the Code shall apply, as such
A-1
amount may be adjusted by the Secretary of the Treasury from time to time.
(d) Impact on Maximum Benefits. For any Plan Year in which the Plan
is a Top-Heavy Plan or Super Top-Heavy Plan, the number "1.00" shall be
substituted for the number "1.25" wherever it appears in section 415(e)(2) and
(3) of the Code; provided, however, that such substitution shall not have the
effect of reducing any benefit accrued under the Hewlett-Packard Company
Retirement Plan prior to the first day of the Plan Year in which this provision
becomes applicable.
(e) Definitions. For purposes of this Appendix A, the following
definitions shall apply:
(i) "Aggregation Group" means a group of qualified plans consisting
of:
(A) Each plan of the Affiliated Group in which a Key Employee
participates; and each other plan of the Affiliated Group which
enables any plan in which a Key Employee participates to meet the
requirements of sections 401(a)(4) and 410 of the Code; or
(B) All plans of the Affiliated Group included under (A) above
plus, at the election of the Company, one or more additional plans of
the Affiliated Group that satisfy the requirements of sections
401(a)(4) and 410 of the Code when considered together with the plans
included under (A) above.
A-2
(ii) "Determination Date" means the last day of the preceding Plan
Year. The Valuation Date applicable to such Determination Date shall be
the Valuation Date coinciding with or immediately preceding such
Determination Date.
(iii) "Key Employee" means a key employee as defined by section 416(i)
of the Code and the regulations thereunder.
(iv) "Super Top-Heavy Plan" means a Top-Heavy Plan for which the Top-
Heavy Ratio exceeds 90 percent.
(v) "Top-Heavy Ratio" means the top-heavy ratio of the Aggregation
Group as computed in accordance with section 416(g) of the Code and the
regulations thereunder.
Capitalized terms used in this Appendix A that are not defined herein shall
have the same meaning as those terms do in the Plan.
A-3
APPENDIX B
LIMITATIONS ON CONTRIBUTIONS
TABLE OF CONTENTS
-----------------
Page
----
APPENDIX B - LIMITATIONS ON CONTRIBUTIONS........................... 1
SECTION 1. DEFINITIONS............................................. 1
(a) "Aggregate 401(k) Contributions"........................ 1
(b) "Aggregate 401(m) Contributions"........................ 1
(c) "Excess Aggregate Contributions"........................ 2
(d) "Excess Contributions".................................. 2
(e) "Excess Deferrals"...................................... 2
(f) "Family Member"......................................... 2
(g) "Highly Compensated Employee"........................... 2
(h) "Highly Compensated Former Employee".................... 4
(i) "Nonhighly Compensated Employee"........................ 4
(j) "Section 414(s) Compensation"........................... 5
(k) "Top-Paid Group"........................................ 7
(l) "Total Compensation".................................... 7
SECTION 2. DEFERRAL AND AVERAGE DEFERRAL PERCENTAGE LIMITATIONS.... 9
(a) Return of Excess Deferrals.............................. 9
(b) Average Deferral Percentage Limitation.................. 10
(c) Allocation of Excess Contributions to Highly Compensated
Employees............................................... 11
(d) Distribution of Excess Contributions.................... 12
(e) Qualified Regular Company Contributions................. 12
(f) Corrective Qualified Nonelective Contributions.......... 12
(g) Special Rules........................................... 13
SECTION 3. AVERAGE CONTRIBUTION PERCENTAGE LIMITATIONS............. 16
(a) Average Contribution Percentage Limitation.............. 16
(b) Allocation of Excess Aggregate Contributions to Highly
Compensated Employees................................... 17
(c) Distribution of Excess Aggregate Contributions.......... 17
(d) Use of Deferred Contributions........................... 18
(e) Corrective Qualified Nonelective Contributions.......... 18
(f) Special Rules........................................... 18
SECTION 4. MULTIPLE-USE LIMITATIONS................................ 21
(a) Applicability of the Multiple-Use Limitation............ 21
(b) Multiple-Use Limitation................................. 21
(c) Correction of Multiple-Use Limitation................... 22
B-i
APPENDIX B
----------
LIMITATIONS ON CONTRIBUTIONS
----------------------------
SECTION 1. DEFINITIONS
- --------- -----------
(a) "Aggregate 401(k) Contributions" means, for any Plan Year, the sum of the
following: (i) the Participant's Deferred Contributions for the Plan Year; (ii)
the Regular Company Contributions allocated to the Participant's Accounts as of
a date within the Plan Year, to the extent that such Regular Company
Contributions are aggregated with Deferred Contributions pursuant to Section
2(e) of this Appendix B; and (iii) the Qualified Nonelective Contributions
allocated to the Participant's Accounts as of a date within the Plan Year, to
the extent that such Qualified Nonelective Contributions are aggregated with
Deferred Contributions pursuant to Section 2(f) of this Appendix B.
(b) "Aggregate 401(m) Contributions" means, for any Plan Year, the sum of the
following: (i) the Regular Company Contributions allocated to the Participant's
Accounts as of a date within the Plan Year; (ii) the Participant's Deferred
Contributions for the Plan Year, to the extent that such Deferred Contributions
are aggregated with Regular Company Contributions pursuant to Section 3(d) of
this Appendix B; and (iii) the Qualified Nonelective Contributions allocated to
the Participant's Accounts as of a date within the Plan Year, to the extent that
such Qualified Nonelective Contributions are
B-1
aggregated with Regular Company Contributions pursuant to Section 3(e) of this
Appendix B.
(c) "Excess Aggregate Contributions" means the amount by which the Aggregate
401(m) Contributions of Highly Compensated Employees are reduced pursuant to
Section 3(c) of this Appendix B.
(d) "Excess Contributions" means the amount by which the Aggregate 401(k)
Contributions of Highly Compensated Employees are reduced pursuant to Section
2(d) of this Appendix B.
(e) "Excess Deferrals" means the amount of a Participant's Deferred
Contributions distributed to the Participant pursuant to Section 2(a) of this
Appendix B.
(f) "Family Member," for purposes of this Appendix B, means an individual's
spouse, lineal ascendants and descendants, and the spouses of such lineal
ascendants and descendants.
(g) "Highly Compensated Employee" for any Plan Year means any active Employee
who, during the look-back year:
(i) Received Total Compensation of more than $75,000 (or such larger amount
as may be adopted by the Commissioner of Internal Revenue to reflect a
cost-of-living adjustment);
(ii) Received Total Compensation of more than $50,000 (or such larger
amount as may be adopted by the Commissioner of Internal Revenue to reflect a
cost-of-
B-2
living adjustment) and was a member of the Top-Paid Group; or
(iii) Was an officer of a member of the Affiliated Group and received Total
Compensation of more than 50 percent of the dollar limitation in effect
under section 415(b)(1)(A) of the Code.
The term 'Highly Compensated Employee' also includes: (A) Employees who are both
described in the preceding sentence if the term 'determination year' is
substituted for the term 'look-back year' and the Employee is one of the 100
Employees who received the most Total Compensation from members of the
Affiliated Group during the determination year; and (B) Employees who are five-
percent owners at any time during the look-back year or determination year. If
no officer has satisfied the Total Compensation requirement of (iii) above
during either a determination year or look-back year, the highest paid officer
for such year shall be treated as a Highly Compensated Employee.
If an Employee is, during a determination year or look-back year, a Family
Member of either a five-percent owner who is an active or former Employee or a
Highly Compensated Employee who is one of the 10 most Highly Compensated
Employees ranked on the basis of Total Compensation paid during such year, then
the Family Member and the five-percent owner or top-ten Highly Compensated
Employee shall be aggregated. In such case, the Family Member and the five-
percent owner or top-ten Highly Compensated Employee shall be treated as a
single Employee
B-3
receiving compensation and Plan contributions and benefits of the Family Member
and five-percent owner or top-ten Highly Compensated Employee.
For purposes of this Section 1(g), the determination year shall be the Plan
Year. The look-back year shall be the 12-month period immediately preceding the
determination year.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the Top-Paid Group,
the top 100 Employees, the number of Employees treated as officers, the Total
Compensation that is considered and whether the simplified method for
determining who is a Highly Compensated Employee will be used, will be made in
accordance with section 414(q) of the Code and regulations thereunder.
(h) "Highly Compensated Former Employee" means a former Employee who separated
from service (or is deemed to have separated) prior to the determination year,
performs no service for any member of the Affiliated Group during the
determination year, and was a Highly Compensated Employee as an active Employee
for either the separation year or any determination year ending on or after the
Employee's 55th birthday. The determination of who is a Highly Compensated
Former Employee will be made in accordance with section 414(q) of the Code and
regulations thereunder.
(i) "Nonhighly Compensated Employee" for any Plan Year means any active
Employee who is not a Highly Compensated Employee.
B-4
(j) "Section 414(s) Compensation" means, at the discretion of the Company,
any one of the following definitions of compensation received by an Employee
from member of the Affiliated Group during the portion of the Plan Year that the
Employee is a Participant or is eligible to become a Participant in the Plan:
(i) Compensation as defined in Treasury Regulation section 1.415-2(d) or any
successor thereto;
(ii) "Wages" as defined in section 3401(a) of the Code for purposes of
income tax withholding at the source, but determined without regard to any
rules that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception
for agricultural labor in section 3401(a)(2) of the Code);
(iii) "Wages" as defined in section 3401(a) of the Code for purposes of
income tax withholding at the source, plus all other payments of compensation
reportable under Code sections 6041(d), 6051(a)(3) and 6052 and the
regulations thereunder, determined without regard to any rules that limit such
Wages or reportable compensation based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in section 3401(a)(23) of the Code), and modified, at the election of
the Company, to exclude amounts paid or reimbursed for the Employee's moving
expenses, to the
B-5
extent it is reasonable to believe that these amounts are deductible by the
Employee under section 217 of the Code;
(iv) Any of the definitions of Section 414(s) Compensation set forth in
Subsections (i), (ii), and (iii) above, reduced by all of the following items
(even if includable in gross income): reimbursements or other expense
allowances, fringe benefits (cash and noncash), moving expenses, deferred
compensation and welfare benefits;
(v) Any of the definitions of Section 414(s) Compensation set forth in
Subsections (i), (ii), (iii), and (iv) above, modified to include any elective
contributions made by a member of the Affiliated Group on behalf of the
Employee that are not includable in gross income under section 125, 402(a)(8),
402(h) or 403(b) of the Code; or
(vi) Any reasonable definition of compensation that does not by design favor
Highly Compensated Employees and that satisfies the nondiscrimination
requirement set forth in Treasury Regulation section 1.414(s)-1(d)(2) or the
successor thereto.
Any definition of Section 414(s) Compensation shall be used consistently to
define the compensation of all Employees taken into account in satisfying the
requirements of an applicable provision of this Appendix B for the relevant
determination period. For purposes of applying the limitations set forth in
Sections 2, 3 and 4 of this Appendix B, Section 414(s) Compensation shall not
include compensation paid to an Employee
B-6
for a Plan Year in excess of such amount as may be specified in Code section
401(a)(17), as such amount may be adjusted by the Secretary of the Treasury from
time to time.
(k) "Top-Paid Group" for any Plan Year means the top 20 percent (in terms of
Total Compensation) of all Employees of the Affiliated Group, excluding the
following:
(i) Any Employee covered by a collective bargaining agreement who is not an
Eligible Employee;
(ii) Any Employee who is a nonresident alien with respect to the United
States who receives no income with a source within the United States from a
member of the Affiliated Group;
(iii) Any Employee who has not completed at least 500 Hours of Service
during any six-month period at the end of the Plan Year;
(iv) Any Employee who normally works less than 17 1/2 hours per week;
(v) Any Employee who normally works no more than six months during any year;
and
(vi) Any Employee who has not attained the age of 21 at the end of the Plan
Year."
(l) "Total Compensation" means, at the discretion of the Company, consistently
applied, one of the definitions of compensation described in subparagraphs (i),
(ii) or (iii) of subsection (j) of this Section 1, plus amounts deferred but not
refunded under a cafeteria plan, as such term is defined in
B-7
section 125(c) of the Code and under a plan, including this Plan, qualified
under section 401(k) of the Code.
Capitalized terms used in this Appendix B that are not defined herein shall
have the same meaning as those terms do in the Plan.
B-8
SECTION 2. DEFERRAL AND AVERAGE DEFERRAL PERCENTAGE LIMITATIONS
- --------- ----------------------------------------------------
(a) Return of Excess Deferrals. The aggregate Deferred Contributions of any
Participant for any calendar year to the Plan (and any plans maintained by the
Affiliated Group), shall not exceed the amount determined under section
402(g)(1) of the Code. In the event that the aggregate Deferred Contributions
of any Participant for any calendar year, together with any other elective
deferrals (within the meaning of section 402(g)(3) of the Code) under all plans,
contracts or arrangements of the Affiliated Group, exceed $7,000 (or such larger
amount as may be adopted by the Commissioner of Internal Revenue to reflect a
cost-of-living adjustment), then the Participant may designate all or a portion
of such Excess Deferrals as attributable to this Plan and may request a refund
of such portion by notifying the Company in writing as soon as practicable
following the close of such calendar year. If timely notice is received by the
Company, then such portion of the Excess Deferrals, and any income or loss
allocable to such portion, shall be refunded to the Participant not later than
the April 15 next following the close of such calendar year. If the Participant
fails to request a distribution of Excess Deferrals, the Company shall be deemed
to have notice of the Excess Deferrals and shall designate one or more plans
maintained by a member of the Affiliated Group from which the refund of Excess
Deferral and allocable income or loss shall be made. Such
B-9
refunds shall be made no later than April 15 next following the close of such
calendar year.
In the event that the aggregate Deferred Contributions of any Participant for
any calendar year, together with any other elective deferrals (within the
meaning of section 402(g)(3) of the Code) under all plans, contracts or
arrangements including those not maintained by the Affiliated Group, exceed
$7,000 (or such larger amount as may be adopted by the Commissioner of Internal
Revenue to reflect a cost-of-living adjustment), then the Participant may
designate all or a portion of such Excess Deferrals as attributable to this Plan
and may request a refund of such portion by notifying the Employer in
writing on or before the March 1 next following the close of such calendar year.
If timely notice is received by the Employer, then such portion of the Excess
Deferrals, and any income or loss allocable to such portion, shall be refunded
to the Participant not later than the April 15 next following the close of such
calendar year.
(b) Average Deferral Percentage Limitation. The Plan shall satisfy the
average deferral percentage test, as provided in section 401(k)(3) of the Code
and section 1.401(k)-1 of the regulations issued thereunder. Subject to the
special rules described in Section 2(g) of this Appendix B, the Aggregate 401(k)
Contributions of Highly Compensated Employees shall not exceed the limits
described below:
(i) An Actual Deferral Percentage shall be determined for each individual
who, at any time during the
B-10
Plan Year, is a Participant (including a suspended Participant) or is eligible
to participate in the Plan, which Actual Deferral Percentage shall be the
ratio, computed to the nearest one-hundredth of one percent, of the
individual's Aggregate 401(k) Contributions for the Plan Year to the
individual's Section 414(s) Compensation for the Plan Year;
(ii) The Actual Deferral Percentages (including zero percentages) of Highly
Compensated Employees and Nonhighly Compensated Employees shall be separately
averaged to determine each group's Average Deferral Percentage; and
(iii) The Aggregate 401(k) Contributions of Highly Compensated Employees
shall constitute Excess Contributions and shall be reduced, pursuant to
Sections 2(c) and 2(d) of this Appendix B, to the extent that the Average
Deferral Percentage of Highly Compensated Employees (A) exceeds 125 percent of
the Average Deferral Percentage of Nonhighly Compensated Employees or (B)
exceeds the lesser of (1) 200 percent of the Average Deferral Percentage of
Nonhighly Compensated Employees or (2) the Average Deferral Percentage of
Nonhighly Compensated Employees plus two percentage points.
(c) Allocation of Excess Contributions to Highly Compensated Employees. Any
Excess Contributions for a Plan Year shall be allocated to Highly Compensated
Employees by use of a leveling process, whereby the Actual Deferral Percentage
of the Highly Compensated Employee with the highest Actual Deferral
B-11
Percentage is reduced to the extent required to (i) eliminate all Excess
Contributions or (ii) cause such Highly Compensated Employee's Actual Deferral
Percentage to equal the Actual Deferral Percentage of the Highly Compensated
Employee with the next-highest Actual Deferral Percentage. Such leveling
process shall be repeated until all Excess Contributions for such Plan Year are
allocated to Highly Compensated Employees.
(d) Distribution of Excess Contributions. Excess Contributions allocated to
Highly Compensated Employees for the Plan Year pursuant to Section 2(c) of this
Appendix B, together with any income or loss allocable to such Excess
Contributions, shall be distributed to such Highly Compensated Employees not
later than 2 1/2 months following the close of such Plan Year, if possible, but
in no event later than the close of the following Plan Year. Any Deferred
Contributions distributed pursuant to this Section 2(d) shall not be included in
the Deferred Contributions that attract a Regular Company Contribution under
Section 4 of the Plan.
(e) Qualified Regular Company Contributions. The Company, in its sole
discretion, may include all or a portion of the Regular Company Contributions
for a Plan Year in Aggregate 401(k) Contributions taken into account in applying
the Average Deferral Percentage limitation described in Section 2(b) of this
Appendix B for such Plan Year, provided that the requirements of Treasury
Regulation section 1.401(k)-1(b)(5) are satisfied.
(f) Corrective Qualified Nonelective Contributions. In order to satisfy (or
partially satisfy) the Average Deferral
B-12
Percentage limitation described in Section 2(b) of this Appendix B, the Average
Contribution Percentage limitation described in Section 3(a) of this Appendix B
or the multiple-use limitation described in Section 4(b) of this Appendix B (or
more than one of such limitations), the Company, in its sole discretion, may
make a Qualified Nonelective Contribution to the Plan. Any such Qualified
Nonelective Contribution shall be allocated, in a manner determined by the
Company, to the Accounts of such Nonhighly Compensated Employees as the Company
selects. Qualified Nonelective Contributions shall be paid to the Trustee as
soon as reasonably practicable following the close of the Plan Year and shall be
allocated to the Accounts of Nonhighly Compensated Employees as of the last day
of the Plan Year. In all other respects, the contribution, allocation,
investment, vesting and distribution of Qualified Nonelective Contributions
shall be governed by the provisions of the Plan concerning Regular Company
Contributions. The Company, in its sole discretion, may include all or a
portion of the Qualified Nonelective Contributions for a Plan Year in the
Aggregate 401(k) Contributions taken into account in applying the Average
Deferral Percentage limitation described in Section 2(b) of this Appendix B for
such Plan Year, provided that the requirements of Treasury Regulation section
1.401(k)-1(b)(5) are satisfied.
(g) Special Rules. The following special rules shall apply for purposes of
this Section 2:
(i) For purposes of applying the limitation described in Section 2(a) of
this Appendix B, Deferred
B-13
Contributions taken into account for the calendar year for any Participant
shall not include any Excess Contributions previously distributed to such
Participant for the Plan Year ending within such calendar year;
(ii) For purposes of applying the limitation described in Section 2(b) of
this Appendix B, the Aggregate 401(k) Contributions taken into account for the
Plan Year for any Participant shall not include any Excess Deferrals
previously distributed to such Participant for the calendar year ending with
such Plan Year;
(iii) For purposes of applying the limitation described in Section 2(b) of
this Appendix B, the Actual Deferral Percentage of any Highly Compensated
Employee who is eligible to make Deferred Contributions and to make elective
deferrals (within the meaning of section 402(g)(3) of the Code) under any
other plans, contracts or arrangements of the Affiliated Group shall be
determined as if all such Deferred Contributions and elective deferrals were
made under a single arrangement;
(iv) In the event that this Plan is aggregated with one or more other plans
in order to satisfy the requirements of sections 401(a)(4), 401(k) or 410(b)
of the Code, then all such aggregated plans, including the Plan, shall be
treated as a single plan for all purposes under all such Code sections (except
for purposes of the average benefit percentage provisions of section
410(b)(2)(A)(ii) of the Code);
B-14
(v) The Actual Deferral Percentage of any of the 10 most highly compensated
Highly Compensated Employees or any five-percent owner shall be determined by
combining the Aggregate 401(k) Contributions and Section 414(s) Compensation
of such top-10 Highly Compensated Employee or five- percent owner with the
Aggregate 401(k) Contributions and Section 414(s) Compensation of any
Employees who are Family Members of such top-10 Highly Compensated Employee or
five-percent owner;
(vi) Any Excess Contributions of any of the 10 most highly compensated
Highly Compensated Employees or five-percent owner affected by the family-
aggregation rules described in Subsection (v) of this Section 2(g) shall be
allocated among the individuals in each family aggregation group in proportion
to the Aggregate 401(k) Contributions of each such individual; and
(vii) Income (and loss) allocable to Excess Contributions for the Plan Year
and for the period between the end of the Plan Year and the date of
distribution of such Excess Contributions shall be determined pursuant to
Proposed Treasury Regulation section 1.401(k)-1(f)(4) or the successor
thereto.
B-15
SECTION 3. AVERAGE CONTRIBUTION PERCENTAGE LIMITATIONS
- --------- -------------------------------------------
(a) Average Contribution Percentage Limitation. The Plan shall satisfy the
average contribution percentage test, as provided in section 401(m)(2) of the
Code and section 1.401(m)-1 of the regulations issued thereunder. Subject to
the special rules described in Section 3(f) of this Appendix B, the Aggregate
401(m) Contributions of Highly Compensated Employees shall not exceed the limits
described below:
(i) An Actual Contribution Percentage shall be determined for each
individual who, at any time during the Plan Year, is a Participant (including
a suspended Participant) or is eligible to participate in the Plan, which
Actual Contribution Percentage shall be the ratio, computed to the nearest
one-hundredth of one percent, of the individual's Aggregate 401(m)
Contributions for the Plan Year to the individual's Section 414(s)
Compensation for the Plan Year;
(ii) The Actual Contribution Percentages (including zero percentages) of
Highly Compensated Employees and Nonhighly Compensated Employees shall be
separately averaged to determine each group's Average Contribution Percentage;
and
(iii) The Aggregate 401(m) Contributions of Highly Compensated Employees
shall constitute Excess Aggregate Contributions and shall be reduced, pursuant
to Sections 3(b) and 3(c) of this Appendix B, to the extent that the
B-16
Average Contribution Percentage of Highly Compensated Employees (i) exceeds
125 percent of the Average Contribution Percentage of Nonhighly Compensated
Employees or (ii) exceeds the lesser of (A) 200 percent of the Average
Contribution Percentage of Nonhighly Compensated Employees or (B) the Average
Contribution Percentage of Nonhighly Compensated Employees plus two percentage
points.
(b) Allocation of Excess Aggregate Contributions to Highly Compensated
Employees. Any Excess Aggregate Contributions for a Plan Year shall be
allocated to Highly Compensated Employees by use of a leveling process, whereby
the Actual Contribution Percentage of the Highly Compensated Employee with the
highest Actual Contribution Percentage is reduced to the extent required to (i)
eliminate all Excess Aggregate Contributions or (ii) cause such Highly
Compensated Employee's Actual Contribution Percentage to equal the Actual
Contribution Percentage of the Highly Compensated Employee with the next-highest
Actual Contribution Percentage. Such leveling process shall be repeated until
all Excess Aggregate Contributions for such Plan Year are allocated to Highly
Compensated Employees.
(c) Distribution of Excess Aggregate Contributions. Excess Aggregate
Contributions allocated to Highly Compensated Employees for the Plan Year
pursuant to Section 3(b) of this Appendix B, together with any income or loss
allocable to such Excess Aggregate Contributions, shall be distributed to such
Highly Compensated Employees not later than 2 1/2 months following
B-17
the close of such Plan Year, if possible, but in no event later than the close
of the following Plan Year.
(d) Use of Deferred Contributions. The Company, in its sole discretion, may
include all or a portion of the Deferred Contributions for a Plan Year in
Aggregate 401(m) Contributions taken into account in applying the Average
Contribution Percentage limitation described in Section 3(a) of this Appendix B
for such Plan Year, provided that the requirements of Treasury Regulation
section 1.401(m)-1(b)(5) are satisfied.
(e) Corrective Qualified Nonelective Contributions. The Company, in its sole
discretion, may include all or a portion of the Qualified Nonelective
Contributions made pursuant to Section 2(f) of this Appendix B for a Plan Year
in Aggregate 401(m) Contributions taken into account in applying the Average
Contribution Percentage limitation described in Section 3(a) of this Appendix B
for such Plan Year, provided that the requirements of Treasury Regulation
section 1.401(m)-1(b)(5) are satisfied.
(f) Special Rules. The following special rules shall apply for purposes of
this Section 3:
(i) For purposes of applying the limitation described in Section 3(a) of
this Appendix B, the Actual Contribution Percentage of any Highly Compensated
Employee who is eligible to participate in the Plan and to make employee
contributions or receive an allocation of matching contributions (within the
meaning of section 401(m)(4)(A)
B-18
of the Code) under any other plans, contracts or arrangements of the
Affiliated Group shall be determined as if Regular Company Contributions
allocated to such Highly Compensated Employee's Accounts and all such employee
contributions and matching contributions were made under a single arrangement;
(ii) In the event that this Plan is aggregated with one or more other plans
in order to satisfy the requirements of Code section 401(a)(4), 401(m) or
410(b), then all such aggregated plans, including the Plan, shall be treated
as a single plan for all purposes under all such Code sections (except for
purposes of the average benefit percentage provisions of Code section
410(b)(2)(A)(ii));
(iii) The Actual Contribution Percentage of any of the 10 most highly
compensated Highly Compensated Employees or any five-percent owner shall be
determined by combining the Aggregate 401(m) Contributions and Section 414(s)
Compensation of such top-10 Highly Compensated Employee or five- percent owner
with the Aggregate 401(m) Contributions and Section 414(s) Compensation of any
Employees who are Family Members of such top-10 Highly Compensated Employee or
five-percent owner;
(iv) Any Excess Aggregate Contributions of any of the 10 most highly
compensated Highly Compensated Employees or five-percent owner affected by the
family-aggregation rules described in Subsection (iii) of this Section 3(f)
shall be allocated among the individuals in each family
B-19
aggregation group in proportion to the Aggregate 401(m) Contributions of each
such individual; and
(v) Income (and loss) allocable to Excess Aggregate Contributions for the
Plan Year and for the period between the end of the Plan Year and the date of
distribution of such Excess Aggregated Contributions shall be determined
pursuant to Proposed Treasury Regulation section 1.401(m)- 1(e)(3) or the
successor thereto.
B-20
SECTION 4. MULTIPLE-USE LIMITATIONS
- --------- ------------------------
(a) Applicability of the Multiple-Use Limitation. The limitation described in
this Section 4 shall apply only if, for a Plan Year, after the limitations of
Sections 2 and 3 of this Appendix B are applied:
(i) The Average Deferral Percentage of Highly Compensated Employees (A)
exceeds 125 percent of the Average Deferral Percentage of Nonhighly
Compensated Employees, but (B) does not exceed the lesser of (1) 200 percent
of the Average Deferral Percentage of Nonhighly Compensated Employees or (2)
the Average Deferral Percentage of Nonhighly Compensated Employees plus two
percentage points; and
(ii) The Average Contribution Percentage of Highly Compensated Employees (A)
exceeds 125 percent of the Average Contribution Percentage of Nonhighly
Compensated Employees, but (B) does not exceed the lesser of (1) 200 percent
of the Average Contribution Percentage of Nonhighly Compensated Employees or
(2) the Average Contribution Percentage of Nonhighly Compensated Employees
plus two percentage points.
(b) Multiple-Use Limitation. The sum of the Average Deferral Percentage and
Average Compensation Percentage of Highly Compensated Employees shall not exceed
the greater of (i) or (ii) below.
(i) This limit equals the sum of:
B-21
A. 1.25 times the greater of the Average Deferral Percentage or Average
Contribution Percentage of Nonhighly Compensated Employees; and
B. The lesser of (1) 200 percent of the lesser of the Average Deferral
Percentage or Average Contribution Percentage of Nonhighly Compensated
Employees, or (2) the lesser of the Average Deferral Percentage or Average
Contribution Percentage of Nonhighly Compensated Employees plus two
percentage points.
(ii) This limit equals the sum of:
A. 1.25 times the lesser of the Average Deferral Percentage or Average
Contribution Percentage of Nonhighly Compensated Employees; and
B. The lesser of (1) 200 percent of the greater of the Average Deferral
Percentage or Average Contribution Percentage of Nonhighly Compensated
Employees, or (2) the greater of the Average Deferral Percentage or Average
Contribution Percentage of Nonhighly Compensated Employees plus two
percentage points.
(c) Correction of Multiple-Use Limitation. To the extent necessary, the
limitation of Section 4(b) of this Appendix B shall be satisfied by one or more
of the following methods: (i) the allocation of corrective Qualified
Nonelective Contributions in the manner set forth in Sections 2(f) or 3(e) of
this Appendix B, or (ii) the distribution of Aggregate 401(k)
B-22
Contributions (and income or loss allocable thereto) to Highly Compensated
Employees in the manner set forth in Sections 2(c) and 2(d) of this Appendix B,
followed by the distribution of Aggregate 401(m) Contributions (and income or
loss allocable thereto) to Highly Compensated Employees in the manner set forth
in Sections 3(b) and 3(c) of this Appendix B.
B-23
APPENDIX C
----------
AVANTEK PARTICIPATION
---------------------
Avantek Plan Distributions. If a Participant's Plan Benefit consists
in whole or part of amounts subject to section 417 of the Code that were
transferred into the Plan in a trustee-to-trustee transfer from the Avantek
Plan, the following distribution rules shall apply to the entire Plan Benefit in
lieu of those provided by the Plan. Section 9 of the Plan shall also apply,
except to the extent it is inconsistent with these provisions:
(a) Rollover Accounts. A Participant who has one or more Rollover
Accounts consisting of rollover contributions transferred to the Plan in a
trustee-to-trustee transfer from the Avantek Plan in 1992 may make
reinvestment elections pursuant to Subsection 7(c) of the Plan. Such a
Participant may also at any time withdraw from such Accounts any amount
which does not exceed the balance in such Accounts as of any Valuation
Date. A Participant who wishes to make a withdrawal under Subsection (a)
of this Appendix C shall file an election with the Company in the
prescribed manner.
(b) Payment of Withdrawals; Limitations. All withdrawals under this
Subsection (b) shall be paid in
C-1
cash as soon as reasonably practicable after a request has been received
(unless such request is denied by the Company). In the case of a married
Participant, a requested withdrawal shall not be paid unless the
Participant's spouse has consented in writing to the payment of such
withdrawal in the form of a lump sum (instead of a Qualified Joint and
Survivor Annuity). The spouse's consent shall be given within the 90-day
period preceding payment of the withdrawal.
(c) Time of Distribution: General Rules. A Participant's Plan
Benefit shall be distributed to him or her on or about the date that he or
she has elected. Within the 60-day period commencing 90 days before the
Annuity Starting Date, the Company shall provide to each Participant the
written explanation of his or her distribution options (including his or
her right to defer receipt of the distribution) prescribed by the
applicable regulations. The distribution election shall be made in the
prescribed manner, and filed with the Company after the Participant has
received such explanation. Where applicable, the distribution election
shall include the written consent of the Participant to the distribution of
his or her Plan Benefit before he or she attains age 65.
C-2
(d) Normal Form of Distribution: Annuity Contract. A Participant's
Plan Benefit shall be distributed in the form of a nontransferable
immediate annuity, unless such Participant has elected the optional form of
distribution described in Subsection (e) below. The forms of immediate
annuity available shall include a "Qualified Joint and Survivor Annuity" (a
monthly annuity which is actuarially equivalent to the Participant's Plan
Benefit and which is payable for the joint lives of the Participant and his
or her spouse, with 100 percent of such annuity continued for the life of
the survivor), a single-life annuity and a term-certain annuity. In each
case, the Participant's entire Plan Benefit shall be distributed in
substantially nonincreasing payments over a period not exceeding the
greatest of (i) the Participant's own lifetime, (ii) the Participant's own
life expectancy, (iii) the lifetimes of the Participant and his or her
Beneficiary or (iv) the life expectancies of the Participant and his or her
Beneficiary. The present value of the amounts payable to the Participant
shall be more than 50 percent of the present value of the Participant's
entire Plan Benefit, unless the Plan Benefit is payable as a Qualified
Joint and Survivor Annuity. All life expectancies and present values shall
be determined not later than the date when payments commence. In the case
of a married
C-3
Participant who does not otherwise elect, the immediate annuity shall
provide for payments in the form of a Qualified Joint and Survivor Annuity.
In the case of an unmarried Participant who does not otherwise elect, the
immediate annuity shall provide for payments in the form of a life annuity
payable over the Participant's own lifetime only.
(e) Optional Form of Distribution: Lump Sum. A Participant may
elect to have his or her Plan Benefit distributed in the form of a single
sum in cash.
(f) Death of Participant Before Distribution. If a Participant dies
before receiving his or her Plan Benefit, then such Participant's
Beneficiary shall be entitled to receive such Plan Benefit. (Subsection
12(j) of the Plan provides that the surviving spouse of a married
Participant shall be his or her Beneficiary, unless such Participant, with
the spouse's consent, has otherwise elected prior to his or her death.)
Upon the death of the Participant, the Beneficiary shall file an
application for benefits with the Company in the prescribed manner. The
Beneficiary may make the election that the Participant would have been
entitled to make with respect to the form of the benefit. In the absence
of an election of a form of benefit, a Plan Benefit payable to a
C-4
Beneficiary shall be distributed in the form of a life annuity over the
Beneficiary's lifetime. In each case, the Participant's entire Plan
Benefit shall be distributed in substantially nonincreasing payments over a
period not exceeding the greater of the Beneficiary's lifetime or the
Beneficiary's life expectancy. The Beneficiary's life expectancy shall be
determined not later than the date when payments commence. Payments shall
commence on or about the date selected by the Beneficiary; provided,
however, that such date shall not be later than (i) 12 months after the
date of the Participant's death, if the Beneficiary is not the
Participant's surviving spouse, or (ii) the latest date provided in
Subsection 9(c) of the Plan, if the Beneficiary is the Participant's
surviving spouse. Any election by a surviving spouse under this Subsection
(f) shall be made only during the 90-day period preceding the Annuity
Starting Date.
(g) Election of Form of Distribution. An election of a form of
annuity under Subsection (d) above or the optional form of distribution
under Subsection (e) above shall be made in the manner prescribed by the
Company. Such election may be made only during an election period
consisting of the 90 consecutive days ending on the Participant's Annuity
Starting Date. A Participant may revoke any election
C-5
of a form of annuity or the optional form of distribution (without the
consent of the Company) at any time prior to the end of such election
period. If the Participant, having revoked a prior election, does not make
another election within such election period, then his or her Plan Benefit
shall be distributed in the form specified in Subsection (d) above. In the
case of a married Participant, any election involving a waiver of the
Qualified Joint and Survivor Annuity shall not take effect unless the
Participant's spouse consents in writing to the election during such
election period. Any spousal consent shall be in writing and shall be
witnessed by a plan representative (if permitted by the Company) or by a
notary public. The spousal consent shall acknowledge the effect of the
Participant's action and shall specify the particular optional form of
benefit being elected or the specific non-spouse Beneficiary being
designated (including any class of Beneficiaries or any contingent
Beneficiaries).
(h) Information on Distribution Options. Within the 60-day period
commencing 90 days before the Annuity Starting Date, the Company shall
provide to each Participant (whether or not married) the explanation of the
Qualified Joint and Survivor Annuity prescribed by the applicable
regulations.
C-6
Within the three-year period commencing with the first day of the Plan Year
in which the Participant attains age 32 or within the one-year period
commencing when he or she becomes a Participant (whichever ends later), the
Company shall provide to each Participant the explanation of the qualified
preretirement survivor annuity prescribed by the applicable regulations.
In the case of a Participant who ceases to be an Employee before attaining
age 35, the explanation of the qualified preretirement survivor annuity
shall be provided not later than one year after the termination of
employment.
(i) Determination of Marital Status. Whether a Participant is
married and the identity of his or her spouse (if any) shall be determined
by the Company as of the earlier of (i) his or her Annuity Starting Date or
(ii) the date of his or her death.
(j) Withdrawals. Withdrawals under Subsections 10(a) and (b) of the
Plan shall not be permitted by a married Participant unless the spousal
consent requirements of Subsection 2(b) of this Appendix C are satisfied.
(k) Loans. No loan shall be granted pursuant to Section 11 of the
Plan to a married Participant unless
C-7
the spouse of such Participant, in accordance with the requirements of
Subsection 2(b) of this Appendix C, consents to the assignment of the Plan
Benefit as security for repayment of the loan, and any actions the Company
subsequently may take under Section 11 of the Plan.
(l) Beneficiary. In the case of a married Participant, any
designation of a person other than his or her spouse as the sole primary
Beneficiary, if made before the first day of the Plan Year in which the
Participant attains age 35, shall become invalid on such day. The
Participant may make a new designation (with spousal consent) on or after
such day. If the Participant dies on or after such day without having made
a new designation, his or her spouse shall be the Beneficiary.
A Beneficiary designation shall not be valid unless such designation
is made on the Beneficiary designation form prescribed by the Company.
(m) Contributions. For purposes of the Plan and this Appendix C, the
term "Deferred Contributions" as it is defined in the Plan shall also
include that portion of a Participant's Future Fund 4 Account attributable
to Future Fund 4 Contributions under the
C-8
Avantek Plan that were transferred into the Plan in a trustee-to-trustee
transfer from the Avantek Plan and that portion of a Participant's Special
Company Account under the Avantek Plan that was transferred into the Plan
in a trustee-to-trustee transfer from the Avantek Plan. For purposes of
the Plan and this Appendix C, the term "Regular Company Contributions" as
it is defined in the Plan shall include that portion of a Participant's
Future Fund 4 Account attributable to Company Matching Contributions under
the Avantek Plan that were transferred into the Plan in a trustee-to-
trustee transfer from the Avantek Plan.
(n) Annuity Starting Date. For purposes of this Appendix C, the term
"Annuity Starting Date" means the first day of the first period for which
an amount is payable as an annuity. If the amount payable is a single sum
payment, the Annuity Starting Date is the date on which a properly
completed claim for such benefit is filed under Section 15 of the Plan.
C-9
APPENDIX D
----------
AOT PARTICIPATION
-----------------
AOT Plan Distributions. If a Participant's Plan Benefit consists in whole
or part of amounts subject to section 417 of the Code that were transferred into
the Plan in a trustee-to-trustee transfer from the AOT 401(k) Salary Savings
Plan (the "AOT Plan"), the following distribution rules shall apply to the
entire Plan Benefit in lieu of those provided by the Plan. Section 9 of the
Plan shall also apply, except to the extent it is inconsistent with these
provisions:
(a) Rollover Accounts. A Participant who has one or more Rollover
Accounts consisting of rollover contributions transferred into the Plan in
1991 in a trustee-to-trustee transfer from the AOT Plan may make
reinvestment elections pursuant to Subsection 7(c) of the Plan.
(b) Time of Distribution: General Rules. A Participant's Plan
Benefit shall be distributed to him or her on or about the date that he or
she has elected. Within the 60-day period commencing 90 days before the
Annuity Starting Date, the Company shall provide to each Participant the
explanation of his or her distribution options (including his or her right
D-1
to defer receipt of the distribution) prescribed by the applicable
regulations. The distribution election shall be made in the prescribed
manner and filed with the Company after he or she has received such
explana-tion. Where applicable, the distribution election form shall
include the written consent of the Partici-pant to the distribution of his
or her Plan Benefit before he or she attains age 65.
(c) Normal Form of Distribution: Lump Sum. A Participant's Plan
Benefit shall be distributed in the form of a single lump sum in cash,
unless such Par-ticipant has elected the optional form of distribution
described in Subsection (d) below. Notwithstanding the foregoing, if a
Participant is married his or her Plan Benefit will be paid in the form of
a 50 percent "Qualified Joint and Survivor Annuity" (a monthly annuity
which is actuarially equivalent to the Participant's Plan Benefit and which
is payable for the joint lives of the Participant and his or her spouse,
with 50 percent of such annuity continued for the life of the survivor),
unless a Participant has elected a single lump sum under this Subsection
(c) or an optional form of benefit under Subsection (d) of this Appendix D.
D-2
(d) Optional Form of Distribution: Annuity Contract. A Participant
may elect to have his or her Plan Benefit distributed in the form of a
nontrans-ferable immediate annuity. The forms of immediate annuity
available shall include a joint and survivor annuity with 50 percent of the
annuity continued to the Participant's Beneficiary, a single-life annuity
and a term-certain annuity. In each case, the Par-ticipant's entire Plan
Benefit shall be distributed in substantially nonincreasing payments over a
period not exceeding the greatest of (i) the Participant's own lifetime,
(ii) the Participant's own life expectancy, (iii) the lifetimes of the
Participant and his or her Beneficiary or (iv) the life expectancies of the
Participant and his or her Beneficiary. The present value of the amounts
payable to the Participant shall be more than 50 percent of the present
value of the Participant's entire Plan Benefit, unless the Plan Benefit is
payable as a Qualified Joint and Survivor Annuity. All life expectancies
and present values shall be determined not later than the date when
payments commence.
(e) Death of Participant Before Distribution. If a Participant dies
before receiving his or her Plan Benefit, then such Participant's
Beneficiary shall be entitled to receive such Plan Benefit. (Subsection
D-3
12(j) of the Plan provides that the surviving spouse of a married
Participant shall be his or her Beneficiary, unless such Participant, with
the spouse's consent, has otherwise elected prior to his or her death.)
Upon the death of the Participant, the Beneficiary shall file an
application for benefits with the Company in the prescribed manner. The
Beneficiary may make the election that the Participant would have been
entitled to make with respect to the form of the benefit. In the absence
of an election of a form of benefit, a Plan Benefit payable to a
Beneficiary shall be distributed in the form of a life annuity over the
Beneficiary's lifetime. In each case, the Participant's entire Plan
Benefit shall be distributed in substantially nonincreasing payments over a
period not exceeding the greater of the Beneficiary's lifetime or the
Beneficiary's life expectancy. The Beneficiary's life expectancy shall be
determined not later than the date when payments commence. Payments shall
commence on or about the date selected by the Beneficiary; provided,
however, that such date shall not be later than (i) 12 months after the
date of the Participant's death, if the Beneficiary is not the
Participant's surviving spouse, or (ii) the latest date provided in
Subsection 9(c) of the Plan if the Beneficiary is the Participant's
surviving spouse. Any election by a surviving spouse
D-4
under this Subsection (e) shall be made only during the 90-day period
preceding the Annuity Starting Date.
(f) Election of Form of Distribution. An election of a single lump
sum distribution under Subsection (c) above or the optional form of
distribu-tion under Subsection (d) above shall be made in the manner
prescribed by the Company. Such election may be made only during an
election period consisting of the 90 consecutive days ending on the
Participant's Annuity Starting Date. A Participant may revoke any election
of a form of annuity or the optional form of distribution (without the
consent of the Company) at any time prior to the end of such election
period. If the Participant, having revoked a prior election, does not make
another election within such election period, then his or her Plan Benefit
shall be distributed in the form specified in Subsection (c) above. In the
case of a married Participant, any election involving a waiver of the
Qualified Joint and Survivor Annuity shall not take effect unless the
Participant's spouse consents in writing to the election during such
election period. Any spousal consent shall be in writing and shall be
witnessed by a plan representative (if permitted by the Company) or by a
notary public. The spousal consent shall acknowledge the effect of the
Participant's action and shall
D-5
specify the particular optional form of benefit being elected or the
specific non-spouse Beneficiary being designated (including any class of
Beneficiaries or any contingent Beneficiaries).
(g) Information on Distribution Options. Within the 60-day period
commencing 90 days before the Annuity Starting Date, the Company shall
provide to each Participant (whether or not married) the explana-tion of
the Qualified Joint and Survivor Annuity prescribed by the applicable
regulations. Within the three-year period commencing with the first day of
the Plan Year in which the Participant attains age 32 or within the one-
year period commencing when he or she becomes a Participant (whichever ends
later), the Company shall provide to each Participant the explana-tion of
the qualified preretirement survivor annuity prescribed by the applicable
regulations. In the case of a Participant who ceases to be an Employee
before attaining age 35, the explanation of the qualified preretirement
survivor annuity shall be provided not later than one year after the
termination of employment.
(h) Determination of Marital Status. Whether a Participant is
married and the identity of his or her spouse (if any) shall be determined
by the Company as
D-6
of the earlier of (i) his or her Annuity Starting Date or (ii) the date of
his or her death.
(i) Withdrawals. In the case of a married Participant, a requested
withdrawal under Subsections 10(a) and (b) of the Plan shall not be paid
unless the Participant's spouse has consented in writing to the payment of
such withdrawal in the form of a lump sum (instead of a Qualified Joint and
Survivor Annuity). The spouse's consent shall be given within the 90-day
period preceding payment of the withdrawal.
(j) Loans. No loan shall be granted pursuant to Section 11 of the
Plan to a married Participant unless the spouse of such Participant, in
accordance with the requirements of Subsection 1(i) of this Appendix D,
consents to the assignment of the Plan Benefit as security for repayment of
the loan, and any actions the Company subsequently may take under Section
11 of the Plan.
(k) Beneficiary. In the case of a married Participant, any
designation of a person other than his or her spouse as the sole primary
Beneficiary, if made before the first day of the Plan Year in which the
Participant attains age 35, shall become invalid on such day. The
Participant may make a new
D-7
designation (with spousal consent) on or after such day. If the
Participant dies on or after such day without having made a new
designation, his or her spouse shall be the Beneficiary.
A Beneficiary designation shall not be valid unless such designation
is made on the Beneficiary designation form prescribed by the Company.
(l) Contributions. For purposes of the Plan and this Appendix D, the
term "Deferred Contributions" as it is defined in the Plan shall also
include any salary reduction contributions that were transferred into the
Plan in a trustee-to-trustee transfer from the AOT Plan.
(m) Annuity Starting Date. For purposes of this Appendix D, the term
"Annuity Starting Date" means the first day of the first period for which
an amount is payable as an annuity. If the amount payable is a single sum
payment, the Annuity Starting Date is the date on which a properly
completed claim for such benefit is filed under Section 15 of the Plan.
D-8
APPENDIX E
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CMS PARTICIPATION
-----------------
CMS Plan Distributions. If a Participant's Plan Benefit consists in
whole or part of amounts subject to section 417 of the Code that are merged into
the Plan from the CMS Plan, the following distribution and withdrawal rules
shall apply to the entire Plan Benefit in lieu of those provided by the Plan.
The Plan's rules on distributions and withdrawals shall also apply, except to
the extent they are inconsistent with these provisions:
(a) Rollover Accounts. A Participant who has one or more Rollover
Accounts consisting of rollover contributions that are merged into the Plan
from the CMS Plan in 1993 may make reinvestment elections pursuant to
Subsection 7(c) of the Plan. Such a Participant may also at any time
withdraw from such Accounts any amount which does not exceed the balance in
such Accounts as of any Valuation Date. A Participant who wishes to make a
withdrawal under this Subsection (a) shall file an election with the
Company in the prescribed manner.
(b) Payment of Withdrawals; Limitations. All withdrawals under this
Appendix E shall be paid in cash as soon as reasonably practicable after a
request
E-1
has been received (unless such request is denied by the Company). In the
case of a married Participant, a requested withdrawal shall not be paid
unless the Participant's spouse has consented in writing to the payment of
such withdrawal in the form of a lump sum (instead of a Qualified Joint and
Survivor Annuity). The spouse's consent shall be given within the 90-day
period preceding payment of the withdrawal.
(c) Time of Distribution: General Rules. A Participant's Plan
Benefit shall be distributed to him or her on or about the date that he or
she has elected. Within the 60-day period commencing 90 days before the
Annuity Starting Date the Company shall provide to each Participant the
explanation of his or her distribution options (including his or her right
to defer receipt of the distribution) prescribed by the applicable
regulations. The distribution election shall be made in the prescribed
manner and filed with the Company after the Participant has received such
explanation. Where applicable, the distribution election shall include the
written consent of the Participant to the distribution of his or her Plan
Benefit before he or she attains age 65.
(d) Normal Form of Distribution: Annuity Contract. A Participant's
Plan Benefit shall be
E-2
distributed in the form of a nontransferable immediate annuity, unless such
Participant has elected one of the optional forms of distribution described
in Subsection (e) below. The forms of immediate annuity available shall
include a Qualified Joint and Survivor Annuity and a single-life annuity.
In each case, the Participant's entire Plan Benefit shall be distributed in
substantially nonincreasing payments over a period not exceeding the
greatest of (i) the Participant's own lifetime, or (ii) the lifetimes of
the Participant and his or her spouse. In the case of a married
Participant who does not otherwise elect, the immediate annuity shall
provide for payments in the form of a Qualified Joint and Survivor Annuity.
In the case of an unmarried Participant who does not otherwise elect, the
immediate annuity shall provide for payments in the form of a life annuity
payable over the Participant's own lifetime only.
(e) Optional Forms of Distribution: Lump Sum or Installments. A
Participant may elect to have his or her Plan Benefit distributed in the
form of a single sum in cash. Alternatively, a Participant may elect to
have his or her Plan Benefit distributed in the form of a series of
substantially equal monthly, quarterly, semiannual or annual payments for a
period not exceeding the life expectancy of the Participant
E-3
or the life and last survivor expectancy of the Participant and his or her
Beneficiary. The present value of the amounts payable to the Participant
shall be more than 50 percent of the present value of the Participant's
entire Plan Benefit, unless the Plan Benefit is payable as a Qualified
Joint and Survivor Annuity. All life expectancies and present values shall
be determined not later than the date when payments commence.
(f) Death of Participant Before Distribution. If a Participant dies
before receiving his or her Plan Benefit, then such Participant's
Beneficiary shall be entitled to receive such Plan Benefit. (Subsection
12(j) of the Plan provides that the surviving spouse of a married
Participant shall be his or her Benefi-ciary, unless such Participant, with
the spouse's consent, has otherwise elected prior to his or her death.)
Upon the death of the Participant, the Bene-ficiary shall file an
application for benefits with the Company in the prescribed manner. The
Beneficiary may make the election that the Participant would have been
entitled to make with respect to the form of the benefit. In the absence
of an election of a form of benefit, a Plan Benefit payable to a
Beneficiary shall be distributed in the form of a life annuity over the
Beneficiary's lifetime. Except in the case of
E-4
installments, the Participant's entire Plan Benefit shall be distributed in
substantially equal nonin-creasing payments over a period not exceeding the
greater of the Beneficiary's lifetime or the Benefi-ciary's life
expectancy. The Beneficiary's life expectancy shall be determined not
later than the date when payments commence. Payments shall commence on or
about the date selected by the Beneficiary; provided, however, that such
date shall not be later than (i) 12 months after the date of the
Participant's death, if the Beneficiary is not the Participant's surviving
spouse, or (ii) the latest date provided in Subsection 9(c) of the Plan, if
the Beneficiary is the Participant's surviving spouse. Any election by a
surviving spouse under this Subsection (f) shall be made only during the
90-day period preceding the Annuity Starting Date.
(g) Election of Form of Distribution. An elec-tion of a form of
annuity under Subsection (d) above or one of the optional forms of
distribution under Subsection (e) above shall be made in the manner pre-
scribed by the Company. Such election may be made only during an election
period consisting of the 90 consecutive days ending on the Participant's
Annuity Starting Date. A Participant may revoke any election of a form of
annuity or an optional form of
E-5
distribution (without the consent of the Company) at any time prior to the
end of such election period. If the Participant, having revoked a prior
election, does not make another election within such election period, then
his or her Plan Benefit shall be distributed in the form specified in
Subsection (d) above. In the case of a married Participant, any election
involving a waiver of the Qualified Joint and Survivor Annuity shall not
take effect unless the Participant's spouse consents in writing to the
election during such election period. Any spousal consent shall be in
writing and shall be witnessed by a plan representa-tive (if permitted by
the Company) or by a notary public. The spousal consent shall acknowledge
the effect of the Participant's action and shall specify the particular
optional form of benefit being elected or the specific non-spouse
Beneficiary being desig-nated (including any class of Beneficiaries or any
contingent Beneficiaries).
(h) Information on Distribution Options. Within the 60-day period
commencing 90 days before the Annuity Starting Date, the Company shall
provide to each Participant (whether or not married) the written
explanation of the Qualified Joint and Survivor Annuity prescribed by the
applicable regulations. Within the three-year period commencing with the
first
E-6
day of the Plan Year in which the Participant attains age 32 or within the
one-year period commencing when he or she becomes a Participant (whichever
ends later), the Company shall provide to each Participant the explanation
of the qualified preretirement sur-vivor annuity prescribed by the
applicable regula-tions. In the case of a Participant who ceases to be an
Employee before attaining age 35, the explanation of the qualified
preretirement survivor annuity shall be provided not later than one year
after the termination of employment.
(i) Determination of Marital Status. Whether a Participant is
married and the identity of his or her spouse (if any) shall be determined
by the Company as of the earlier of (i) his or her Annuity Starting Date or
(ii) the date of his or her death.
(j) Withdrawals. Withdrawals under Subsections 10(a) and (b) of the
Plan shall not be permitted by a married Participant unless the spousal
consent requirements of Subsection (b) of this Appendix E are satisfied.
(k) Loans. No loan shall be granted pursuant to Section 11 of the
Plan to a married Participant unless the spouse of such Participant, in
accordance with the
E-7
requirements of Subsection (b) of this Appendix E, consents to the
assignment of the Plan Benefit as security for repayment of the loan, and
any actions the Company subsequently may take under Section 11 of the Plan.
(l) Beneficiary. In the case of a married Participant, any
designation of a person other than his or her spouse as the sole primary
Beneficiary, if made before the first day of the Plan Year in which the
Participant attains age 35, shall become invalid on such day. The
Participant may make a new desig-nation (with spousal consent) on or after
such day. If the Participant dies on or after such day without having made
a new designation, his or her spouse shall be the Beneficiary.
A Beneficiary designation shall not be valid unless such designation
is made on the Beneficiary designation form prescribed by the Company.
(m) Contributions. For purposes of the Plan and this Appendix E, the
term "Deferred Contributions" as it is defined in the Plan shall also
include that portion of a Participant's CMS Plan accounts attribut-able to
elective deferral contributions under the CMS Plan that are merged into the
Plan from the CMS Plan.
E-8
For purposes of the Plan and this Appendix E, the term "Regular Company
Contributions" as it is defined in the Plan shall include that portion of a
Participant's CMS Plan accounts attributable to employer profit sharing and
matching contributions under the CMS Plan that are merged into the Plan
from the CMS Plan.
(n) Definitions. Capitalized terms that are used in this Appendix E
that are not defined below shall have the same meaning as those terms do in
the Plan.
(i) "Annuity Starting Date" means the first day of the first
period for which an amount is payable as an annuity or in
installments. If the amount payable is a single sum payment, the
Annuity Starting Date is the date on which a properly completed claim
for such benefit is filed under Section 15 of the Plan.
(ii) "Qualified Joint and Survivor Annuity" means a monthly
annuity which is actuarially equivalent to the Participant's Plan
Benefit and which is payable for the joint lives of the Par-ticipant
and his or her spouse, with 50 percent of such annuity continued for
the life of the survivor.
E-9
APPENDIX F
----------
DIRECT TRANSFER PROVISIONS
--------------------------
(Effective January 1, 1993)
Section 1.
- ---------
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a distributee's election under this Appendix F, a distributee
may elect, subject to the conditions and administrative procedures prescribed by
the Company, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in a direct
rollover.
Section 2. Definitions.
- --------- -----------
(a) Eligible Rollover Distributions. An eligible rollover
distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eli-gible rollover distribution does
not include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's Benefi-ciary, or for a specified period
of 10 years or more; any dis-tribution to the extent such distribution is
required under section 401(a)(9) of the Code; and the portion of any distri-
bution that is not includable in gross income (determined
F-1
without regard to the exclusion for net unrealized appreciation with respect to
employer securities).
(b) Eligible Retirement Plan. An eligible retirement plan is an
individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or an individual retirement annuity.
(c) Distributee. A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in section 414(p)
of the Code, are distributees with regard to the interest of the spouse or
former spouse.
(d) Direct Rollover. A direct rollover is a payment by the Plan to
an eligible retirement plan.
Capitalized terms used in this Appendix F that are not defined herein
shall have the same meaning as those terms do in the Plan.
F-2
HEWLETT-PACKARD COMPANY
Annual Meeting of Shareholders February 22, 1994
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints Lewis E. Platt, and D. Craig Nordlund and each
of them as proxies for the undersigned, with full power of substitution, to act
and to vote all the shares of Common Stock of Hewlett-Packard Company held of
record by the undersigned on December 27, 1993, at the annual meeting of
shareholders to be held on Tuesday, February 22, 1994, or any adjournment
thereof.
IMPORTANT--This Proxy must be signed and dated on the reverse side.
HEWLETT-PACKARD COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
_________
/________/
1. Election of Directors-- For All
T.E. Everhart, J.B. Fery, J.P.G. Gimon, For Withhold Except nominees(s) written below:
R.A. Hackborn, H.J. Haynes, W.B. Hewlett, / / / / / /
S.M. Hufstedler, G.A. Keyworth II, P.F. Miller, Jr., ----------------------------------------------------
S.P. Orr, D.W. Packard, D.E. Petersen, L.E. Platt,
and R.P. Wayman 4. In their discretion the Proxies are authorized
(INSTRUCTION: To withhold authority to vote for any to vote upon such other business as may
individual nominee write that nominee's name in the properly come before the meeting.
space provided)
For Against Abstain THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN
2. Proposal to Amend the Tax Saving Capital / / / / / / THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
Accumulation Plan. SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ITEMS 1, 2, AND 3.
3. Proposal to Approve the Appointment of For Against Abstain Dated___________________, 1994
Price Waterhouse as Independent Accountants. / / / / / /
--------------------------------------------------
Signature
--------------------------------------------------
Signature
Please sign exactly as your name or names appear on the reverse side. For joint
accounts, each owner should sign. When signing as executor, administrator,
attorney, trustee or guardian, etc., please give your full title.