Document:

Exhibit
10(c)

 

HEWLETT-PACKARD
COMPANY

 

1995
INCENTIVE STOCK PLAN

 

PART 1. PLAN
ADMINISTRATION AND ELIGIBILITY

 

I. PURPOSE

 

The purpose of this 1995 Incentive Stock Plan (the “Plan”) of
Hewlett-Packard Company (“HP” or the “Company”) is to encourage ownership in
the Company by key personnel whose long-term employment is considered essential
to the Company’s continued progress and thus to provide them with a further
incentive to continue in the employ of the Company or its subsidiaries or
affiliates. (Each of the Company and all such subsidiaries and affiliates is
referred to hereinafter as a “Participating Company.”)

 

II. ADMINISTRATION

 

The Board of Directors (the “Board) of the Company or any committee
(the “Committee”) of the Board that will satisfy Rule 16b-3 of the Exchange
Act, and any regulations promulgated thereunder, as from time to time in
effect, including any successor rule (“Rule 16b-3), shall supervise and
administer the Plan.  The Committee
shall consist solely of two or more non-employee directors of the Company, who
shall be appointed by the Board.  A
member of the Board shall be deemed to be a “non-employee director” only if he
satisfies such requirements as the Securities and Exchange Commission may
establish for non-employee directors under Rule 16b-3.  Members of the Board receive no additional
compensation for their services in connection with the administration of the
Plan.

 

The Board or the Committee may adopt such rules or guidelines as it
deems appropriate to implement the Plan. 
All questions of interpretation of the Plan or of any shares issued
under it shall be determined by the Board or the Committee and such
determination shall be final and binding upon all persons having an interest in
the Plan.  Any or all powers and
discretion vested in the Board or the Committee under this Plan may be
exercised by any subcommittee so authorized by the Board or the Committee and
satisfying the requirements of Rule 16b-3 for employees subject to Section 16
of the Exchange Act.  In addition, the Board
or the Committee may delegate to the Executive Committee of the Board of
Directors the power to approve stock options and stock awards to employees not
subject to Section 16 of the Exchange Act.

 

Delegation of Authority for the Day-to-Day Administration of
the Plan.  Except to the extent
prohibited by applicable law or applicable rules of a stock exchange, the Board
or any of its committees as shall be administering the Plan may delegate to one
or more individuals the day-to-day administration of the Plan and any of the
functions assigned to it in this Plan. The delegation may be revoked at any
time.

 

 

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III. PARTICIPATION IN THE PLAN

 

Key employees of the Company, including officers, and directors of the
Company, who are also employed by a Participating Company, shall be eligible to
participate in the Plan.

 

IV. STOCK SUBJECT TO THE PLAN

 

The maximum number of shares that may be awarded under the Plan shall
be 128,000,000 shares of the Company’s $0.01 par value Common Stock (“Common
Stock”). If a class of Preferred Stock is created and authorized by the
Company’s Amended Certificate of Incorporation, Preferred Stock may be used in
lieu of Common Stock for Plan grants. The limitation on the number of shares
that may be awarded under the Plan shall be subject to adjustment as provided
in Section XXII of the Plan.

 

The grant of a stock award not pursuant to an option under the Plan
(“Stock Award”) shall be subject to such restrictions as the Committee shall
determine to be appropriate, including but not limited to restrictions on
resale, repurchase provisions, special vesting requirements or forfeiture
provisions. The grant and exercise of a stock option shall be subject to such
restrictions as the Committee may determine to be appropriate in accordance
with Section VII of the Plan.

 

The Committee may authorize conversion, assumption or substitution
under the Plan of any or all outstanding stock options or other stock-based
awards (“Conversion Options”) held by employees of an entity (the “Acquired
Company”) with whom HP or one of HP’s subsidiaries engages in an
Acquisition.  For purposes of this
paragraph, an “Acquisition” shall mean (1) a dissolution or liquidation of all
or substantially all of the assets of the Acquired Company, (2) a purchase of
assets from the Acquired Company, whether or not the purchased assets represent
substantially all of the assets of the Acquired Company or one of its
subsidiaries, (3) a reverse merger in which the Acquired Company is the
surviving corporation but the shares of the Acquired Company’s voting stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, or (4) any other capital reorganization or purchase in which more
than fifty percent (50%) of the shares of the Acquired Company entitled to vote
are exchanged.  Any conversion,
assumption or substitution will be effective on the closing date of the
Acquisition.  The Conversion Options may
be nonstatutory options or incentive stock options entitled to special tax
treatment under Section 422 of the Code (“ISOs”). Notwithstanding any other
provision of this Plan, the Committee may specify the Conversion Options’ terms
and conditions, which may be different from those applicable to other options
or awards granted under the Plan and may replicate the material terms and
conditions of the Conversion Options.

 

The Committee may authorize the conversion under the Plan of any or all
outstanding stock appreciation rights held by employees of a Participating
Company.  Such converted options are
referred to as “FSAR Conversion Options”, and shall be nonstatutory options.

 

 

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All FSAR Conversion Options shall have the same terms and conditions as
options granted under the Plan.

 

If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, or if any Stock Awards are
forfeited, the forfeited shares or shares allocable to the unexercised portion
of such option shall again become available for grant pursuant to the Plan.

 

PART 2. OPTIONS AND STOCK
APPRECIATION RIGHTS

 

V. INCENTIVE STOCK OPTIONS

 

Any option granted under the Plan may be designated by the Committee as
a non-statutory option or as an ISO.

 

No option intended to qualify as an ISO may be granted under the Plan
if such grant, together with any applicable prior grants, would exceed any
maximum established under the Internal Revenue Code for ISOs that may be
granted to a single employee. Should it be determined that any ISO granted
under the Plan exceeds such maximum, the ISO shall be null and void to the
extent, but only to the extent, of such excess. Section 422(d)(1) of the
Internal Revenue Code presently provides that with respect to options granted
after December 31, 1986 the aggregate fair market value (determined as of the
time the ISO is granted) of the stock with respect to which ISOs are
exercisable for the first time by an employee in any calendar year under all
incentive stock option plans of the Company shall not exceed $100,000.

 

Nothing in this section shall be deemed to prevent the grant of options
in excess of the maximum established by the Internal Revenue Code where such
excess amount is treated as a nonstatutory option not entitled to special tax
treatment under Section 422 of the Internal Revenue Code.

 

VI. TERMS, CONDITIONS AND FORM OF OPTIONS

 

Each option granted under this Plan shall be authorized by action of
the Committee and shall be evidenced by a written agreement in such form as the
Committee shall from time to time approve, which agreements shall comply with
and be subject to the following terms and conditions:

 

    A. Options Non-transferable

 

      (1) General

 

Except as provided in subsection VI.A(2) below, each option granted
under the Plan by its terms shall not be transferable by the optionee otherwise
than by will, or by the laws of descent and distribution, and shall be
exercised during the lifetime of the optionee only by him. No option or
interest therein may be transferred, assigned, pledged or 

 

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hypothecated by the optionee during his lifetime, whether by operation
of law or otherwise, or be made subject to execution, attachment or similar
process.

 

      (2) Transferability to Certain Vehicles

 

The Committee, in its
sole discretion, may establish, as 
permitted by applicable law, rules and conditions under which an  optionee may transfer an option to those
types of trusts or other  vehicles that
the Committee may determine to be eligible for 
transfer.

 

    B. Period of Option. The
Committee may specify, at the time of grant, a vesting schedule of any option.
If no vesting schedule is specified, no option may be exercised before the
first anniversary of the date upon which it was granted, nor may it be
exercised as to more than one-fourth of the number of shares covered thereby
before the second anniversary of such date, nor as to more than one-half of the
number of shares covered thereby before the third anniversary of such date, nor
as to more than three-fourths of the number of shares covered thereby before
the fourth anniversary of such date. Any option granted pursuant to the Plan shall
become exercisable in full upon the retirement of the optionee because of age
or total and permanent disability or upon the death of the optionee. Except as
provided in this subsection B, no option shall be exercisable after the
expiration of 10 years from the date upon which such option is granted.  However, the Committee may, at the time an
option is granted to any employee who is not subject to Section 16 of the
Exchange Act, specify a different term for the option up to a maximum term of
10.5 years.  Each option shall be
subject to termination before its date of expiration as hereinafter provided.

 

    C. Exercise of Options.
Options may be exercised only by written notice to the Company at its head
office accompanied by payment in U.S. dollars of the full consideration for the
shares as to which they are exercised, and, with respect to nonstatutory
options, by payment of all applicable U.S. withholding taxes upon such
exercise. In addition, if and to the extent authorized by the Committee,
optionees may make all or any portion of any payment due to the Company upon
exercise of an option by delivery of any property (including securities of the
Company) other than cash, as long as such property constitutes valid
consideration for the stock under applicable law.

 

The Committee may, but need not, permit the payment of required tax
withholding due upon exercise of an option by the withholding of shares
otherwise issuable upon exercise of the option. Option shares withheld in
payment of such taxes shall be valued at the fair market value of the stock on
the date of exercise. Fair market value shall be deemed to be the mean of the
highest and lowest quoted selling prices for such shares on the exercise date
as reported on the New York Stock Exchange Composite Tape. The Committee may
impose special restrictions on the use of option shares as payment for
withholding taxes by individuals subject to Section 16 of the Exchange Act.

 

No option may be exercised while the optionee is on any leave of
absence from the Company, other than an approved personal or medical leave
having an employment guaranty. Options will continue to vest during any
authorized leave of absence, and may 

 

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be exercised to the extent permitted by subsection VI.B above upon the
optionee’s return to an active employment status.

 

    D. Termination of Options

 

      (1) Termination of
Employment

 

All rights of an employee in an option, to the extent that it has not
been exercised, shall terminate upon the termination of his employment for any
reason.

 

      (2) Retirement and Death

 

In the event of an employee’s retirement due to age or total and
permanent disability, all rights of an employee in an option, to the extent
that it has not been exercised, shall terminate three years from the date
thereof with respect to nonstatutory options and three months from the
retirement date with respect to ISOs or upon expiration of the option,
whichever shall first occur. In the event of the death of the employee, the
option shall terminate upon failure of his designated representative to
exercise the option in accordance with the time period provided in subsection
VI(E) below.

 

      (3) Leave of Absence

 

The Committee may, but shall not be required to, authorize the
continuation of options held by employees who, at the Company’s request or with
the Company’s consent, are terminating or taking a leave of absence from the
Company to accept employment with not-for-profit or for-profit corporations,
governmental agencies, industry associations or other organizations in
connection with the Company’s investments or strategic alliances. Such approval
must be obtained from the Committee prior to termination of employment in order
to prevent the immediate termination of options. The Committee may, in its sole
discretion, delegate its authority under this subsection to the Executive
Committee.

 

      (4) Divestiture

 

If an employee terminates because of a divestiture by the Company, the
Committee may, in its sole discretion, amend any option previously granted to
such employee pursuant to the Plan such that the option becomes exercisable in
full and/or permits the employee to exercise such option which has not already
been exercised until the earlier of: (i) three months from the closing date of
the divestiture, or such longer date, if any, which the Committee may
authorize, or (ii) the expiration of the option. The Committee may, in its sole
discretion, delegate its authority under this subsection to the Executive
Committee.

 

      (5) Voluntary Severance
Program

 

If an employee terminates as a result of participation in a  Participating Company voluntary severance
program approved by the  Executive
Committee, any option granted pursuant to the Plan shall become exercisable in
full, and the employee may exercise any 

 

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such option that has not already been exercised until the earlier of
(i) three months from the employee’s termination date, or (ii) the expiration
of the option.

 

    E. Exercise by
Representative Following Death of Employee. The employee, by written notice to
the Company, may designate one or more persons (and from time to time change
such designation) including his legal representative, who, by reason of his death,
shall acquire the right to exercise all or a portion of the option. If the
person or persons so designated wish to exercise any portion of the option,
they must do so within one year after the death of the employee or retired
employee, as the case may be. All rights of the representative(s) in the option
shall terminate upon failure to exercise the option within the time period set
forth in this subsection VI.E. Any exercise by a representative shall be
subject to the provisions of this Plan.

 

VII. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS

 

The Committee shall have the power to modify, extend or renew
outstanding options and authorize the grant of new options in substitution
therefor, provided that any such action may not have the effect of altering or
impairing any rights or obligations of any option previously granted without
the consent of the optionee.

 

The Committee shall have the power to lower the exercise price of an
outstanding option not intended to qualify as an ISO under the Internal Revenue
Code; provided, however, that the exercise price per share may not be reduced
below 75% of the fair market value of a share of Common Stock on the date the
action is taken to reduce the exercise price. Such fair market value shall be
deemed to be the mean of the highest and lowest quoted selling prices for such
shares on that date as reported on The New York Stock Exchange Composite Tape.

 

VIII. OPTION PRICE

 

The option price per share for the shares covered by each nonstatutory
option shall be not less than 75% of the fair market value of a share of Common
Stock on the date the option is granted. The option price per share for ISOs
shall be not less than the fair market value on the option grant date. Such
fair market value shall be deemed to be the mean of the highest and lowest
quoted selling prices for such share on that date as reported on The New York
Stock Exchange Composite Tape. The option price per share for Conversion
Options shall be determined by the Committee at the time of the related merger
or acquisition.

 

IX. LOANS FOR EXERCISE OF OPTIONS

 

Any option agreement under this Plan entered into with an employee may,
but need not, provide that the Company shall lend to the employee who holds the
option the funds for any exercise of his option. Any such loans made to
individuals subject to Section 16 of the Exchange Act shall be at a rate of
interest adequate to avoid imputation of income under Sections 483 and 7872 of
the Internal Revenue Code and shall be for a term not to 

 

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exceed 15 months from the date of exercise of the related option. Any
loan by the Company to fund the exercise of an option shall be subject to such
other terms and conditions as shall be set forth in the option agreement, which
terms and conditions shall be determined by the Committee at the time of the
grant of the option. Loans may or may not be secured by stock issued pursuant
to such option exercises, at the Committee’s discretion.

 

X. STOCK APPRECIATION RIGHTS

 

  A. General. This section shall
apply to employees who hold options heretofore or hereafter granted under the
Plan (“Options”). The Committee may, but shall not be required to, grant to
such employees stock appreciation rights as herein provided with respect to not
more than the number of shares (from time to time) subject to the Options held
by such employees. The stock appreciation rights shall be integral parts of the
respective Options and shall have no existence apart therefrom.

 

A stock appreciation right shall be the right of the holder thereof to
elect to surrender part or all of any Option that is wholly exercisable, or of
any exercisable portion of an Option that is partially exercisable, and receive
in exchange therefore cash or shares of Common Stock (valued at current fair
market value) or a combination thereof. Such cash or shares or combination
shall have an aggregate value (“Appreciation”) equal to the excess of the
current fair market value of one share over the Option price of one share
specified in such Option multiplied by the number of shares subject to such
Option or the portion thereof that is surrendered. The current fair market
value of a share shall be the mean of the highest and lowest quoted selling
prices for shares as reported on The New York Stock Exchange Composite Tape on
the day on which a stock appreciation right is exercised, or if no sale was
made on such date, then on the next preceding day on which such a sale was
made. No fractional share shall be issued on the exercise of a stock
appreciation right, and settlement therefore shall be made in cash.

 

Each stock appreciation right granted under this Plan shall be subject
to the following terms and conditions: (1) each stock appreciation right shall
be evidenced by a written agreement between the Company and the holder in such
form as the Committee shall authorize; (2) each stock appreciation right
granted under the Plan by its terms shall not be transferable by the holder
otherwise than by will or by the laws of descent and distribution, and shall be
exercised during the lifetime of the holder only by him, and no stock
appreciation right or interest therein may be transferred, assigned, pledged or
hypothecated by the holder during his lifetime, whether by operation of law or
otherwise, or be made subject to execution, attachment or similar process; (3)
all rights of an employee in a stock appreciation right, to the extent that it
has not been exercised, shall terminate upon the death of the employee or the
termination of his employment for any reason other than retirement because of
age or total and permanent disability, and in case of such retirement three
years from the date thereof with respect to nonstatutory Options and three
months from the date thereof with respect to Options intended to qualify as
ISOs or upon expiration of the Option, whichever shall first occur; provided,
however, that the employee, by written notice to the Company, may designate one
or more persons 

 

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(and from time to time change such designation), including his legal
representative, who, by reason of his death, shall acquire the right to
exercise all or a portion of the rights accrued under the stock appreciation
right as of the date of his death. If the person or persons so designated wish
to exercise any portion of the stock appreciation right, they must do so within
one year after the death of the employee or retired employee, as the case may
be, and such exercise shall be subject to the provisions of this Plan; and (4)
the life of stock appreciation rights shall be coterminous with the life of the
Options.

 

The holder of a stock appreciation right may exercise the same by (1)
filing with the Secretary of the Company a written election, which election
shall be delivered by the Secretary to the Committee, specifying (a) the Option
or portion thereof to be surrendered, and (b) the percentage of the
Appreciation that he desires to receive in cash, if any; and (2) surrendering
such Option for cancellation or partial cancellation, as the case may be;
provided, however, that any election that specifies that the holder of a stock
appreciation right desires to receive any portion of the Appreciation in cash
shall be of no force or effect unless and until the Committee shall have
consented to such election.

 

Upon exercise of a stock appreciation right, the number of shares
reserved for issuance under the Plan shall be reduced by the number of shares
covered by the Option, or the portion thereof, which is surrendered in connection
with such exercise.

 

Nothing in the Plan shall be construed to give any eligible employee
any right to be granted a stock appreciation right. Neither the Plan nor the
granting of a stock appreciation right nor any other action taken pursuant to the
Plan shall constitute or be evidence of any agreement or understanding, express
or implied, that the Company will employ the holder of a stock appreciation
right for any period of time or in any position or at any particular rate of
compensation. The holder of a stock appreciation right shall have no rights as
a shareholder with respect to the shares covered by his stock appreciation
right until the date of issuance to him of a stock certificate therefor, and,
except as otherwise specifically provided in the stock option agreement for the
Options, no adjustment will be made for dividends or other rights for which the
record date is prior to the date such certificate is issued.

 

The Board or the Committee shall have the sole discretion to consent to
approve or disapprove, in whole or in part, any election to receive any portion
of the Appreciation in cash.

 

B. ADDITIONAL RESTRICTIONS APPLICABLE TO SECTION 16 EMPLOYEES.  No stock appreciation right or related
Option may be exercised during the first six months of its term, except in the
event of death or total and permanent disability of the holder occurring prior
to the expiration of this six-month period.

 

Stock appreciation rights granted to individuals subject to Section 16
of the Exchange Act must comply with any applicable provisions of Rule
16b-3.  These rights shall contain such
additional conditions or restrictions as may be required under this rule (or 

 

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any successor rule) to qualify for the maximum exemption from Section
16 of the Exchange Act with respect to Plan transactions.

 

XI. INDIVIDUAL GRANT LIMITATION

 

  The Plan prohibits a single
participant from receiving grants of options or stock appreciation rights
during any single fiscal year of the Company for more than an aggregate of
1,200,000 shares of Common Stock (subject to adjustment as provided in Section
XXII of the Plan). The amount of any payment of stock appreciation rights in
cash shall be based upon the fair market value of Common Stock on the date of
exercise. Fair market value shall be the mean of the high and low prices of
such stock on The New York Stock Exchange Composite Tape on the date in
question, or if no sales of such stock were made on that date, the mean of the
high and low prices of such stock on the next preceding day on which sales were
made.

 

PART 3. STOCK AND CASH
AWARDS

 

XII. STOCK AND CASH AWARD DETERMINATION

 

The Committee may grant an eligible employee Stock Awards or awards of
cash (“Cash Awards”) at such times and in such amounts as the Committee may
designate which in its opinion fully reflect the performance level and
potential of such employee. The Committee shall designate whether such awards
are payable in Common Stock, cash, or a combination thereof. Such awards shall
be made in accordance with such guidelines as the Committee may from time to
time adopt. Stock Awards and Cash Awards shall be independent of any grant of
an option under this Plan and shall be made subject to such restrictions as the
Committee may determine to be appropriate.

 

XIII. PAYMENT OF STOCK OR CASH AWARDS

 

  A. No employee shall have the
right to receive payment of any Stock Award or Cash Award until notified of the
amount of such award, in writing, by the Committee or its authorized delegate.

 

  B. Payment of Cash Awards
shall be made in a lump sum or in annual installments over such period as the
Committee may designate, which period shall not exceed five years, provided
that the Committee may from time to time designate minimum installment amounts.

 

  C. After an award of Common
Stock subject to restrictions (“Restricted Stock”), such shares will be
deposited in certificate or book entry form in escrow with the Company’s
Secretary. The employee shall retain all rights in the Restricted Stock while
it is held in escrow including but not limited to voting rights and the right
to receive dividends, except that the employee shall not have the right to
transfer or assign such shares until all restrictions pertaining to such shares
are terminated, at which time the applicable stock 

 

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certificates shall be released from escrow and delivered to the
employee by the Company’s Secretary.

 

  D. The Committee may permit,
on such terms as it deems appropriate, use of Restricted Stock as partial or
full payment upon exercise of a stock option under the Company’s incentive
stock option or compensation plans or this Plan. In the event shares of
Restricted Stock are so tendered as consideration for the exercise of an
option, a number of the shares issued upon the exercise of said option, equal
to the number of shares of Restricted Stock used as consideration therefor,
shall be subject to the same restrictions as the Restricted Stock so submitted
plus any additional restrictions that may be imposed by the Committee.

 

XIV. TERMINATION OF RESTRICTIONS ON STOCK AWARDS

 

The Committee will establish the period or periods after which the
restrictions on Restricted Stock will lapse.

 

The Committee may in its discretion permit an employee to elect to
receive in lieu of shares of Restricted Stock, at the expiration of the
restrictions, a cash payment equal to the fair market value of the Common Stock
on the date the restrictions lapse. The Committee may also permit the employee
to elect to pay required tax withholding due upon the lapse of restrictions
with part of the shares due the employee at such time. The shares cancelled in
payment of required tax withholding shall be valued at the fair market value of
the Common Stock on the date the restrictions lapse. Fair market value shall be
the mean of the high and low prices of such stock on The New York Stock
Exchange Composite Tape on the date in question, or if no sales of such stock
were made on that date, the mean of the high and low prices of such stock on
the next preceding day on which sales were made.

 

XV. RESTRICTIONS AND FORFEITURE OF STOCK AWARDS

 

The Company’s obligation to deliver stock held in escrow is subject to
the condition that the employee remain an employee of the Company on active or
authorized leave status or be under contract to provide services to the Company
as provided in Section XVII hereof for the entire deferral and/or restriction
period, including mandatory and optional deferrals. If the employee fails to
meet this condition, the employee’s right to any such unpaid amounts or
undelivered stock shall be forfeited. This provision may be waived by the
Committee in exceptional circumstances, including the employee serving at the
Company’s request or with the Company’s consent as an employee of a
not-for-profit or for-profit corporation, a governmental agency, industry
association or other similar organization in connection with the Company’s
investments or strategic alliances. Unless the Committee provides otherwise, in
the event an employee holding restricted shares ceases to be on active pay
status during the restricted period for a period of more than six months, the
restricted period shall be extended by a period of time equal to the length of
the period of inactive status.

 

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XVI. DEATH OF A PARTICIPATING EMPLOYEE HOLDING RESTRICTED STOCK

 

  A. By written notice to the
Company, an employee who has received a grant of Restricted Stock may designate
one or more persons (and from time to time change such designation) who, by
reason of his death, shall acquire the right to receive any vested but unpaid
awards held by the employee at the time of his death. Such awards shall be paid
to the designated representative at such time and in such manner as if the
employee were living.

 

  B. In the event of the death
of an employee holding unvested restricted shares, the employee’s designated
representative shall be entitled to receive a prorated number of shares
determined by dividing the number of whole years lapsed since the grant date by
the number of years in the restricted period and multiplying this ratio by the
number of shares subject to the restricted stock award. Remaining unvested
shares shall be forfeited unless additional payments are specifically
authorized by the Committee.

 

  C. If at the time of the
employee’s death, there is no effective beneficiary designation as to all or
some portion of the awards hereunder, such awards or such portion thereof shall
be paid to or on the order of the legal representative of the employee’s
estate. In the event of uncertainty as to the interpretation or effect of any
notice of designation, the Committee’s decision with respect thereto shall be
conclusive.

 

XVII. RETIREMENT OR DISABILITY OF EMPLOYEE HOLDING STOCK AWARD

 

In the event of total and permanent disability of an employee who has
participated in the Plan, any unpaid but vested award shall be paid to the
employee if legally competent or to a committee or other legally designated
guardian or representative if the employee is legally incompetent.

 

At the time of grant of any Stock Award, the Committee may specify
special conditions or terms covering the status of such Stock Award upon the
retirement or total and permanent disability of the employee. If no provision
is made, and if the employee retires due to age or is totally and permanently
disabled but is still legally competent, the Company’s obligation to make any
payment due thereafter under the Stock Award feature of the Plan is subject to
the conditions that for the entire period of deferral or restriction, including
mandatory and optional deferrals:

 

    A. An employee retiring due
to age shall render as an independent contractor and not as an employee such
advisory or consultative services to the Company as shall be reasonably
requested by the Company’s Board of Directors (the “Board”) or the Executive
Committee in writing from time to time, consistent with the state of the
retired employee’s health and any employment or other activities in which such
employee may be engaged. For purposes of this Plan, the employee shall not be
required to devote a major portion of time to such services and shall be
entitled to reimbursement for any 

 

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reasonable out-of-pocket expenses incurred in connection with the
performance of such services;

 

    B. The employee shall not
render services for any organization or engage directly or indirectly in any
business which, in the opinion of the Committee, competes with, or is in
conflict with the interest of, a Participating Company. The employee shall be
free, however, to purchase, as an investment or otherwise, stock or other
securities of such organizations as long as they are listed upon a recognized
securities exchange or traded over-the-counter, or as long as such investment
does not represent a substantial investment to the employee or a significant
(greater than 10%) interest in the particular organization. For the purposes of
this subsection XVII(B), any organization that is engaged in the business of
producing, leasing or selling products or providing services of the type now or
at any time hereafter made or provided by a Participating Company shall be
deemed to compete with a Participating Company;

 

    C. The employee shall not,
without prior written authorization from the Company, disclose to anyone
outside a Participating Company, or use in other than a Participating Company’s
business, any confidential information   or material relating to the business of any Participating
Company, either during or after employment with a Participating Company; and

 

    D. The employee shall
disclose promptly and assign to the Company all right, title and interest in
any invention or idea, patentable or not, made or conceived by the employee
during employment by the Company, relating in any manner to the actual or
anticipated business, research or development work of the Company and shall do
anything reasonably necessary to enable the Company to secure a patent where
appropriate in the United States and in foreign countries.

 

XVIII. PERFORMANCE-BASED RESTRICTED STOCK AWARDS.

 

  A. Award Agreement. The
Committee, in its discretion, may grant performance-based restricted stock
awards to an eligible employee or make vesting of performance-based restricted
shares contingent upon the attainment of performance goals relating to: (1)
earnings growth, (2) return on shareholders’ equity, (3) earnings per share,
(4) return on assets, (5) revenue growth, (6)stock price, or (7) other business
goals defined by the Committee, each as may be adjusted by extraordinary
financial events, if applicable. Any such objectives and the period in which
such objectives are to be met will be determined by the Committee at the time
of grant and reflected in the written award agreement. The number or value of
performance shares that will be paid out to a participant at the end of the
performance period will depend on the extent to which the Company has met the
objectives determined by the Committee.

 

  B. Payment of
Performance-based Restricted Shares. Payment of earned performance-based
restricted shares is made as soon as practicable after the Committee has
determined that the performance goals have been met. The Committee, in its
discretion, may pay earned performance-based restricted stock in the form of
shares of Common Stock, cash 

 

12

 

or a combination thereof. Payment of performance-based restricted stock
in cash results in the return of the shares to the Plan, and the shares subject
to an award paid in cash will again be available for grant under the Plan.
Unless otherwise established by the Committee in the applicable award
agreement, upon a participant’s termination of employment, for any reason, all
remaining unearned performance-based restricted shares shall be forfeited and
returned to the Plan and shall again be available for award under the Plan. The
Committee shall also set forth in the grant the number of performance-based
restricted shares or the amount of payment to be made under a performance award
if the performance goals are met or exceeded, including the fixing of a maximum
payment (subject to subsection XVIII(D)).

 

  C. Nontransferability. A
performance share award is nontransferable other than by will, the laws of
descent and distribution or, if permitted by the Committee, beneficiary
designation, and a participant’s rights under an award are exercisable during
the participant’s lifetime only by the participant. The extent to which a
participant’s rights under an award of performance-based restricted stock are
exercisable, if at all, in the event of the total and permanent disability or
death during a performance period of a participant shall be determined by the
Committee at the time of grant.

 

  D. Maximum Payment. In any
fiscal year, no individual may receive payment for performance-based restricted
stock in excess of an aggregate of 1,200,000 shares of Common Stock, including
stock options, stock appreciation rights and other Stock Awards granted under
this Plan (subject to adjustment as provided in Section XXII of the Plan). The
amount of any payment of performance-based restricted shares in cash shall be
based upon the fair market value of the Common Stock on the date the
restrictions lapse. Fair market value shall be the mean of the high and low
prices of such stock on The New York Stock Exchange Composite Tape on the date
in question, or if no sales of such stock were made on that date, the mean of
the high and low prices of such stock on the next preceding day on which sales
were made.

 

PART 4. GENERAL
PROVISIONS

 

XIX. ASSIGNMENTS

 

The rights and benefits under this Plan may not be assigned except for
the designation of a representative or beneficiary, as provided in Sections VI,
X, XVI and XVIII.

 

XX. TIME FOR GRANTING OPTIONS OR STOCK AWARDS

 

All options for shares, stock appreciation rights and Stock Awards
subject to this Plan shall be granted, if at all, not later than 10 years after
the adoption of this Plan by the Board.

 

13

 

XXI. LIMITATION OF RIGHTS

 

  A. No Right to an Option or Stock Award.
Nothing in the Plan shall be construed to give any personnel of the
Participating Companies any right to be granted an option, Stock Award or Cash
Award.

 

  B. No Employment Right.
Neither the Plan, nor the granting of an option, Stock Award or Cash Award nor
any other action taken pursuant to the Plan shall constitute or be evidence of
any agreement or understanding, express or implied, that any of the
Participating Companies will employ a grantee for any period of time or in any
position, or at any particular rate of compensation.

 

  C. No Shareholder Rights for
Options. An optionee shall have no rights as a shareholder with respect to the
shares covered by his options until the date of the issuance to him of a stock
certificate therefor, and no adjustment will be made for dividends or other
rights for which the record date is prior to the date such certificate is
issued.

 

XXII. CHANGES IN PRESENT STOCK

 

In the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, or other change in the corporate
structure or capitalization affecting the Company’s present Common Stock,
appropriate adjustment shall be made by the Board in the number (including the
aggregate numbers specified in Section IV, XI and XVIII(D)) and kind of shares
that are or may become subject to options and Stock Awards granted or to be
granted hereunder, and in the option price of shares which are subject to
options granted hereunder.

 

XXIII. CHANGE IN CONTROL

 

In the event that the Company is merged into or acquired by another
entity in a transaction involving a change in control, the Committee shall have
complete authority and discretion, but not the obligation, to accelerate the
vesting of outstanding stock options and the termination of restrictions on
Stock Awards.

 

The Committee may also ask the Board to negotiate, as part of any
agreement involving a sale or merger of the Company, a sale of substantially
all the Company’s assets or similar transaction, terms providing protection for
employees holding stock options or Stock Awards.

 

XXIV. EFFECTIVE DATE OF THE PLAN

 

The Plan shall take effect on the date of adoption by the Board,
subject to approval by the shareholders of the Company at a meeting held within
12 months after the date of such adoption. Options, Stock Awards or Cash Awards
may be granted under the Plan at any time after the adoption of the Plan by the
Board and prior to the termination of this Plan.

 

14

 

XXV. AMENDMENT OF THE PLAN

 

The Board or the Committee may suspend or discontinue the Plan or
revise or amend it in any respect whatsoever; provided, however, that the
Company may seek shareholder approval of an amendment if determined to be
required by or advisable by any law or regulation, including without
limitation, any regulations of the Securities and Exchange Commission or the Internal
Revenue Service, the rules of any stock exchange on which the Company’s stock
is listed or other applicable law or regulation.

 

XXVI. NOTICE

 

Any written notice to the
Company required by any of the provisions of this Plan shall be addressed to the
Secretary of the Company and shall become effective when it is received.

 

XXVII. COMPANY BENEFIT PLANS

 

Nothing contained in this Plan shall prevent the employee prior to
death, or the employee’s dependents or beneficiaries after the employee’s
death, from receiving, in addition to any awards provided for under this Plan
and any salary, any payments under a Company retirement plan or which may be
otherwise payable or distributable to such employee, or to the employee’s
dependents or beneficiaries under any other plan or policy of the Company or
otherwise.

 

XXVIII. UNFUNDED PLAN

 

Insofar as it provides for awards of stock or cash, this Plan shall be
unfunded. Although bookkeeping accounts may be established with respect to
employees who are granted awards of stock under this Plan, any such accounts
will be used merely as a bookkeeping convenience. Except for the holding of
Restricted Stock in escrow pursuant to subsection XIII(C), the Company shall
not be required to segregate any assets that may at any time be represented by
awards of stock or cash, nor shall this Plan be construed as providing for such
segregation, nor shall the Company nor the Board nor the Committee be deemed to
be a trustee of stock or cash to be awarded under the Plan. Any liability of the
Company to any employee with respect to an award of stock or cash under this
Plan shall be based solely upon any contractual obligations that may be created
by the Plan; no such obligation of the Company shall be deemed to be secured by
any pledge or other encumbrance on any property of the Company.  Neither the Company nor the Board nor the
Committee shall be required to give any security or bond for the performance of
any obligation that may be created by this Plan.

 

XXIX. GOVERNING LAW

 

This Plan and all determinations made and actions taken pursuant hereto
shall be governed by the law of the State of California and construed
accordingly.

 

15

 

XXX. BUYOUT PROVISIONS

 

At any time, the
Committee may, but shall not be required to, authorize the Company to offer to
buy out for a payment in cash or Common Stock an option, stock appreciation
right, Stock Award or Restricted Stock previously granted based on such terms
and conditions as the Committee shall establish and communicate to the holder
in connection with such offer.

 

 

	
  11/24/94

  	
  Adopted by the Compensation Committee

  
	
  2/28/95

  	
  Approved by the Shareholders

  
	
  4/17/95

  	
  Two for one stock split

  
	
  7/16/96

  	
  Two for one stock split

  
	
  11/21/96

  	
  Part 1, Section II, Part 2, Section X and Part 4,
  Section XXV amended by the Compensation Committee

  
	
  7/17/97

  	
  Part 1, Section VI amended by the Compensation
  Committee

  
	
  2/12/99

  	
  Part 2, Section VI(B) & (D) amended by the
  Compensation Committee

  
	
  9/16/99

  	
  Part 1, Section VI amended by the Compensation
  Committee

  
	
  6/30/00

  	
  Part 2, Section VI(C) & Part 3, Section XIV
  amended by the Compensation Committee

  
	
  10/27/00

  	
  Two for one stock split in the form of a stock
  dividend

  
	
  9/12/02

  	
  Part 4, Section
  XXX added and plan restated by HR & Compensation Committee

  
	
  11/21/02

  	
  Part 1, Section
  II added new paragraph and plan restated by HR & Compensation Committee

  

 

 

16Exhibit
10(d)

 

HEWLETT–PACKARD
COMPANY

 

1990
INCENTIVE STOCK PLAN

 

 

PART 1.   PLAN ADMINISTRATION AND ELIGIBILITY

 

I. PURPOSE

 

The purpose of this 1990 Incentive Stock Plan (the
“Plan”) of Hewlett–Packard Company (the “Company”) is to encourage
ownership in the Company by key personnel whose long–term employment is
considered essential to the Company’s continued progress and thus to provide
them with a further incentive to continue in the employ of the Company or its
subsidiaries or affiliates. (The Company and all such subsidiaries are
collectively referred to hereinafter as the “Participating Companies.”)

 

II. ADMINISTRATION

 

The Board of Directors (the “Board) of the Company or
any committee (the “Committee”) of the Board that will satisfy Rule 16b–3
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and
any regulations promulgated thereunder, as from time to time in effect,
including any successor rule (“Rule 16b-3”), shall supervise and administer the
Plan. The Committee shall consist solely of two or more non-employee directors
of the Company, who shall be appointed by the Board.  A member of the Board shall be deemed to be a “non-employee
director” only if he satisfies such requirements as the Securities and Exchange
Commission may establish for non-employee directors under Rule 16b-3.  Members of the Board receive no additional
compensation for their services in connection with the administration of the
Plan.

 

The Committee or the Board shall from time to time
designate the key employees of the Participating Companies who shall be granted
stock options, stock or cash awards under the Plan and the amount and nature of
the award to be granted to each such employee.

 

The Board or the Committee may adopt such rules or
guidelines as it deems appropriate to implement the Plan.  All questions of interpretation of the Plan
or of any shares issued under it shall be determined by the Board or the
Committee and such determination shall be final and binding upon all persons
having an interest in the Plan. Any or all powers and discretion vested in the
Board or the Committee under this Plan may be exercised by any subcommittee so
authorized by the Board or the Committee and satisfying the requirements of
Rule 16b-3 for employees subject to Section 16 of the Exchange Act.  In addition, the Board or the Committee may
delegate to the Executive Committee of the Board of Directors the power to
approve stock options and stock awards to employees not subject to Section 16
of the Exchange Act.

 

 

1

 

Delegation of Authority for the Day-to-Day Administration of
the Plan.  Except to the extent
prohibited by applicable law or applicable rules of a stock exchange, the Board
or any of its committees as shall be administering the Plan may delegate to one
or more individuals the day-to-day administration of the Plan and any of the
functions assigned to it in this Plan. The delegation may be revoked at any
time.

 

III. PARTICIPATION IN THE PLAN

 

Key employees of the Company, including officers (with
the exception of David Packard), and directors of the Company who are also
employed by a Participating Company shall be eligible to participate in the
Plan.

 

IV. STOCK SUBJECT TO THE PLAN

 

The maximum number of
shares which may be optioned or awarded under the Plan shall be 128,000,000
shares of the Company’s $0.01 par value Common Stock. In any fiscal year, no
individual may be granted stock awards or stock options exceeding 1,000,000
shares or five percent of all shares optioned or awarded that year, whichever
is less.  If a class of Preferred Stock
is created and authorized by the Company’s Certificate of Amendment to the
Certificate of Incorporation, Preferred Stock may be used in lieu of Common
Stock for Plan grants. The limitation on the number of shares which may be
optioned or awarded under the Plan shall be subject to adjustment as provided
in Section XX of the Plan.

 

The grant of a stock award not pursuant to an option
under the Plan (“Stock Award”) shall be subject to such restrictions as the
Committee shall determine to be appropriate, including but not limited to
restrictions on resale, repurchase provisions, special vesting requirements or
forfeiture provisions. The grant and exercise of a stock option shall be subject
to such restrictions as the Committee may determine to be appropriate in
accordance with Section VI of the Plan.

 

If any outstanding option under the Plan for any
reason expires or is terminated without having been exercised in full, or if
any Stock Awards are forfeited, the forfeited shares or shares allocable to the
unexercised portion of such option shall again become available for grant
pursuant to the Plan.

 

 

PART 2.   OPTIONS AND STOCK APPRECIATION RIGHTS

 

V. INCENTIVE STOCK OPTIONS

 

Any option granted under the Plan may be designated by
the Committee as a nonstatutory option or as an incentive stock option (“ISO”)
entitled to special tax treatment under Section 422A of the Internal Revenue
Code of 1986, as amended to date and as may be amended from time to time (the
“Code”).

 

 

2

 

No option intended to qualify as an ISO may be granted
under the Plan if such grant, together with any applicable prior grants, would
exceed any maximum established under the Code for ISOs that may be granted to a
single employee. Should it be determined that any ISO granted under the Plan
exceeds such maximum, the ISO shall be null and void to the extent, but only to
the extent, of such excess. Section 422A(b)(7) of the Code presently provides
that with respect to options granted after December 31, 1986 the aggregate fair
market value (determined as of the time the ISO is granted) of the stock with
respect to which ISOs are exercisable for the first time by an employee in any
calendar year under all incentive stock option plans of the Company shall not
exceed $100,000.

 

Nothing in this section shall be deemed to prevent the
grant of options in excess of the maximum established by the Code where such
excess amount is treated as a nonstatutory option not entitled to special tax
treatment under Section 422A of the Code.

 

VI. TERMS, CONDITIONS AND FORM OF OPTIONS

 

Each option granted under this Plan shall be
authorized by action of the Committee and shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve, which
agreements shall comply with and be subject to the following terms and
conditions:

 

A. Options Non–Transferable.
Each option granted under the Plan by its terms shall not be transferable
by the optionee otherwise than by will, or by the laws of descent and
distribution, and shall be exercised during the lifetime of the optionee only
by him. No option or interest therein may be transferred, assigned, pledged or
hypothecated by the optionee during his lifetime, whether by operation of law
or otherwise, or be made subject to execution, attachment or similar process.

 

B.
Period of Option. The Committee may specify, at the time of grant a
vesting schedule for any option.  If no
vesting schedule is specified, no option may be exercised before the first anniversary
of the date upon which it was granted, nor may it be exercised as to more than
one–fourth of the number of shares covered thereby before the second
anniversary of such date, nor as to more than one–half of the number of
shares covered thereby before the third anniversary of such date, nor as to
more than three–fourths of the number of shares covered thereby before
the fourth anniversary of such date. 
Any option granted pursuant to the Plan shall become exercisable in full
upon the retirement of the optionee because of age or total and permanent
disability or upon the death of the optionee. Except as provided in this
subsection B, no option shall be exercisable after the expiration of 10 years
from the date upon which such option is granted. However, the Committee may, at
the time an option is granted to any employee who is not subject to Section 16
of the Exchange Act, specify a different term for the option up to a maximum term
of 10.5 years.  Each option shall be
subject to termination before its date of expiration as hereinafter provided.

 

 

3

 

C.
Exercise of Options. Options may be exercised only by written notice to the Company at its
head office accompanied by payment in cash of the full consideration for the
shares as to which they are exercised, and, with respect to nonstatutory
options, by payment of all applicable U.S. withholding taxes upon such
exercise. In addition, if and to the extent authorized by the Committee,
optionees may make all or any portion of any payment due to the Company upon
exercise of an option by delivery of any property (including securities of the
Company) other than cash, as long as such property constitutes valid
consideration for the stock under applicable law.

 

The Committee may permit the payment of required tax
withholding due upon exercise of an option by the withholding of shares
otherwise issuable upon exercise of the option. Option shares withheld in
payment of such taxes shall be valued at the fair market value of the stock on
the date of exercise. Fair market value shall be deemed to be the mean of the
highest and lowest quoted selling prices for such shares on the exercise date
as reported on the New York Stock Exchange Composite Tape. The Committee may
impose special restrictions on the use of option shares as payment for
withholding taxes by individuals subject to Section 16(b) of the Exchange Act.

 

No option may be exercised while the optionee is on
any leave of absence from the Company other than an approved medical leave.
Options will continue to vest during any authorized leave of absence, and may
be exercised to the extent permitted by subsection VI(B) above upon the
optionee’s return to active employment status.

 

D.
Termination of Options. All rights of an employee in an option, to the extent that it has not
been exercised, shall terminate upon the termination of his employment for any
reason other than the death of the employee or retirement because of age or
total and permanent disability and in case of such retirement three years from
the date thereof with respect to nonstatutory options and three months from the–retirement
date with respect to ISOs. In the event of the death of the employee, the
option shall terminate upon failure of his designated representative to
exercise the option in accordance with the time period provided in subsection
VI(E) below. The Committee may authorize the continuation of options held by
terminating employees who, at the Company’s request or with the Company’s
consent, are terminating to accept employment with not–for–profit
corporations, governmental agencies or industry associations. Such approval
must be obtained from the Committee prior to termination of employment in order
to prevent termination of options.

 

(1)                                  Divestiture.

 

Notwithstanding the
foregoing, if an employee terminates because of a divestiture by the Company,
the Committee may, in its sole discretion, amend any option previously granted
to such employee pursuant to the Plan such that the option becomes exercisable
in full and/or permits the employee to exercise such option which has not
already been exercised until the earlier of: (i) three months from the closing
date of the divestiture, or such longer date, if any which the committee may
authorize, or (ii) the 

 

 

4

 

expiration of the option.  The
Committee may, in its sole discretion, delegate its authority under this
subsection to the Executive Committee.

 

(2)                                  Voluntary Severance Program.

 

Notwithstanding the foregoing, if an employee who is
not a Section 16 officer terminates as a result of participation in a Company
voluntary severance program approved by the Executive Committee, any option
granted pursuant to the Plan shall become exercisable in full, and the employee
may exercise any such option which has not already been exercised until the
earlier of (i) three months from the employee’s termination date, or (ii) the
expiration of the option.

 

E. Exercise by Representative Following Death of
Employee. The employee, by written notice to the Company, may
designate one or more persons (and from time to time change such designation)
including his legal representative, who, by reason of his death, shall acquire
the right to exercise all or a portion of the option. If the person or persons
so designated wish to exercise any portion of the option, they must do so
within one year after the death of the employee or retired employee, as the case
may be. All rights of the representative(s) in the option shall terminate upon
failure to exercise the option within the time period set forth in this
subsection VI(E). Any exercise by a representative shall be subject to the
provisions of this Plan.

 

VII. MODIFICATION, EXTENSION AND
RENEWAL OF OPTIONS

 

The Committee
shall have the power to modify, extend or renew outstanding options and
authorize the grant of new options in substitution therefor, provided that any
such action may not have the effect of altering or impairing any rights or
obligations of any option previously granted without the consent of the
optionee.

 

The Committee shall have the power to lower the
exercise price of an outstanding option not intended to qualify as an ISO under
the Code; provided, however, that the exercise price per share may not be
reduced below 75% of the fair market value of a share of Common Stock of the
Company on the date the action is taken to reduce the exercise price. Such fair
market value shall be deemed to be the mean of the highest and lowest quoted
selling prices for such shares on that date as reported on The New York Stock
Exchange Composite Tape.

 

VIII. OPTION PRICE

 

The option price per share for the shares covered by
each nonstatutory option shall be not less than 75% of the fair market value of
a share of Common Stock of the Company on the date the option is granted. The
option price per share for ISOs shall be not less than the fair market value on
the option grant date. Such fair market value shall be deemed to be the mean of
the highest and lowest quoted selling prices for such share on that date as
reported on The New York Stock Exchange Composite Tape.

 

5

 

IX. LOANS FOR EXERCISE OF OPTIONS

 

          Any option agreement under this Plan entered into with an
employee may, but need not, provide that the Company shall lend to the employee
who holds the option the funds for any exercise of his option. Any such loans
made to individuals subject to Section 16 of the Exchange Act shall be at a
rate of interest adequate to avoid imputation of income under Sections 483 and
7872 of the Code and shall be for a term not to exceed 15 months from the date
of exercise of the related option. Any loan by the Company to fund the exercise
of an option shall be subject to such other terms and conditions as shall be
set forth in the option agreement, which terms and conditions shall be
determined by the Committee at the time of the grant of the option. Loans may
or may not be secured by stock issued pursuant to such option exercises, at the
Committee’s discretion.

 

X. STOCK APPRECIATION RIGHTS

 

This section shall apply to employees who hold options
heretofore or hereafter granted under the Plan (“Options”) and who are or may
hereafter be subject to Section 16 of the Exchange Act. The Committee may, but
shall not be required to, grant to such employees stock appreciation rights as
herein provided with respect to not more than the number of shares from time to
time subject to the Options held by such employees. The stock appreciation
rights shall be integral parts of the respective Options and shall have no
existence apart therefrom.

 

A stock appreciation right shall be the right of the
holder thereof to elect to surrender part or all of any Option which is wholly
exercisable, or of any exercisable portion of an Option which is partially
exercisable, and receive in exchange therefor cash or shares (valued at current
fair market value) or a combination thereof. Such cash or shares or combination
shall have an aggregate value (“Appreciation”) equal to the excess of the
current fair market value of one share over the Option price of one share
specified in such Option multiplied by the number of shares subject to such
Option or the portion thereof which is surrendered. The current fair market
value of a share shall be the mean of the highest and lowest quoted selling
prices for shares as reported on The New York Stock Exchange Composite Tape on
the day on which a stock appreciation right is exercised, or if no sale was
made on such date, then on the next preceding day on which   such a sale was made. No fractional share
shall be issued on the exercise of a stock appreciation right, and settlement
therefor shall be made in cash.

 

Each stock appreciation right granted under this Plan
shall be subject to the following terms and conditions: (1) each stock
appreciation right shall be evidenced by a written agreement between the
Company and the holder in such form as the Committee shall authorize; (2) each
stock appreciation right granted under the Plan by its terms shall not be
transferable by the holder otherwise than by will or by the law of descent and
distribution, and shall be exercised during the lifetime of the holder only by
him, and no stock appreciation right or interest therein may be transferred,
assigned, pledged or hypothecated by the holder during his lifetime, whether by
operation of law or otherwise, or be made subject to execution, attachment or
similar process; (3) all rights of an 

 

6

 

 

employee in a stock
appreciation right, to the extent that it has not been exercised, shall
terminate upon the death of the employee or the termination of his employment
for any reason other than retirement because of age or total and permanent
disability, and in case of such retirement three years from the date thereof
with respect to nonstatutory Options and three months from the date thereof
with respect to Options intended to qualify as ISOs; provided, however, that
the employee, by written notice to the Company, may designate one or more
persons (and from time to time change such designation), including his legal
representative, who, by reason of his death, shall acquire the right to
exercise all or a portion of the rights accrued under the stock appreciation
right as of the date of his death. If the person or persons so designated wish
to exercise any portion of the stock appreciation right, they must do so within
one year after the death of the employee or retired employee, as the case may
be, and such exercise shall be subject to the provisions of this Plan; and (4)
the life of stock appreciation rights shall be coterminous with the life of the
Options.

 

The holder of a stock appreciation right may exercise
the same by (1) filing with the Secretary of the Company a written election,
which election shall be delivered by the Secretary to the Committee, specifying
(a) the Option or portion thereof to be surrendered, and (b) the percentage of
the Appreciation which he desires to receive in cash, if any; and (2)
surrendering such Option for cancellation or partial cancellation, as the case
may be; provided, however, that any election which specifies that the holder of
a stock appreciation right desires to receive any portion of the Appreciation
in cash shall be of no force or effect unless and until the Committee shall
have consented to such election.

 

No stock appreciation right or related Option may be
exercised during the first six months of its term, except in the event death or
total and permanent disability of the holder occurs prior to the expiration of
this six–month period. No election to receive any portion of the
Appreciation in cash shall be filed with the Secretary and no stock
appreciation right shall be exercised to receive any cash unless such election
and exercise shall occur during the period (hereinafter referred to as the
“Cash Window Period”) beginning on the third business day following the date of
release for publication by the Company of a regular quarterly or annual
statement of sales and earnings and ending on the twelfth business day
following such date. The Committee may consent to the election of a holder to
receive any portion of the Appreciation in cash at any time after such election
has been made.

 

                No stock
appreciation right or related Option may be exercised during the first six
months of its term, except in the event of death or total and permanent
disability of the holder occurs prior to the expiration of this six-month
period.

 

                The Board or the
Committee shall have the sole discretion to consent to approve or disapprove,
in whole or in part, any election to receive any portion of the Appreciation in
cash.

 

Nothing in the Plan shall be construed to give any
eligible employee any right to be granted a stock appreciation right. Neither
the Plan nor the granting of a stock 

 

7

 

appreciation right nor any other action taken pursuant to the Plan
shall constitute or be evidence of any agreement or understanding, express or
implied, that the Company will employ the holder of a stock appreciation right
for any period of time or in any position or at any particular rate of
compensation. The holder of a stock appreciation right shall have no rights as
a stockholder with respect to the shares covered by his stock appreciation
right until the date of issuance to him of a stock certificate therefor, and,
except as otherwise specifically provided in the stock option agreement for the
Options, no adjustment will be made for dividends or other rights for which the
record date is prior to the date such certificate is issued.

 

 

PART 3.   STOCK AND CASH AWARDS

 

XI. STOCK AND CASH AWARD DETERMINATION

 

The Committee may grant an eligible employee Stock Awards
or awards of cash (“Cash Awards”) at such times and in such amounts as the
Committee may designate which in its opinion fully reflect the performance
level and potential of such employee. The Committee shall designate whether
such awards are payable in Common Stock, cash or a combination thereof. Such
awards shall be made in accordance with such guidelines as the Committee may
from time to time adopt. Stock and Cash Awards shall be independent of any
grant of an option under this Plan and shall be made subject to such
restrictions as the Committee may determine to be appropriate.

 

XII. PAYMENT OF STOCK OR CASH AWARDS

 

A. No employee shall have the right to receive payment
of any Stock or Cash Award until notified of the amount of such award, in
writing, by the Committee or its authorized delegate.

 

B. Payment of Cash Awards shall be made in a lump sum
or in annual installments over such period as the Committee may designate,
which period shall not exceed five years, provided that the Committee may from time
to time designate minimum installment amounts.

 

C. After an award of Common Stock subject to
restrictions (“Restricted Stock”), such shares will be deposited in certificate
or book entry form in escrow with the Company’s Secretary. The employee shall retain
all rights in the Restricted Stock while it is held in escrow including but not
limited to voting rights and the right to receive dividends, except that the
employee shall not have the right to transfer or assign such shares until all
restrictions pertaining to such shares are terminated, at which time the
applicable stock certificates shall be released from escrow and delivered to
the employee by the Company’s Secretary.

 

D. The Committee may permit, on such terms as it deems
appropriate, use of Restricted Stock as partial or full payment upon exercise
of a stock option under the 

 

8

 

Company’s incentive stock option or compensation plans or this Plan. In
the event shares of Restricted Stock are so tendered as consideration for the
exercise of an option, a number of the shares issued upon the exercise of said
option, equal to the number of shares of Restricted Stock used as consideration
therefor, shall be subject to the same restrictions as the Restricted Stock so
submitted plus any additional restrictions that may be imposed by the
Committee.

 

XIII. TERMINATION OF RESTRICTIONS ON STOCK AWARDS

 

The Committee will establish the period or periods
after which the restrictions on Restricted Stock will lapse.

 

The Committee may in its discretion permit an employee
to elect to receive in lieu of shares of Restricted Stock, at the expiration of
the restrictions, a cash payment equal to the fair market value of the
Company’s Common Stock on the date the restrictions lapse. The Committee may
also permit the employee to elect to pay required tax withholding due upon the
lapse of restrictions with part of the shares due the employee at such time.
The shares cancelled in payment of required tax withholding shall be valued at
the fair market value of the Company’s Common Stock on the date the
restrictions lapse. Fair market value shall be the mean of the high and low
prices of such stock on The New York Stock Exchange Composite Tape on the date
in question, or if no sales of such stock were made on that date, the mean of
the high and low prices of such stock on the next preceding day on which sales
were made.

 

XIV.  DEATH OR
TOTAL AND PERMANENT DISABILITY OF A PARTICIPATING EMPLOYEE HOLDING RESTRICTED
STOCK

 

By written notice to the Company, an employee who has
received a grant of Restricted Stock may designate one or more persons (and
from time to time change such designation) who, by reason of his death, shall
acquire the right to receive any vested but unpaid awards held by the employee
at the time of his death. Such awards shall be paid to the designated
representative at such time and in such manner as if the employee were living.

 

In the event of total and permanent disability of an
employee who has participated in the Plan, any unpaid but vested award shall be
paid to the employee if legally competent or to a committee or other legally
designated guardian or representative if the employee is legally incompetent.

 

In the event of the death or total and permanent disability
of an employee holding unvested restricted shares, the employee’s designated
representative or the employee, as the case may be, shall be entitled to
receive a prorated number of shares determined by dividing the number of years
in the restricted period by the number of whole years lapsed since the grant
date. Remaining unvested shares shall be forfeited unless additional payments
are specifically authorized by the Committee.

 

If at the time of the employee’s death there is no
effective beneficiary designation as to all or some portion of the awards
hereunder, such awards or such portion thereof shall be paid to or on the order
of the legal representative of the employee’s estate. In the event of
uncertainty as to the interpretation or effect of any notice of designation,
the Committee’s decision with respect thereto shall be conclusive.

 

 

 

9

 

XV.
RESTRICTIONS
AND FORFEITURE OF STOCK AWARDS

 

The Company’s obligation to deliver stock held in
escrow is subject to the condition that the employee remain an employee of the
Company on active or authorized leave status or be under contract to provide
services to the Company as provided in Section XVI hereof for the entire
deferral and/or restriction period, including mandatory and optional deferrals.
If the employee fails to meet this condition, the employee’s right to any such
unpaid amounts or undelivered stock shall be forfeited. This provision may be
waived by the Committee in exceptional circumstances. In the event an employee
holding restricted shares ceases to be on active pay status during the
restricted period for a period of more than six months, the restricted period
shall be extended by a period of time equal to the length of the period of
inactive status.

 

XVI. RETIREMENT OF EMPLOYEE HOLDING STOCK AWARD

 

At the time of grant of any Stock Award, the Committee
may specify special conditions or terms covering the status of such Stock Award
upon the retirement of the employee. If no provision is made, the following
provisions shall govern if the employee retires due to age: the Company’s
obligation to make any payment due thereafter under the Stock Award feature of
the Plan is subject to the condition that for the entire period of deferral or
restriction, including mandatory and optional deferrals:

 

A. The employee shall render as an independent
contractor and not as an employee such advisory or consultative services to the
Company as shall be reasonably requested by the Board or the Executive
Committee of the Board in writing from time to time, consistent with the state
of the retired employee’s health and any employment or other activities in
which such employee may be engaged. For purposes of this Plan, the employee
shall not be required to devote a major portion of time to such services and
shall be entitled to reimbursement for any reasonable out–of–pocket
expenses incurred in connection with the performance of such services;

 

B. The employee shall not render services for any
organization or engage directly or indirectly in any business which, in the
opinion of the Committee, competes with, or is in conflict with the interest
of, the Company. The employee shall be free, however, to purchase as an
investment or otherwise stock or other securities of such organizations as long
as they are listed upon a recognized securities exchange or traded over–the–counter,
or as long as such investment does not represent a substantial investment to
the employee or a significant (greater than 10%) interest in the particular
organization. For the purposes of this subsection XVI(B), a company (other than
a subsidiary) which is engaged in the business of producing, leasing or selling
products or providing services of the type now or at any time hereafter made or
provided by the Company shall be deemed to compete with the Company;

 

C. The employee shall not,
without prior written authorization from the Company, disclose to anyone
outside the Company, or use in other than the Company’s business, 

 

 

10

 

any confidential information or material relating to the business of
the Company, either during or after employment with the Company; and

 

D. The employee shall
disclose promptly and assign to the Company all right, title and interest in
any invention or idea, patentable or not, made or conceived by the employee
during employment by the Company, relating in any manner to the actual or
anticipated business, research or development work of the Company and shall do
anything reasonably necessary to enable the Company to secure a patent where
appropriate in the United States and in foreign countries.

 

 

PART 4.   GENERAL PROVISIONS

 

XVII. ASSIGNMENTS

 

The rights and
benefits under this Plan may not be assigned except for the designation of a
beneficiary as provided in Sections VI and XIV.

 

XVIII. TIME FOR GRANTING OPTIONS OR STOCK AWARDS

 

All options for shares and
Stock Awards subject to this Plan shall be granted, if at all, not later than
10 years after the adoption of this Plan by the Company’s Board of Directors.

 

XIX. LIMITATION OF RIGHTS

 

A. No Right to an Option or Stock Award.  Nothing in the Plan shall be
construed to give any personnel of the Participating Companies any right to be
granted an option or Stock or Cash Award.

 

B. No Employment Right. 
Neither
the Plan, nor the granting of an option or Stock or Cash Award nor any other
action taken pursuant to the Plan shall constitute or be evidence of any
agreement or understanding, express or implied, that any of the Participating
Companies will employ a grantee for any period of time or in any position, or
at any particular rate of compensation.

 

C.
No Shareholder Rights for Options.  An optionee shall have no rights as a shareholder with
respect to the shares covered by his options until the date of the issuance to
him of a stock certificate therefor, and no adjustment will be made for
dividends or other rights for which the record date is prior to the date such
certificate is issued.

 

XX. CHANGES IN PRESENT STOCK

 

In the event of any merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or other change
in the corporate structure or capitalization affecting the Company’s present
Common Stock, appropriate adjustment shall be made by the 

 

 

11

 

Board of Directors in the number (including the aggregate numbers
specified in Section IV) and kind of shares which are or may become subject to
options and Stock Awards granted or to be granted hereunder, and in the option
price of shares which are subject to options granted hereunder.

 

XXI. CHANGE IN CONTROL

 

In the event that the Company is merged into or
acquired by another entity in a transaction involving a change in control, the
Committee shall have complete authority and discretion, but not the obligation,
to accelerate the vesting of outstanding stock options and the termination of
restrictions on Stock Awards.

 

The Committee may also ask the Board of Directors to
negotiate, as part of any agreement involving a sale or merger of the Company,
a sale of substantially all the Company’s assets or similar transaction, terms
providing protection for employees holding stock options or Stock Awards.

 

XXII. EFFECTIVE DATE OF THE PLAN

 

The Plan shall take effect on the date of adoption by
the Board of Directors of the Company, subject to approval by the shareholders
of the Company at a meeting held within 12 months after the date of such
adoption. Options and Stock or Cash Awards may be granted under the Plan at any
time after the adoption of the Plan by the Board of Directors of the Company
and prior to the termination of this Plan.

 

XXIII. AMENDMENT OF THE PLAN

 

The Board or the
Committee may suspend or discontinue the Plan or revise or amend it in any
respect whatsoever; provided, however, that the Company may seek shareholder
approval of an amendment if determined to be required by or advisable by any
law or regulation, including without limitation, any regulations of the
Securities and Exchange Commission or the Internal Revenue Service, the rules
of any stock exchange on which the Company’s stock is listed or other
applicable law or regulation.

 

XXIV. NOTICE

 

Any written notice to the Company required by any of
the provisions of this Plan shall be addressed to the Secretary of the Company
and shall become effective when it is received.

 

XXV. COMPANY BENEFITS PLANS

 

Nothing contained in this Plan shall prevent the
employee prior to death, or the employee’s dependents or beneficiaries after
the employee’s death, from receiving, in addition to any awards provided for
under this Plan and any salary, any payments under a Company retirement plan or
which may be otherwise payable or distributable to such 

 

 

12

 

employee, or to the employee’s dependents or beneficiaries under any
other plan or policy of the Company or otherwise.

 

XXVI. UNFUNDED PLAN

 

Insofar as it provides for awards of stock or cash,
this Plan shall be unfunded. Although bookkeeping accounts may be established
with respect to employees who are granted awards of stock under this Plan, any
such accounts will be used merely as a bookkeeping convenience. Except for the
holding of Restricted Stock in escrow pursuant to subsection XII(C), the
Company shall not be required to segregate any assets which may at any time be
represented by awards of stock or cash, nor shall this Plan be construed as
providing for such segregation, nor shall the Company nor the Board nor the
Committee be deemed to be a trustee of stock or cash to be awarded under the
Plan. Any liability of the Company to any employee with respect to an award of
stock or cash under this Plan shall be based solely upon any contractual
obligations which may be created by the Plan; no such obligation of the Company
shall be deemed to be secured by any pledge or other encumbrance on any
property of the Company. Neither the Company nor the Board nor the Committee
shall be required to give any security or bond for the performance of any
obligation which may be created by this Plan.

 

XXVII. GOVERNING LAW

 

This Plan and all determinations made and actions
taken pursuant hereto shall be governed by the law of the State of California
and construed accordingly.

 

XXVIII. BUYOUT PROVISIONS

 

At any
time, the Committee may, but shall not be required to, authorize the Company to
offer to buy out for a payment in cash or shares an option, stock appreciation
right, Stock Award or Restricted Stock previously granted based on such terms
and conditions as the Committee shall establish and communicate to the holder
of such option, stock appreciation right, Stock Award or Restricted Stock in
connection with such offer.

 

 

*****

 

	
  9/21/89

  	
  Adopted by the Executive Compensation and Stock
  Option Committee

  
	
  2/27/90

  	
  Approved by the Shareholders

  
	
  7/17/91

  	
  Part 1, Section II amended by the Executive
  Compensation and Stock Option Committee

  
	
  11/18/93

  	
  Section IV amended by the Executive Compensation and
  Stock Option Committee

  
	
  4/13/95

  	
  Payment date for two for one stock split (record
  date 3/24/95)

  
	
  7/15/96

  	
  Payment date for two for one stock split (record
  date 6/21/96)

  
	
  11/21/96

  	
  Part 1, Section II, Part 2, Section X and Part 4,
  Section XXIII amended by the Compensation Committee

  

 

 

13

 

	
  5/15/97

  	
  Section VI D amended by the Compensation Committee

  
	
  5/20/98

  	
  The Company reincorporated in the State of Delaware

  
	
  2/12/99

  	
  Section VI B & D amended by the Compensation
  Committee

  
	
  6/30/00

  	
  Section VI C and XIII amended by the Compensation
  Committee

  
	
  10/27/00

  	
  Payment date for two for one stock split in the form
  of a stock dividend (record date 9/27/00)

  
	
  9/12/02

  	
  Part 4, Section XXVIII added and plan restated by HR
  & Compensation Committee

  
	
  11/21/02

  	
  Part 1, Section II added new paragraph and plan
  restated by HR & Compensation Committee

  

 

 

14

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