HP Inc.
Prospectus
Second Amended and Restated Hewlett-Packard Company 2004 Stock Incentive Plan
Hewlett-Packard Company 2000 Stock Plan
Amended and Restated 2003 Incentive Plan of Electronic Data Systems Corporation
The date of this prospectus is December 7, 2016
This document constitutes part of a prospectus covering securities that
have been registered under the Securities Act of 1933, as amended.
You are advised that this document is not a European prospectus for the purposes of the
Directive of the European Parliament and of the Council of November 4, 2003 on the prospectus
to be published when securities are offered to the public or admitted to trading (No 2003/71/EC)
(the “Prospectus Directive”).
HP offers awards to employees outside of the United States under the Second Amended and
Restated Hewlett-Packard Company 2004 Stock Incentive Plan.
In order to comply with the Prospectus Directive in some European Economic Area countries,
HP may offer restricted stock, restricted stock units and stock options pursuant to the Second
Amended and Restated Hewlett-Packard Company 2004 Stock Incentive Plan pursuant to a
Prospectus Directive compliant prospectus. A copy of that prospectus can be found on the Long-
term Incentive Programs website on the @hp portal and on the website of the Luxembourg Stock
Exchange (www.bourse.lu). In the other European Economic Area countries, HP has been
advised that the offer of restricted stock, restricted stock units, stock options and stock
appreciation rights pursuant to the Second Amended and Restated Hewlett-Packard Company
2004 Stock Incentive Plan need not be made pursuant to a Prospectus Directive compliant
prospectus.
TABLE OF CONTENTS
Page
-i-
INTRODUCTION ............................................................................................................. 1
1. What types of awards are available under the plans? ....................................................................................... 1 A. What is a stock option? ................................................................................................................................... 1 B. What is a stock appreciation right? ................................................................................................................. 1 C. What is restricted stock?.................................................................................................................................. 1 D. What is a restricted stock unit? ........................................................................................................................ 2 E. What is a restricted stock unit for cash? .......................................................................................................... 2 F. What is a cash award? ..................................................................................................................................... 2
2. What does owning Shares mean? ........................................................................................................................ 2 A. What is the par value of a Share? .................................................................................................................... 3 B. Will I receive a stock certificate? .................................................................................................................... 3 C. Are Shares acquired pursuant to the plans newly issued or purchased on the market? ................................... 3 D. What are dividends? ........................................................................................................................................ 3 E. What is the annual meeting of stockholders? .................................................................................................. 3 F. What HP documents are available? ................................................................................................................. 3 G. What additional rights may stockholders have? .............................................................................................. 4
3. How do I know which Award I have and its terms? .......................................................................................... 4
4. Is my Award the same as Shares? ....................................................................................................................... 4
5. What action do I need to take with respect to my Award? ............................................................................... 5
6. How can I follow the market value of Shares? ................................................................................................... 5
ADMINISTRATION AND ELIGIBILITY ........................................................................... 5
7. Who administers the plans?................................................................................................................................. 5
8. Who is eligible to participate in the plans? ........................................................................................................ 6
9. Does participation in the plans affect my employment or service? .................................................................. 6
STOCK OPTIONS........................................................................................................... 6
10. Why are stock options valuable? ......................................................................................................................... 6
11. Why does HP grant stock options? ..................................................................................................................... 7
12. How will I know the terms of my stock option? ................................................................................................. 7
13. Are there different types of stock options? ......................................................................................................... 7
14. What is the grant price? ....................................................................................................................................... 7
15. What is the fair market value (FMV) of the Shares? ........................................................................................ 8
16. What is the option cost? ....................................................................................................................................... 8
17. What is the spread (also known as gain)? .......................................................................................................... 8
18. How is the grant price determined? .................................................................................................................... 8
19. When can I exercise my stock option? ................................................................................................................ 8
20. When does my stock option vest? ........................................................................................................................ 8
21. What does it mean to exercise a stock option? ................................................................................................... 9
22. Do I have to exercise my stock option? ............................................................................................................... 9
23. Are there any restrictions on the method I use to exercise my stock option? ................................................. 9
TABLE OF CONTENTS
(continued) Page
-ii-
24. How do I exercise my stock option? .................................................................................................................... 9 A. What is a cashless sell exercise? ................................................................................................................... 10 B. What is a cashless hold exercise? .................................................................................................................. 10 C. What is a cash purchase exercise? ................................................................................................................. 10 D. What is a stock swap exercise? ..................................................................................................................... 11
25. Are there special procedures for exercising stock options outside the United States? ................................. 11
26. Are there any fees for exercising a stock option? ............................................................................................ 11
27. How do I pay United States withholding taxes?............................................................................................... 11
STOCK APPRECIATION RIGHTS ............................................................................... 12
28. What are Stock Appreciation Rights (“SARs”)? ............................................................................................. 12
29. Why are SARs valuable? ................................................................................................................................... 12
30. What plan documents govern SARs? ............................................................................................................... 12
31. What are the terms of each SAR? ..................................................................................................................... 12
32. What happens when I exercise my SAR? ......................................................................................................... 12
33. How do I exercise my SAR?............................................................................................................................... 13
TERMINATION PROVISIONS FOR STOCK OPTIONS AND SARS ........................... 13
34. How long do I have to exercise my stock option or SAR? ............................................................................... 13
35. What happens to my stock option or SAR if I am in a non-pay status or on a leave of absence? ............... 13
36. What happens to my stock option or SAR if my employment with HP terminates? .................................... 14
37. What happens to my stock option or SAR when I retire? .............................................................................. 14
38. What happens to my stock option or SAR if I become disabled? ................................................................... 15
39. What happens to my stock option or SAR if I die? ......................................................................................... 15
40. Will I receive a reminder when my stock option or SAR is expiring? ........................................................... 15
41. When may I exercise if my stock option or SAR expires on a holiday or weekend day? ............................. 15
42. Once I leave HP, how can I obtain information about my stock option or SAR?......................................... 15
RESTRICTED STOCK AND RESTRICTED STOCK UNITS ........................................ 16
43. What is the purpose of granting restricted stock and restricted stock units? ............................................... 16
44. Are restricted stock and restricted stock units subject to conditions? ........................................................... 16
45. Why are restricted stock and restricted stock units valuable? ....................................................................... 16
46. Do restricted stock units have voting and dividend rights? ............................................................................ 16
47. How are dividend equivalents determined? ..................................................................................................... 17
48. Why would I receive restricted stock units for cash rather than restricted stock units? ............................. 17
49. What are the differences between restricted stock and restricted stock units? ............................................ 17
50. What is the difference between restricted stock units and stock options?..................................................... 18
51. Where and when can I see my restricted stock or restricted stock unit award? ........................................... 19
52. When do restricted stock or restricted stock units vest? ................................................................................. 19
TABLE OF CONTENTS
(continued) Page
-iii-
A. What happens to my restricted stock or restricted stock units if I am in a non-pay status or on a leave of
absence? ............................................................................................................................................................... 19 B. What happens to my restricted stock or restricted stock units if my employment with HP terminates? ....... 19 C. What happens to my restricted stock or restricted stock units when I retire or become disabled? ................ 20 D. What happens to my restricted stock or restricted stock units if I die? ......................................................... 20 E. What happens to my restricted stock or restricted stock units if I leave HP under a Workforce Restructuring
program? ............................................................................................................................................................... 20
53. What happens to my restricted stock or restricted stock units if I leave HP after the Award vests? ......... 20
54. What happens when my restricted stock or restricted stock units vest? ....................................................... 20
55. Do I need to do anything to initiate the release of restricted stock or restricted stock units at the end of
the restriction period? ............................................................................................................................................... 20
56. Will I receive confirmation when my restricted stock or restricted stock units vest? .................................. 21
57. How are restricted stock and restricted stock units taxed? ............................................................................ 21
LONG-TERM CASH AWARDS .................................................................................... 21
58. What is the purpose of granting long-term cash awards? .............................................................................. 21
59. Are long-term cash awards subject to conditions? .......................................................................................... 22
60. Do long-term cash awards have voting and dividend rights? ......................................................................... 22
61. Where and when can I see my long-term cash awards? .................................................................................. 22 A. What happens to my long-term cash awards if I am in a non-pay status or on a leave of absence? .............. 22 B. What happens to my long-term cash awards if my employment with HP terminates? ................................. 22 C. What happens to my long-term cash awards when I retire or become disabled? .......................................... 22 D. What happens to my long-term cash awards if I die? .................................................................................... 22 E. What happens to my long-term cash awards if I leave HP under a Workforce Restructuring program? ...... 23
62. Do I need to do anything to initiate the release of long-term cash awards at the end of the vesting period?
23
63. How are long-term cash awards taxed? ............................................................................................................ 23
INCOME TAX INFORMATION ..................................................................................... 23
64. What are the tax effects of NQs in the United States?..................................................................................... 24
65. What are the tax effects of ISOs? ...................................................................................................................... 25
66. How will alternative minimum tax affect my exercise? .................................................................................. 26
67. What are the tax effects of SARs in the United States? ................................................................................... 26
68. What are the tax effects of restricted stock units in the United States?......................................................... 26
69. What are the tax effects of restricted stock in the United States? .................................................................. 27
70. How are long-term cash awards taxed? ............................................................................................................ 27
71. How do I pay United States withholding taxes on restricted stock, restricted stock units and long-term
cash awards? .............................................................................................................................................................. 27
72. Will the taxes that HP withholds be enough to cover my taxes due? ............................................................. 27
73. What are the tax effects for HP? ....................................................................................................................... 28
ADDITIONAL INFORMATION ABOUT HP, THE PLANS AND THE PROSPECTUS.. 28
TABLE OF CONTENTS
(continued) Page
-iv-
74. Where are the principal offices of HP? ............................................................................................................. 28
75. Where can I find information about HP? ......................................................................................................... 28
76. Can HP change or terminate the plans? ........................................................................................................... 28
77. What types of Shares are available under the plans? ...................................................................................... 28
78. Are the plans subject to ERISA or section 401(a) of the Code? ..................................................................... 28
79. What happens to my Award if there is a stock split or other change to HP’s capital structure? ................ 29
80. Do the plans limit my ability to resell Shares acquired under the plans? ..................................................... 29
81. Are there account fees associated with having a Merrill Lynch brokerage account? .................................. 30
82. Are Awards transferable?.................................................................................................................................. 30
83. Can Awards become part of a property settlement? ....................................................................................... 30
84. What if I need more information? .................................................................................................................... 30
85. What additional information may I need about the plans? ............................................................................ 31
86. How did the HP merger with EDS impact my Awards under the plans? ..................................................... 31
87. What else should I know about this prospectus? ............................................................................................. 32
1
INTRODUCTION
HP Inc. (“HP”) has adopted or assumed through acquisition various stock plans. The purpose of
offering awards under the plans is to encourage employee ownership of HP common stock and to
align employees’ interests with the interests of HP’s stockholders. These questions and answers
provide information on the Second Amended and Restated Hewlett-Packard Company 2004
Stock Incentive Plan, the Hewlett-Packard Company 2000 Stock Plan, and the Amended and
Restated 2003 Incentive Plan of Electronic Data Systems Corporation.
HP currently grants Awards only under the Second Amended and Restated Hewlett-Packard
Company 2004 Stock Incentive Plan (the “2004 Plan”). No new grants have been made under
the other plans listed here since November 18, 2009.
This prospectus provides general information about the plans. The specific terms and conditions
of an award are provided in the Grant Agreement. In the event of any discrepancy between this
prospectus and a plan document, the applicable plan document shall govern.
The plans, Grant Agreements, and information on the @hp portal referenced throughout this
prospectus are available by going to the Long-term Incentives website on the @hp portal.
1. What types of awards are available under the plans?
The plans provide for the grant of stock options, stock appreciation rights, restricted stock,
restricted stock units and cash awards (“Awards”) to eligible employees, directors, and
consultants of HP, its subsidiaries, and its affiliates. The Awards offer participants the
opportunity to acquire HP common stock, par value $0.01 (“Shares”) or, in some cases, to
receive a cash payment. Every Award is subject to the terms and conditions of the applicable
Grant Agreement, the plan document it was granted under, and all applicable laws.
A. What is a stock option?
A stock option is the right to purchase a specified number of Shares at a fixed price (the “grant
price”) for a specified period, generally eight years.
B. What is a stock appreciation right?
A stock appreciation right (“SAR”) is the right to receive the appreciation in the value of a Share
over a certain period, generally eight years. Historically, HP has not granted SARs, but
companies acquired by HP have granted SARs. HP has granted Foreign Stock Appreciation
Rights (“FSARs”) in countries where it is illegal or administratively burdensome to grant stock
options. HP does not grant FSARs under the plans covered by this prospectus. For additional
information regarding FSARs, please see the Long-term Incentives website.
C. What is restricted stock?
Restricted stock is an award of Shares, which is subject to certain restrictions. When you receive
a grant of restricted stock you have the rights associated with owning Shares, including voting at
2
the annual meeting of HP stockholders and receiving dividends; however, you do not have the
right to sell, pledge or otherwise transfer the restricted stock for a specified period (the vesting
period). Once the vesting period expires and the restrictions lapse, you receive the Shares and
are free to hold, sell or transfer the Shares.
Restricted stock is granted at no cost to you, therefore the total value of the Award on any given
day is equal to the stock price on that day multiplied by the number of Shares of restricted stock
you received. The value of the Award will increase and decrease with the stock price during the
vesting period.
D. What is a restricted stock unit?
A restricted stock unit represents a hypothetical Share. Like restricted stock, you will not have
the right to receive, sell, pledge or otherwise transfer the restricted stock units or underlying
rights for a specified period (the vesting period). However, restricted stock units do not have
voting or dividend rights. Restricted stock units may receive dividend equivalent payments paid
in Shares upon vesting depending on the terms of the applicable Grant Agreement. Once the
restrictions lapse at the end of the vesting period, you will receive one Share for each restricted
stock unit. Generally, HP grants restricted stock units at no cost to the recipient, therefore the
total value of the Award on any given day is equal to the stock price on that day multiplied by
the number of Shares of restricted stock units you received. The value of the Award will
increase and decrease with the stock price during the vesting period.
E. What is a restricted stock unit for cash?
HP grants restricted stock units for cash in countries where local laws and regulations limit the
issuance of Shares. Restricted stock units for cash have the same terms and conditions as the
restricted stock units described above except when the restrictions lapse at the end of the vesting
period, HP pays the recipient cash in an amount equal to the value of the Shares on the vesting
date instead of Shares. Restricted stock units for cash may receive dividend equivalent payments
paid in cash upon vesting depending on the terms of the applicable Grant Agreement.
F. What is a cash award?
A cash award is a payment in the future upon fulfillment of the conditions in the Grant
Agreement.
2. What does owning Shares mean?
When you acquire shares in a company, you become a part owner of that company. The more
shares you acquire, the larger the part of the company you own. As an owner of a company,
stockholders have certain rights. Some rights relate to the financial consequences of owning
shares, like receiving dividends, while others relate to the communications between the company
and its stockholder, like receiving notice of the annual stockholders meeting.
3
HP is authorized to issue common stock and preferred stock, and each class of stock may have
different rights. At this time, HP has issued only common stock, so all Shares have the same
rights described below.
A. What is the par value of a Share?
Each Share of HP common stock has a par value of $0.01. The par value is the nominal value or
face value, rather than the market value at any particular time.
B. Will I receive a stock certificate?
When you acquire Shares pursuant to your Award, you will not automatically receive a stock
certificate. Most stockholders prefer to hold their shares through a broker, bank or other trustee,
in which case the broker, bank or other trustee will be the registered stockholder and you will be
the beneficial owner of the Shares. Generally, stockholders prefer not to request stock
certificates because replacing a lost stock certificate can be costly and time consuming.
However, you may request a stock certificate by contacting HP’s transfer agent, Wells Fargo, at
1-800-286-5977 (U.S. and Canada) or 1-651-450-4064 (outside the U.S. and Canada).
C. Are Shares acquired pursuant to the plans newly issued or purchased on the market?
Shares acquired pursuant to the plans are new shares issued by HP. The issuance of such Shares
increases the total number of Shares issued and outstanding. The Shares acquired under the
plans are not purchased on the open market.
D. What are dividends?
Generally, dividends are the amount of a company’s profit that it pays to stockholders each year
as a return on their investment. This is the amount left after a company decides what it needs for
its on-going financial obligations and development. There is no guarantee that a company will
pay a dividend on any shares. If a dividend is paid, it is stated as an amount per share.
Companies that pay dividends often do so more than once a year; for example, historically, HP
has paid dividends quarterly. Dividends generally are paid to stockholders automatically.
Dividends are generally subject to tax.
E. What is the annual meeting of stockholders?
Generally, companies hold a meeting of stockholders every year. Once you acquire Shares, HP
will send you notice of the annual meeting and a proxy statement in accordance with applicable
law and listing standards. You may attend the meeting in person. You may vote your Shares at
the meeting or by proxy.
F. What HP documents are available?
HP’s proxy statement, annual report and other stockholder communications are available online
at hp.com under Investor Relations. Documents filed with the United States Securities and
Exchange Commission (“SEC”) also are available on the SEC’s website at www.sec.gov.
4
As an employee stockholder, you will receive electronic copies of stockholder materials unless
you request a paper copy.
Please see “Incorporation of Certain Documents by Reference” below.
G. What additional rights may stockholders have?
Sometimes companies offer existing stockholders free new shares. This action will increase the
number of shares that you hold as well as the total number of shares issued, so the price per share
will also fall. The value of your overall stockholding will remain the same. Generally, a
company takes such action to improve the market liquidity in the shares.
A company also may use a rights issue to raise capital whereby the company asks existing
stockholders if they wish to acquire new shares in the company in proportion to their existing
stockholding.
Please see question 93 regarding stock splits and other changes in capital structure.
3. How do I know which Award I have and its terms?
If HP grants you an Award, you will receive a notification with instructions on how to view your
Grant Agreement at Merrill Lynch, which includes the terms and conditions of your Award
(“Grant Agreement”). Additional information regarding HP stock awards and the stock plans are
available on the Long-term Incentives website on the @hp portal.
If you previously received an Award and no longer have the documents from when the Award
was granted, you may obtain information regarding your Award by accessing the Merrill Lynch
website at www.mybenefits.ml.com.
4. Is my Award the same as Shares?
No, generally an Award is not the same as Shares or in situations where the Award is for Shares,
for example restricted stock, you do not have all the rights of a stockholder at grant. The
differences between various Awards and Shares are noted below.
- If you receive a stock option, you have the opportunity to purchase a Share at a
fixed price for a given period; however, you do not have the rights of HP
stockholders.
- If you receive a SAR, you have the opportunity to receive Shares or a cash
payment for the appreciation, if any, in the value of the Shares over a given
period. You do not have the rights of HP stockholders.
- If you receive restricted stock, you own the Shares covered by your Award and
will receive dividends, if any, and voting rights; however, you may not sell,
pledge or transfer your Shares until the restrictions lapse.
5
- If you receive restricted stock units, you have the opportunity to receive a
payment of Shares and or cash at the time the restrictions lapse; you do not have
the rights of an HP stockholder until the restricted stock units vest and you receive
a payment of Shares.
- If you receive a cash award, you have the opportunity to receive a cash payment
in accordance with the terms of your Grant Agreement; you do not have the rights
of an HP stockholder or the right to purchase Shares.
5. What action do I need to take with respect to my Award?
You should immediately print a copy of your Grant Agreement regardless of the type of Award
you receive and keep it for your records. You should open your Merrill Lynch account because
you must have an open Merrill Lynch account before you can exercise your stock options or
conduct any transactions in your Awards. Otherwise, the action, if any, that you must take with
respect to your Award depends on the type of Award you received. If you have received stock
options or SARs, you must determine if and when to exercise your Award. Exercising stock
options and SARs is described in detail below. If you have received restricted stock, restricted
stock units or a cash award, you do not need to exercise your Award. You will be notified when
the restrictions lapse on your restricted stock or restricted stock units, the extent to which
performance criteria are met in connection with your performance-based Awards or when the
conditions of your cash award have been fulfilled.
6. How can I follow the market value of Shares?
You can follow the daily price of the Shares in many newspapers and through online resources.
HP’s stock is listed under the New York Stock Exchange (NYSE) and the daily price of the
Shares can be found at NYSE.com. HP’s stock ticker symbol is “HPQ”.
ADMINISTRATION AND ELIGIBILITY
7. Who administers the plans?
The HR and Compensation Committee of HP’s Board of Directors or its delegate(s) (the
“Committee”) supervises and administers the plans. The members of the Committee are selected
by HP’s Board of Directors to serve on the Committee. HP’s Board of Directors may remove a
Committee member at any time. Among other things, the Committee:
determines which employees, directors, and consultants receive Awards,
determines the terms and conditions of each Award,
adopts rules and procedures for the operation and administration of the plans,
interprets provisions of the plans, and
6
makes all determinations for the administration of the plans.
The Committee’s decisions are final and binding. You may obtain additional information about
the Committee members in the proxy statement on www.hp.com under Investor Relations.
HP's Global Equity Department administers the plans for the Committee on a day-to-day basis,
and provides recordkeeping services for the plans. You may obtain additional information about
the plan by emailing [email protected]. In addition, HP has engaged Merrill Lynch (ML) to
provide recordkeeping, brokerage and related services for HP’s equity incentive programs.
Information regarding all your outstanding Awards is available on the ML website. The ML
website can be accessed through the Long-term Incentive Programs website on the @hp portal or
at www.mybenefits.ml.com. You may also contact ML by telephone at (888) 447-7862 within
the United States, Canada, or Puerto Rico or +1-609-818-8913 outside the United States,
Canada, or Puerto Rico.
8. Who is eligible to participate in the plans?
Under the 2004 Plan, only employees of HP, its subsidiaries, and its affiliates are eligible to
receive discretionary Awards and non-employee directors are eligible for automatic annual
Awards.
Under the other plans, regular employees, directors, and consultants of HP, its subsidiaries, and
its affiliates may have been eligible to receive Awards under the plans.
The Committee has complete authority and discretion to grant Awards. Many factors determine
who receives awards and the size of an Award, including employee performance and expertise.
The fact that you may receive an Award in one year does not mean that you will receive an
Award in another year.
Generally, managers make recommendations regarding who should receive an Award. The
Committee reviews all recommendations and approves specific Awards.
9. Does participation in the plans affect my employment or service?
The grant of an Award under the plans does not affect the terms and conditions of your
employment or service. HP, its subsidiaries and its affiliates reserve the right to terminate your
employment or service at any time, with or without cause, as permitted by law. The grant of an
Award does not entitle you to any future Award, compensation or severance pay.
STOCK OPTIONS
10. Why are stock options valuable?
Stock options are valuable because they allow you to purchase Shares at a price fixed on the
grant date (the grant price) until the expiration date even if the market value of the Shares
7
increases above the grant price. The value of your stock option depends on how the Shares
perform in the market. Just as there can be no guarantee as to how the Shares will perform in the
market, there can be no guarantee of the future value of your stock option. If the market value of
the Shares does not increase above the grant price of your vested stock option, you will not
realize a benefit from your stock option.
11. Why does HP grant stock options?
HP grants stock options in order to attract and retain top talent, to recognize an employee’s
future potential, and strengthen focus on creating long-term value for stockholders. A grant of
stock options in one year does not mean that you will receive a grant in another year.
12. How will I know the terms of my stock option?
The Committee will determine the terms of your stock option. These terms will be in your Grant
Agreement, which will specify the grant date, the number of Shares covered by the stock option,
the type of stock option, the grant price, the vesting schedule, the expiration date, the conditions
for the exercise of the stock option, and any other terms and conditions.
13. Are there different types of stock options?
The plans permit HP to grant various types of stock options. Most stock options granted under
the plans are non-statutory stock options, commonly referred to as non-qualified stock options
(“NQs”). In some countries, HP may grant stock options that qualify for favorable tax treatment
locally when applicable rules are followed. Incentive Stock Options, also known as “ISOs” or
“qualified options” are stock options that qualify for favorable tax treatment in the United States.
Generally, HP does not grant ISOs; however, a number of companies that HP has acquired have
granted ISOs. As of the date of this prospectus, there are no ISOs outstanding under the plans.
Stock options that qualify for favorable tax treatment in countries outside of the United States are
not ISOs.
In some countries due to local laws and regulations, HP grants stock options that must be
exercised using a mandatory cashless sell. HP grants these Awards pursuant to the International
Employee Cashless Stock Option Plan, which is a sub-plan to some of the plans. These Awards
can only be exercised for cash and must be exercised in accordance with the exercise procedures
as described on the Long-term Incentives website on the @hp portal.
Your Grant Agreement will specify the type of stock option you have received. In addition, your
Grant Agreement may note local requirements for favorable tax treatment under local law.
14. What is the grant price?
The grant price is the amount you pay for a Share when you exercise your stock option, which is
generally the fair market value (FMV) of the Shares on the grant date.
8
15. What is the fair market value (FMV) of the Shares?
The fair market value of a Share is the closing sales price for Shares as of such date (or if no sales were reported on such date, the closing sales price on the last preceding day on which a sale was made), as reported in such source as the administrator shall determine.
16. What is the option cost?
The option cost is the grant price multiplied by the number of Shares you are exercising.
17. What is the spread (also known as gain)?
The spread is the difference between the value of the Shares at the time of exercise and the
option cost. When a cash purchase or stock swap exercise method is used, the spread is the
difference between the FMV of the Shares at the time of exercise and the grant price multiplied
by the number of Shares you are exercising. When a cashless sell or cashless hold exercise
method is used, the spread is the difference between the price at which the Shares are sold at the
time of exercise and the grant price multiplied by the number of Shares you are exercising.
18. How is the grant price determined?
The Committee reviews management recommendations regarding grants and approves Awards
on the “grant date”. The grant price of an Award cannot be less than the FMV of a Share on the
grant date.
19. When can I exercise my stock option?
You can exercise your stock option to purchase Shares at the grant price once the stock option
“vests”. A stock option vests when the conditions that must be met to exercise have been
satisfied. HP stock options may vest according to a fixed time-based schedule or upon
achievement of performance criteria.
20. When does my stock option vest?
The Committee has full discretion to determine the vesting schedule for each stock option.
Generally, HP grants stock options that vest over a three- or four-year period. For example, if
you received a stock option for 100 Shares that vests 25% on each anniversary of the grant date
over four years, you would be able to purchase 25 Shares on or after each anniversary of the
grant date.
9
21. What does it mean to exercise a stock option?
When you exercise a stock option, you purchase the Shares at the grant price set forth in your
Grant Agreement. The exercise of your stock option is subject to the terms and conditions of the
applicable plan, your Grant Agreement and all applicable law.
22. Do I have to exercise my stock option?
No. It is entirely your choice whether you exercise your stock option. If you choose to exercise
your stock option, you must exercise it before it expires.
23. Are there any restrictions on the method I use to exercise my stock option?
You must exercise your stock option, if at all, in accordance with the applicable plan, your Grant
Agreement and all applicable laws. Restrictions regarding the method for exercising your stock
option are in your Grant Agreement. Restrictions are based on the country where you are located
at the time your stock option is granted.
For example, if your Award has been granted pursuant to the International Employee Cashless
Stock Option Plan you may exercise only using the cashless sell exercise method.
Optionees in some countries may also have special exercise procedures. The special exercise
procedures can be found on the Long-term Incentives website on the @hp portal.
You must follow the exercise instructions on the Long-term Incentives website on the @hp
portal or the ML website at www.mybenefits.ml.com for the type of Award you have received.
If you do not follow the instructions, you may violate applicable laws. HP is not responsible for
your failure to comply with all applicable laws. You will be responsible for any liability
associated with violating applicable laws.
Please see Question 94 for information on Insider Trading restrictions.
24. How do I exercise my stock option?
Generally, you may exercise the vested portion of your stock option by accessing the ML
website at www.mybenefits.ml.com and exercising the stock option online. If you need
assistance, you can also contact a ML Participant Service Representative at (888) 447-7862 or at
+1-609-818-8913 if you are outside the United States, Canada, or Puerto Rico. In order to
exercise any Award, you will first need to open a ML account.
You may exercise the vested portion of your stock option by using one of the methods described
below, unless otherwise provided in your Grant Agreement:
a cashless sell
a cashless hold,
10
a cash purchase, or
a stock swap.
As noted above, when you exercise, you purchase the Shares subject to your stock option. Your
ability to purchase Shares through the exercise of a stock option is conditioned upon compliance
with any applicable laws and with the terms of your Grant Agreement.
You may obtain additional information regarding exercising your stock option discussed in this
section from the Long-term Incentives website on the @hp portal or by accessing the ML
website at www.mybenefits.ml.com.
Please note that Section 16 officers and members of the HP Board of Directors are subject to
special exercise procedures due to the Sarbanes-Oxley Act of 2002. Such officers or directors
may call the Merrill Lynch Global Corporate and Institutional Advisory Services (GCIAS)
Group at (888) 763-2327 or +1-404-264-7291 if you are outside the United States, Canada, or
Puerto Rico with any questions about exercise procedures.
A. What is a cashless sell exercise?
A cashless sell (also known as same-day-sale) allows you to exercise your stock option without
using your own funds. You authorize ML to exercise your stock option and immediately sell all
the Shares designated by you to pay the option cost, applicable withholding taxes, brokerage fees
and SEC fees. You then receive the balance of the sales proceeds in cash. If taxes are not
withheld by ML, required withholding taxes, if any, generally are handled locally.
B. What is a cashless hold exercise?
A cashless hold (also known as sell-to-cover) exercise allows you to exercise your stock option
without using your own funds. You authorize ML to exercise your stock option and immediately
sell enough of the Shares subject to your stock option to pay the option cost, applicable
withholding taxes, brokerage fees and SEC fees. Any unsold Shares are deposited in your ML
account. If taxes are not withheld by ML, required withholding taxes, if any, generally are
handled locally.
ML will calculate the applicable withholding taxes due using information from HP. ML
calculates the withholding taxes to know how many Shares to sell to cover the option cost, along
with any taxes and fees.
C. What is a cash purchase exercise?
A cash purchase exercise (also known as cash, buy and hold, and self-funded) is using your own
funds to exercise a stock option. If you use a cash purchase exercise, your Shares are deposited
into your ML account. To use a cash purchase exercise, you must provide all of the following
items:
11
payment in full of the option cost for the portion of the stock option you wish to
exercise, that is, the grant price multiplied by the number of Shares subject to your
stock option that you wish to exercise, and
payment of any applicable withholding taxes or fees.
Your payment must be deposited in your ML account before you exercise your stock options.
D. What is a stock swap exercise?
A stock swap exercise allows you to use Shares that you have owned for at least six months to
pay the grant price when you exercise your stock option. This method of exercise may not be
available in all countries due to local regulations and restrictions. If you wish to use a stock
swap to pay for all or part of the grant price, you must follow ML’s procedures, which includes
submitting all of the following:
a Merrill Lynch Attestation form, and
any cash required to cover taxes and partial share costs.
Shares cannot be used to pay the withholding taxes due at exercise.
25. Are there special procedures for exercising stock options outside the United States?
Option exercise procedures may vary from country to country. For example, for stock options
granted in some countries, you may exercise only for cash using the cashless sell exercise
method as described above. You should consult your local HR department, the Long-term
Incentives website on the @hp portal or the ML website at www.mybenefits.ml.com for
additional information.
26. Are there any fees for exercising a stock option?
If you are exercising through a cashless sell or cashless hold, the broker may charge a fee for the
Shares that you sell. For a cash purchase or a stock swap exercise, there are no fees for the
exercise; however, you must pay the option cost and any applicable withholding taxes at the time
of exercise.
27. How do I pay United States withholding taxes?
For employees and former employees in the United States, payment of withholding taxes is
required at the time of exercise. If you exercise your stock option using either the cash purchase
or the stock swap exercise methods, United States withholding taxes are due with your payment
of the option cost. If you exercise your stock option using the cashless sell or cashless hold
exercise methods, ML will retain United States withholding taxes from the sale proceeds and
remit them directly to HP.
12
For participants outside of the United States required withholding taxes, if any, will be withheld
from the sale proceeds or handled locally, depending upon your payroll country.
STOCK APPRECIATION RIGHTS
28. What are Stock Appreciation Rights (“SARs”)?
SARs are the right to receive the appreciation in the value of a Share over a certain period.
When you exercise your SAR, you receive a cash payment equal to the difference between the
FMV of Shares on the grant date and the FMV on the exercise date multiplied by the numbers of
Shares subject to the SAR, or portion thereof, which you are exercising.
29. Why are SARs valuable?
SARs are valuable because they allow you to receive the appreciation in the value of Shares if
the market value of the Shares rises before the expiration date of the SAR. The value of your
SAR depends on the Share price. Just as there can be no guarantee as to how Shares will
perform in the market, there can be no guarantee of the future value of your SAR. If the market
value of Shares does not increase above the FMV on the day your SAR was granted, you will not
realize a benefit from your SAR.
30. What plan documents govern SARs?
Historically, HP has not granted SARs under the plans. In most cases, SARs originally were
granted by a company that HP acquired under the other company’s plan. However, HP may
grant SARs in the future under the 2004 Plan that can be settled in Shares or cash. The plan that
governs your SAR is noted in your Grant Agreement.
31. What are the terms of each SAR?
The terms of your SAR are in your Grant Agreement, which indicates the FMV of a Share on the
grant date, any conditions to exercise, expiration provisions, and all other terms and conditions.
32. What happens when I exercise my SAR?
When you exercise your SAR, HP will pay you an amount equal to the excess of the FMV of a
Share on the date of exercise over the FMV of a Share on the grant date multiplied by the
number of Shares subject to your SAR, or the portion thereof, which you are exercising. The
payment may be in the form of cash or Shares.
13
33. How do I exercise my SAR?
You may exercise the vested portion of your SAR by accessing the ML website at
www.mybenefits.ml.com and exercising the Award online. If you need assistance, you can also
contact a ML Participant Service Representative at (888) 447-7862 or at +1-609-818-8913 if you
are outside the United States, Canada, or Puerto Rico. In order to exercise any SAR, you will
first need to open a ML account.
When you exercise your SAR, you may be subject to withholding taxes. In the United States,
payroll withholds taxes from the amount you receive when you exercise your SAR. Your ability
to exercise your SAR is conditioned upon compliance with any applicable laws.
TERMINATION PROVISIONS FOR STOCK OPTIONS AND SARS
34. How long do I have to exercise my stock option or SAR?
You have until the expiration of your stock option or SAR to exercise the Award. You can find
the expiration date of your Award on your Grant Agreement. You can also check the expiration
date of your Award on the ML website.
Note that stock options and SARs must be exercised, if at all, prior to the applicable
expiration date and at a time when the New York Stock Exchange is open for trading.
Expiring stock options cannot be exercised after the New York Stock Exchange has closed
for the day. The New York Stock Exchange is open from Monday through Friday 9:30a.m.
to 4:00 p.m. ET, except for holidays.
Note that other events, such as termination of employment, may cause your stock option or SAR
to expire earlier. See paragraph 36 for more information.
Generally, awards granted since April 2003 expire eight years from the grant date. For example,
a stock option granted on February 26, 2011 with an expiration date eight years from the grant
date will expire on February 25, 2019, which is the last day to exercise this Award.
The information below describes HP’s general policy with respect to stock options and SARs.
You are subject to the terms and conditions of your Grant Agreement. It is important for you to
read and understand your individual Grant Agreement.
35. What happens to my stock option or SAR if I am in a non-pay status or on a leave of absence?
Subject to applicable laws, stock options and SARs continue to vest while you are on an
approved leave with a guarantee of future employment. You may exercise your vested stock
option and SARs while you are on an approved personal or medical leave with an employment
guarantee upon return, subject to compliance with HP’s Insider Trading Policy.
14
36. What happens to my stock option or SAR if my employment with HP terminates?
The treatment of your stock option or SAR upon termination depends on the plan that governs
your Award, the terms and conditions in your Grant Agreement and the reason for your
termination. Generally, unless you terminate due to retirement, disability or death
(discussed below), the unvested portion of your stock option or SAR expires when your
employment terminates and you may exercise the vested portion within three months of
your termination date, or by the expiration date in your Grant Agreement, whichever is
earlier. If you rejoin HP, your stock option or SAR cannot be reinstated.
If your stock option or SAR was granted under an acquired company’s plan prior to the relevant
merger, the terms of your original grant agreement will generally determine the treatment of your
options upon termination of employment. Thus, Awards granted at different times or under
different plans may receive different treatment upon termination of employment.
If your employment terminates as a part of a Workforce Restructuring program, the termination
treatment of your Award may be modified. If so, the modified treatment will be communicated
to you at the time of termination.
Information on post-termination treatment can be accessed at the ML website at
www.mybenefits.ml.com. Generally, the ML database should be updated to reflect your
departure within one to three weeks after you leave. In order to exercise your award, you will
need to open your ML account. Please be prepared to provide your HP employee number. If
you need assistance, you can contact ML at (888) 447-7862 or +1-609-818-8913 if you are
outside the United States, Canada, or Puerto Rico.
Note that stock options and SARs must be exercised, if at all, prior to the applicable expiration
date and at a time when the New York Stock Exchange is open for trading. Expiring stock
options cannot be exercised after the New York Stock Exchange has closed for the day. The
New York Stock Exchange is open from Monday through Friday 9:30a.m. to 4:00 p.m. ET,
except for holidays.
37. What happens to my stock option or SAR when I retire?
Generally, if you meet the requirements of the local retirement policy, unvested portions of your
stock option or SAR will vest upon retirement, and you may exercise it within three years of
your retirement date or before the expiration date in your Grant Agreement, whichever is earlier.
If your stock option is an NQ, you may exercise within three years of your retirement date or
before the expiration date in your Grant Agreement, whichever is earlier. Generally, if your
stock option is an ISO, you may exercise within three months of your retirement date or before
the expiration date in your Grant Agreement, whichever is earlier.
Stock options granted to non-employee directors may have different terms as set forth in the
applicable Grant Agreement.
15
38. What happens to my stock option or SAR if I become disabled?
Generally, if you become totally and permanently disabled as determined under local law,
unvested portions of your stock option or SAR will vest, and you may exercise it within three
years of your disability date or before the expiration date in your Grant Agreement, whichever is
earlier. Generally, if your stock option is an ISO, you may exercise it within three months of
your disability date or before the expiration date in your Grant Agreement, whichever is earlier.
Stock options granted to non-employee directors may have different terms as set forth in the
applicable Grant Agreement.
39. What happens to my stock option or SAR if I die?
If you die, unvested portions of your stock option or SAR will vest. Unless otherwise required
by local law, your beneficiary or estate may exercise your stock option or SAR within one year
of your death or before the expiration date in your Grant Agreement, whichever is earlier.
Stock options granted to non-employee directors may have different terms as set forth in the
applicable Grant Agreement.
40. Will I receive a reminder when my stock option or SAR is expiring?
It is your responsibility to exercise your stock option or SAR prior to its expiration.
HP will not issue a specific reminder prior to an Award’s expiration. Once a stock option or
SAR has expired, it will not be reinstated. You may receive notices from ML when your Awards
are approaching their expiration dates. However, it is still your responsibility to monitor your
Awards and to exercise them, if at all, before they expire.
41. When may I exercise if my stock option or SAR expires on a holiday or weekend day?
If your stock option or SAR expires on a stock exchange holiday or weekend day, you must
exercise it, if at all, on or before the last trading day prior to the holiday or weekend.
Note that stock options and SARs must be exercised, if at all, prior to the applicable expiration
date and at a time when the New York Stock Exchange is open for trading. Expiring stock
options cannot be exercised after the New York Stock Exchange has closed for the day. The
New York Stock Exchange is open from Monday through Friday 9:30a.m. to 4:00 p.m. ET,
except for holidays.
42. Once I leave HP, how can I obtain information about my stock option or SAR?
If you leave HP, you can access your award information on the ML website at
www.mybenefits.ml.com. Generally, the ML database should be updated to reflect your
departure within one to three weeks after you leave. In order to exercise your award, you will
16
need to open your ML account. Please be prepared to provide your HP employee number. If
you need assistance, you can contact ML at (888) 447-7862 or +1-609-818-8913 if you are
outside the United States, Canada, or Puerto Rico.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
43. What is the purpose of granting restricted stock and restricted stock units?
HP grants restricted stock and restricted stock units to attract and retain top talent, to recognize
an employee’s future potential, and strengthen focus on creating long-term value for
stockholders. A grant of restricted stock or restricted stock units in one year does not mean that
you will receive restricted stock or restricted stock units in another year.
44. Are restricted stock and restricted stock units subject to conditions?
Yes, the conditions of the restricted stock and restricted stock units are in your Grant Agreement.
For example, the Committee may specify that vesting will occur after a period of continued
employment or after satisfaction of performance goals.
Your Grant Agreement will show the number of Shares of restricted stock and restricted stock
units granted, the vesting schedule, the purchase price of the restricted stock, if any, and any
other terms and conditions set by the Committee.
45. Why are restricted stock and restricted stock units valuable?
Restricted stock is valuable because once the vesting requirements are satisfied you own the
Shares without any restrictions. Restricted stock also allows you to receive the benefits of
owning Shares, like dividend payments and voting rights, during the restriction period.
Restricted stock units are valuable because you receive a payment of cash or Shares without any
restrictions once the vesting period lapses and any vesting requirements are satisfied. However,
until the restricted stock units vest and Shares are issued to you, you do not have the benefits of
owning shares such as dividend payments and voting rights. Once the vesting requirements are
satisfied and Shares are issued to you, you have voting rights and dividend rights on any Shares
issued.
46. Do restricted stock units have voting and dividend rights?
No, restricted stock units do not have voting or dividend rights during the vesting period.
Although you do not receive dividends on restricted stock units, you may be credited with
dividend equivalents during the vesting period, depending on the terms of your Grant
Agreement. Once the vesting requirements are satisfied, you will have voting rights and will
receive future dividends in connection with any Shares issued.
17
47. How are dividend equivalents determined?
Dividend equivalents, if any, are paid in Shares and are determined by calculating the cash
dividend that would have been payable if the restricted stock units had been vested and
converting the amount into additional restricted stock units based on the FMV of the Shares at
the time of the dividend payment. For example, if you were granted 1,000 units and the declared
dividend was US$0.08 per Share, the dividend payment would equal US$80 (1,000 units x
US$0.08 per Share). Instead of receiving the US$80 dividend in cash, you would be credited
with an additional four units (US$80 / US$20), assuming a US$20 stock price at the time of
dividend payment. Dividend equivalents, if any, may be subject to the same vesting
requirements as the underlying restricted stock units depending on the terms of the applicable
Grant Agreement.
48. Why would I receive restricted stock units for cash rather than restricted stock units?
Restricted stock units for cash are granted in countries where local laws and regulations make it
difficult to grant restricted stock or issue Shares. Generally, there is no difference between the
monetary value of restricted stock units and restricted stock units for cash.
49. What are the differences between restricted stock and restricted stock units?
There are actually more similarities than differences in the award types. The following chart
provides a comparison:
18
Restricted Stock Restricted Stock
Unit
Restricted Stock
Unit for Cash
Value Number of Shares x
FMV
Number of stock units
x FMV
Number of stock units
x FMV
Upon vesting, you
receive
Shares Shares Cash
Dividends Paid in cash If any, accrued as
additional stock units
paid in Shares at
vesting
If any, accrued as
additional stock units
paid in cash at vesting
Voting Rights
during vesting
period
Yes No No
50. What is the difference between restricted stock units and stock options?
Restricted stock units are a promise to issue Shares in the future if all the vesting conditions are
satisfied. Upon vesting, you will automatically receive Shares without restrictions. The value of
restricted stock units is the same as the current stock price. Therefore, the restricted stock units
have value even if the current stock price fluctuates and goes below the stock price at the time
the restricted stock units were granted to you. In general, restricted stock units are taxable upon
vesting when the Shares are delivered to you.
Stock options provide you the right to purchase Shares in the future at a specified price (the grant
price) set on the grant date. If you receive stock options, you do not own Shares until you
exercise the stock option and purchase the Shares. The value of a stock option typically is
determined as the difference between the current stock price and the grant price multiplied by the
number of stock options. Therefore, if the current stock price is higher than the grant price, the
stock option has current or intrinsic value to you. If the current stock price is less than the grant
price, the stock option is “underwater” and has no current or intrinsic value. In general, stock
options are taxed on the spread (also known as gain) at exercise [(stock price at exercise – grant
price) times the number of stock options exercised].
Each award type has its own advantages. For example, you control the taxation of stock options
based upon your exercise decisions, but restricted stock units are taxed upon vesting. On the
other hand, restricted stock units continue to have value when the stock price decreases, but
stock options have no current value to you when the stock price is lower than the grant price.
19
Here is an example of the value of restricted stock units and stock options at various future stock
prices and assuming the stock options are fully exercised at that stock price. Typically, fewer
restricted stock units are granted, as compared to stock options, given the lower risk profile of
restricted stock units.
Future Value Based on Various Stock Prices
Equity Award Type $10 $20 $30 $40
10,000 Stock Options @$20
exercise price
$0 $0 $100,000
($30-$20)x10,000
$200,000
($40-$20)x10,000
4,000 Restricted Stock Units $40,000 $80,000 $120,000 $160,000
51. Where and when can I see my restricted stock or restricted stock unit award?
If HP grants you an Award, you will receive a notification with information on how to view your
Grant Agreement at Merrill Lynch.
If you previously received an Award and no longer have the documents from when the Award
was granted, you may obtain information regarding your Award by accessing the Merrill Lynch
website at www.mybenefits.ml.com.
52. When do restricted stock or restricted stock units vest?
Restricted stock and restricted stock units vest according to the terms in your Grant Agreement.
Generally, restricted stock and restricted stock units vest in three or five years, or upon
satisfaction of specified performance goals (in the case of performance-based awards).
The information below describes HP’s general policy with respect to restricted stock and
restricted stock units. You are subject to the terms and conditions of your Grant Agreement. It
is important for you to read and understand your Grant Agreement.
A. What happens to my restricted stock or restricted stock units if I am in a non-pay status or on a leave of absence?
Subject to applicable laws, restricted stock or restricted stock units continue to vest while
you are on an approved leave.
B. What happens to my restricted stock or restricted stock units if my employment with HP terminates?
Unless your employment terminates due to retirement, disability or death (discussed
below), you forfeit your unvested restricted stock or restricted stock units when your
20
employment terminates. If you rejoin HP, your restricted stock or restricted stock units
cannot be reinstated.
C. What happens to my restricted stock or restricted stock units when I retire or become disabled?
If you meet the requirements of the local retirement policy or become totally and
permanently disabled as determined under local law, your restricted stock or restricted
stock units granted prior to November 1, 2011 continue to vest provided you comply with
the terms and conditions of the plans and your Grant Agreement. Restricted stock and
restricted stock units granted on or after November 1, 2011 will vest in full upon
termination due to retirement or total and permanent disability.
D. What happens to my restricted stock or restricted stock units if I die?
For any awards outstanding as of January 1, 2016, upon your death, all of your unvested
restricted stock or restricted stock units will vest, including any amounts for dividend
equivalent payments. The vested number of Shares will be delivered to your ML account
or any properly designated beneficiary. Alternatively, your estate will work with ML to
release the Shares to the appropriate beneficiary.
E. What happens to my restricted stock or restricted stock units if I leave HP under a Workforce Restructuring program?
The treatment of your restricted stock or restricted stock units under a Workforce
Restructuring program (WFR) will depend on the program offered at the time you leave
HP.
53. What happens to my restricted stock or restricted stock units if I leave HP after the Award vests?
After your restricted stock or restricted stock units vest, you own the underlying Shares. If you
leave HP after the Award vests, you retain ownership of the Shares.
54. What happens when my restricted stock or restricted stock units vest?
When restricted stock or restricted stock units are about to vest. ML sends you a notification
with additional information about the release of Shares or payment of cash and required
withholding taxes, if any, 30 days prior to the vest date. At the time of vesting, Shares will be
delivered to your ML account and you can retain or dispose of the Shares at any time.
55. Do I need to do anything to initiate the release of restricted stock or restricted stock units at the end of the restriction period?
For restricted stock, at the end of the restriction period, you automatically own the Shares that
have vested, less any required withholding taxes. There is no requirement for you to “exercise”
your right to obtain the Shares (as there is with stock options). After the vesting date, HP will
21
release “net” Shares equal to the vested Shares minus Shares withheld to cover required
withholding taxes, if any, into your ML account. You do need to open your ML account prior to
the release.
For restricted stock units, at the end of the restriction period, you automatically own the
underlying Shares or receive a cash payment, net of required withholding taxes. As with
restricted stock, there is no requirement for you to "exercise” your right with restricted stock
units. As with restricted stock, after the vesting date, HP will release “net” Shares equal to the
vested Shares minus Shares withheld to cover required withholding taxes, if any, into your ML
account. You do need to open your ML account prior to the release.
If you reside in a country where HP has determined that Shares cannot be delivered, you will
receive the cash equivalent. HP will pay the restricted stock units in cash at vesting.
56. Will I receive confirmation when my restricted stock or restricted stock units vest?
Yes, you will receive information prior to the vesting of the restricted stock or restricted stock
units. Once vested, your released Shares will be deposited into your ML account and a
confirmation statement will be sent to you.
57. How are restricted stock and restricted stock units taxed?
The taxation of restricted stock and restricted stock units differs by jurisdiction and you should
consult with your tax advisor to determine the tax impact to you. In general, restricted stock and
restricted stock units are taxed when they vest. The taxable amount is determined based on the
number of Shares of restricted stock or restricted stock units that vest and the value of the Shares
on the vesting date.
Tax withholding requirements vary by country. Generally, if taxes are required to be withheld, a
number of Shares will be withheld to cover the country tax withholding requirement and the
resulting “net” Shares will be delivered to you. Your individual tax rate may differ from the
country tax rate used to determine tax withholding in Shares. If this is the case, you may receive
a cash refund or a cash charge through payroll. Consult your tax advisor for more information.
It is your responsibility to report and pay applicable taxes on your Award.
LONG-TERM CASH AWARDS
58. What is the purpose of granting long-term cash awards?
HP grants long-term cash awards to attract and retain top talent, to recognize an employee’s
future potential, and strengthen focus on creating long-term value for stockholders. A grant of
long-term cash awards in one year does not mean that you will receive an Award in another year.
22
59. Are long-term cash awards subject to conditions?
Yes, the conditions of the long-term cash awards are in your Grant Agreement. For example, the
Committee may specify that vesting will occur after a period of continued employment or after
satisfaction of performance goals.
Your Grant Agreement will show the number amount of cash, the vesting schedule, and any
other terms and conditions set by the Committee.
60. Do long-term cash awards have voting and dividend rights?
No. Long-term cash awards have no connection to HP Shares and do not include any
shareholder rights such as voting and receipt of dividends.
61. Where and when can I see my long-term cash awards?
If HP grants you an Award, you will receive a notification with instructions on how to view your
Grant Agreement at Merrill Lynch.
A. What happens to my long-term cash awards if I am in a non-pay status or on a leave of absence?
Subject to applicable laws, long-term cash awards continue to vest while you are on an approved
leave.
B. What happens to my long-term cash awards if my employment with HP terminates?
Unless your employment terminates due to retirement, disability or death, (discussed below), you
forfeit your unvested long-term cash awards when your employment terminates. If you rejoin
HP, your long-term cash awards cannot be reinstated.
C. What happens to my long-term cash awards when I retire or become disabled?
If your employment terminates and you meet the requirements of the local retirement policy or
become totally and permanently disabled as determined under local law, your long-term cash
award will vest in full and the cash will be delivered through local payroll.
D. What happens to my long-term cash awards if I die?
If you die, a prorated portion of the Award, as determined pursuant to your Grant Agreement,
will be delivered through local payroll to your properly designated beneficiary
23
E. What happens to my long-term cash awards if I leave HP under a Workforce Restructuring program?
The treatment of your long-term cash awards under a Workforce Restructuring program (WFR)
will depend on the program offered at the time you leave HP.
62. Do I need to do anything to initiate the release of long-term cash awards at the end of the vesting period?
No. There is no requirement for you to "exercise” your right with long-term cash awards. HP
will deliver “net” cash equal to the amount vested minus any amounts withheld to cover required
withholding taxes, if any, through local payroll as soon as administratively practicable.
63. How are long-term cash awards taxed?
The taxation of long-term cash awards may differ by jurisdiction and you should consult with
your tax advisor to determine the tax impact to you. In general, long-term cash awards are taxed
when the cash is delivered to you.
Tax withholding requirements vary by country. Generally, if taxes are required to be withheld,
HP will withhold cash to cover the country tax withholding requirement and deliver the resulting
“net” cash to you. Consult your tax advisor for more information. It is your responsibility to
report and pay applicable taxes on your Award.
INCOME TAX INFORMATION
Tax laws change frequently and vary from country to country. In some countries, HP is required
to report all Award grants to the tax authorities. For example, in many countries income realized
through a stock option exercise is reportable income, regardless of the stock option’s tax status
under the tax laws of the United States.
The following discussion is intended only as a summary of the general United States income tax
rules under the United States Internal Revenue Code of 1986, as amended, (the “Code”)
applicable to Awards granted under the plans. The federal, state and local income tax
consequences for any particular taxpayer depend upon individual circumstances.
To the extent that any Award is considered a deferral of compensation subject to Section 409A
of the Code, the Award and the applicable plan shall be construed and administered in a manner
that is intended to comply with Section 409A of the Code and the applicable IRS guidance.
However, HP makes no representations that any Award will be exempt from any penalties that
may apply under Section 409A and makes no undertaking to preclude Section 409A from
applying to any Award.
HP does not provide personal tax advice. You should consult your accountant or tax adviser
regarding the tax implications of your Award.
24
The following discussion applies only to United States taxpayers, unless otherwise specified. It
also assumes that the grant price is less than the FMV on the date of exercise. Also note that
mobile employees may be subject to tax in more than one jurisdiction.
64. What are the tax effects of NQs in the United States?
Generally, the grant of NQs is not taxable in the United States. When you exercise an NQ, you
will have ordinary income for state and federal income tax purposes (including applicable Social
Security and Medicare tax). You will have ordinary income in the tax year of exercise equal to
the difference between the value of the Shares at the time of exercise and the grant price and
applicable withholding taxes will be due at exercise. The difference between the value of the
Shares on the date of sale (or other disposition) and the value of the Shares at the time of
exercise is taxed as a capital gain or loss.
The following examples are for illustration purposes only.
Assume the following facts:
Stock Option Grant – 500 Shares. Shares are fully vested on Day 1.
Grant Price – $12.00 per share.
FMV on Day 1 – $20.00
Cash Purchase Exercise
If the participant does a cash purchase exercise on Day 1 for the 500 vested Shares:
A. Participant deposits $6,000.00 in his or her ML account, which is the number of
Shares exercised multiplied by the grant price (500 x $12.00), plus any withholding taxes due.
B. Reportable income would be $4,000.00, calculated by multiplying the number of
Shares exercised by the FMV of the Shares on the date of exercise (500 x $20.00) minus the
number of Shares exercised multiplied by the grant price (500 x $12.00).
C. If the participant sells 250 Shares at a later date for $25.00, then the capital gains
associated with the sale would be $1,250.00, calculated by multiplying the number of Shares
sold by the sale price (250 x $25.00) minus the FMV of the Shares on the date of exercise (250 x
$20.00).
Cashless Sell Exercise
If the participant does a cashless sell exercise on Day 1 for the 500 vested Shares, and assuming
that the sale price of the stock at the time the broker processes the transaction is $20.50:
A. Optionee does not make a direct cash payment to ML. Instead, ML sells Shares and
pays the option cost (including applicable United States withholding taxes) to HP.
25
B. Reportable income would be $4,250.00, calculated by multiplying the number of
Shares exercised by the sale price of the Shares on the date of exercise (500 x $20.50) minus the
number of Shares exercised multiplied by the grant price (500 x $12.00).
C. For employees in the United States, ML will calculate and deduct the minimum
required withholding taxes from the proceeds of the sale of the Shares. ML will pay the
remaining sales proceeds to the participant less any commissions and broker fees. The
participant will receive cash from the sale of the Shares rather than the Shares.
D. There will be no capital gain on the cashless sell exercise provided ML reports the
same sale price to HP for W-2 reporting and to you on your Form 1099. You should still use a
Schedule D to reflect commissions and broker fees.
Cashless Hold Exercise
If the Optionee does a cashless hold exercise on Day 1 for the 500 vested Shares, and assuming
that the sale price of the Shares at the time the broker processes the transaction is $20.50:
A. Optionee does not make a direct cash payment to HP. Instead, the broker exercising
the stock option sells Shares and pays the option cost (including applicable United States
withholding taxes) to HP.
B. Reportable income would be $4,250.00, calculated by multiplying the number of
Shares exercised by the sale price of the Shares on the date of exercise (500 x $20.50) minus the
number of Shares exercised multiplied by the grant price (500 x $12.00). The number of Shares
sold to cover the option cost is calculated by dividing the option cost of $6,000 (500 Shares
exercised multiplied by $12 per share) by the sale price of $20.50, which equals 293 Shares.
C. There is no capital gain associated with the sale of the 293 Shares provided ML
reports the same sale price to HP for W-2 reporting and to you on your Form 1099. You should
still use a Schedule D to reflect commissions and broker fees.
If the optionee sells the 207 Shares at a later date for $25.00, then the capital gains
associated with the sale would be $931.50, calculated by multiplying the number of Shares sold
by the sale price (207 x $25.00) minus the FMV of the Shares on the date of exercise (207 x
$20.50).
D. For employees in the United States, ML will estimate and deduct the minimum
required withholding taxes from the proceeds of the sale of the Shares. ML will hold the
remaining Shares for the participant.
65. What are the tax effects of ISOs?
Generally, you are not required to pay federal income tax at exercise for an ISO. Instead, you
pay tax when you sell or otherwise dispose of the Shares.
26
If you sell or otherwise dispose of your Shares within two years after the stock option was
granted or within one year after exercise, this is a “disqualifying disposition” for United States
tax purposes. If you have a disqualifying disposition, at the time of such disposition, the gain
represented by the difference between the value at exercise and the grant price is taxed as
ordinary income, and the difference between the sale price and the value at exercise is taxed as a
capital gain or loss.
If the sale (or other disposition) occurs after two years from when the stock option was granted
and after one year from when the stock option was exercised, then the difference between the
sale price of the Shares on the date of sale (or value at disposition) and the grant price is taxed as
a capital gain or loss.
You are obligated to notify the Global Equity Administration Department at
[email protected] if you have ordinary income from a disqualifying disposition. HP is
entitled to take an income tax deduction for such ordinary income when HP reports the income
on your W-2.
66. How will alternative minimum tax affect my exercise?
If you are subject to alternative minimum tax, when you exercise an ISO the difference between
the value of the Shares at the time of exercise and the grant price is included as income for
purposes of calculating your alternative minimum taxable income. Before exercising any ISO,
you should discuss your situation with a qualified tax adviser.
67. What are the tax effects of SARs in the United States?
Generally, the grant of SARs is not taxable in the United States. When you exercise a SAR, you
will have ordinary income for state and federal income tax purposes (including applicable Social
Security and Medicare tax). You will have ordinary income in the tax year of exercise equal to
the difference between the value of the Shares at the time of exercise and the grant price, and
applicable withholding taxes will be due at exercise. The difference between the value of the
Shares on the date of sale (or other disposition) and the value of the Shares at the time of
exercise is taxed as a capital gain or loss.
68. What are the tax effects of restricted stock units in the United States?
Generally, when your restricted stock units vest, you will have ordinary income on the value of
the Shares at vesting for state and federal income tax purposes (including applicable Social
Security and Medicare tax). However, Social Security and Medicare taxes will be due sooner if
the Award is no longer subject to a substantial risk of forfeiture, such as when you become
eligible for retirement as determined according to the plans.
Dividend equivalents paid on restricted stock units are taxable when your restricted stock units
vest and the dividend equivalents are distributed to you.
27
69. What are the tax effects of restricted stock in the United States?
Generally, in the United States, taxes are imposed on the value of the Shares at the date the
Shares become transferable or when the restrictions lapse, whichever is earlier. Unless you make
an election under Section 83(b) of the Code, you will not have taxable income at the time you are
granted restricted stock. Instead, you will have ordinary income if and when the Shares cannot
be forfeited, such as upon vesting or when you become eligible for retirement as determined
according to the plans. If you make a Section 83(b) election, you will recognize ordinary income
at the time HP grants you the restricted stock. However, if you later forfeit the restricted stock,
no tax refund is allowed with respect to the forfeiture. The amount of ordinary income that you
recognize equals the market value of the Shares at the time you recognize income.
You should consult your tax advisor for information regarding a Section 83(b) election.
Dividends paid on restricted stock are taxable as ordinary income. In the United States,
dividends on restricted stock for employees on a United States payroll are treated as
compensation income subject to withholding taxes. Accordingly, dividends paid on restricted
stock will be reported on Form W-2, and not on Form 1099-DIV.
70. How are long-term cash awards taxed?
Generally, when your long-term cash awards vest, you will have ordinary income on the amount
vested for state and federal income tax purposes (including applicable Social Security and
Medicare tax). However, Social Security and Medicare taxes will be due sooner if the Award is
no longer subject to a substantial risk of forfeiture, such as when you become eligible for
retirement as determined according to the plans.
71. How do I pay United States withholding taxes on restricted stock, restricted stock units and long-term cash awards?
For employees on a United States payroll, HP is required to report and withhold taxes on the
income generated by the vesting of restricted stock, restricted stock units and long-term cash
awards. Shares, or cash, from the release will automatically be surrendered to cover the
minimum withholding tax required.
Required withholding taxes for recipients of restricted stock, restricted stock units and long-term
cash awards outside of the United States are handled according to local requirements. Where
applicable, shares, or cash, will automatically be surrendered to cover your local tax withholding.
Please contact your local payroll department for information on tax reporting and withholding.
72. Will the taxes that HP withholds be enough to cover my taxes due?
It is your responsibility to review your personal tax situation to determine if the taxes that HP
withholds are adequate. The taxes withheld by HP may be at rates that are lower or higher than
the tax rate applied to you for the tax year. Please consult with your personal tax advisor for any
questions regarding your tax rates.
28
73. What are the tax effects for HP?
Generally, HP is entitled to receive a deduction for federal income tax purposes in an amount
equal to the ordinary income you recognize.
In addition, the Code contains special rules regarding the federal income tax deductibility of
compensation paid to HP’s Chief Executive Officer and to each of the other four most highly
compensated executive officers, excluding the Chief Financial Officer. In general, HP may take
a deduction for compensation paid to these specified executives, so long as the compensation,
which is not qualified performance-based compensation, does not exceed $1,000,000 for the
relevant fiscal year.
ADDITIONAL INFORMATION ABOUT HP, THE PLANS AND THE PROSPECTUS
74. Where are the principal offices of HP?
HP is a Delaware corporation with its principal offices at 1501 Page Mill Road, Palo Alto, CA
94304, USA.
75. Where can I find information about HP?
You can find additional information in HP’s annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K. These documents may be obtained at hp.com
under Investor Relations or on the SEC’s website at sec.gov.
76. Can HP change or terminate the plans?
HP’s Board of Directors or its delegate(s) may amend, alter, suspend or terminate the plans. HP
will obtain stockholder approval of plan amendments to the extent desirable or necessary to
comply with applicable law.
77. What types of Shares are available under the plans?
The plans allow HP to use authorized, but unissued, Shares or reacquired Shares. HP has filed
registration statements with the SEC covering the Shares issuable under the plans.
78. Are the plans subject to ERISA or section 401(a) of the Code?
The plans are not subject to any of the provisions of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”) or Section 401(a) of the Code.
29
79. What happens to my Award if there is a stock split or other change to HP’s capital
structure?
If HP has a stock split, stock dividend, recapitalization, or other change to its capital structure,
HP will adjust the:
number of Shares available for grant under the plans,
outstanding Awards, and
per-person numerical limits on Awards.
80. Do the plans limit my ability to resell Shares acquired under the plans?
Except as described below, you are not limited in your ability to sell Shares acquired under the
plans. HP will not receive any part of the proceeds of any such sales.
HP’s insider trading policy applies to all employees, directors and consultants of HP and its
affiliates. The insider trading policy prohibits a participant from buying or selling Shares when
he or she has “inside information.” Inside information is material information about HP that is
not yet public but that a reasonable investor would consider important in deciding whether to buy
or sell Shares.
A participant who is an “affiliate” of HP (within the meaning of Rule 405 under the Securities
Act of 1933, as amended (the “Securities Act”)), may not resell under this prospectus any Shares
he or she purchases or receives under the plans. (HP’s executive officers and members of the
Board of Directors are considered to be “affiliates” for this purpose.) Any such resale must be
described in a separate prospectus, or, in certain instances, registered in a separate registration
statement, or sold in accordance with the requirements of Rule 144 under the Securities Act or
another exemption available under the Securities Act.
Also, Section 16(b) of the Securities Act permits HP to recover any profit realized by certain
officers, directors, and principal stockholders of HP through the sale and purchase, or purchase
and sale (as defined), of Shares within any period of less than six months.
Additional rules may apply to certain stockholders. Before selling Shares, any officer, a member
of HP’s Board of Directors or principal stockholders should contact HP by calling or writing:
Assistant Secretary, Legal Department
HP Inc.
1501 Page Mill Road m/s 1560
Palo Alto, CA 94304
Telephone: 650-857-1501
30
81. Are there account fees associated with having a Merrill Lynch brokerage account?
As an active participant in an HP sponsored plan, there is no fee to establish or maintain your
ML Brokerage Account. However, if you terminate employment with HP and no longer have
any outstanding stock awards (all your stock options have been exercised or have expired, and
your restricted stock/units have vested), you will be subject to ML account fees if you maintain a
balance (stock or cash). You will be subject to an annual account fee of $65 (and an additional
low balance fee of $15 per quarter if your account balance is below $20,000).
82. Are Awards transferable?
Unless otherwise noted in the Grant Agreement, Awards are not transferable. An Award is
registered in the name of the individual who receives it. Shares obtained from the exercise of a
stock option or after the vesting of restricted stock or restricted stock units may be registered in
any name; however, registering stock in someone else’s name may be considered a disposition
and result in tax consequences. You should consult your tax advisor prior to registering Shares
in someone else’s name.
83. Can Awards become part of a property settlement?
State and local laws govern whether an Award will become part of a property settlement.
84. What if I need more information?
Additional information about the plans and sub plans may be found on the Long-term Incentives
website on the @hp portal.
If you have additional questions about this prospectus or the plans in general, you should direct
your questions to:
Global Equity
HP Inc.
1501 Page Mill Road, m/s 1560
Palo Alto, CA 94304
Email: [email protected]
31
You may obtain a copy of this prospectus or the plans from the Long-term Incentives website on
the @hp portal, your local HR department, or your manager. Upon oral or written request, HP
will provide a free copy of this prospectus or a copy of the plans. Please direct your request for
free copies of this prospectus, any supplements to the prospectus, the plans and further
information concerning the plans, the Committee, the administrators, and its administration to:
Assistant Secretary, Legal Department
HP Inc.
1501 Page Mill Road, m/s 1560
Palo Alto, CA 94304
Telephone: 650-857-1501
85. What additional information may I need about the plans?
Under the Second Amended and Restated Hewlett-Packard Company 2004 Stock Incentive Plan,
HP will offer 417,500,000 Shares of HP common stock with $0.01 par value to regular
employees and employee directors of HP, its subsidiaries and affiliates. Awards will be offered
from March 20, 2013 until March 19, 2023, unless this plan is amended or terminated earlier in
accordance with its provisions. HP stockholders approved this plan.
Under the Hewlett-Packard Company 2000 Stock Plan, HP offered 250,000,000 Shares of HP
common stock with $0.01 par value to regular employees, directors and consultants of HP, its
subsidiaries and affiliates. Awards were offered from November 18, 1999 until November 17,
2009, when the plan expired. HP stockholders approved this plan.
Under the Amended and Restated 2003 Incentive Plan of Electronic Data Systems Corporation,
HP offered 39,862,568 Shares of HP common stock with $0.01 par value to eligible employees
of HP and its affiliates. Awards were offered from August 26, 2008 until November 18, 2009
when the Committee resolved to make no further offers under this plan. HP stockholders have
not approved this plan; however, EDS stockholders approved it.
86. How did the HP merger with EDS impact my Awards under the plans?
On August 26, 2008, Electronic Data Systems Corporation (“EDS”) became a wholly owned
subsidiary of HP pursuant to a merger agreement between HP and EDS dated May 13, 2008. In
connection with the merger (the “EDS Merger”), certain EDS stock plans, restricted stock units
and stock options were assumed by HP under the Transition Incentive Plan of Electronic Data
Systems Corporation, the 2002 Transition Inducement Plan of Electronic Data Systems
Corporation, the 2000 Nonqualified Stock Options Plan of Electronic Data Systems Corporation
(also called the EDS Global Share Plan), the 1997 Nonqualified Stock Option Plan of Electronic
Data Systems Corporation (also called PerformanceShare), and the Amended and Restated 2003
Incentive Plan of Electronic Data Systems Corporation (formerly, the Amended and Restated
Incentive Plan of Electronic Data Systems Corporation and the 1996 Incentive Plan of Electronic
Data Systems Corporation).
32
In the EDS Merger, all Shares were converted from shares of EDS common stock into Shares of
HP common stock. If you received a stock option or restricted stock unit prior to the EDS
Merger, then the number of Shares covered by your stock option or restricted stock unit after the
EDS Merger was determined as follows:
The number of EDS shares covered by your stock option or restricted stock
unit at the effective time of the EDS Merger was multiplied by 0.5519 (the
“Exchange Ratio”). The result, rounded down to the nearest whole number,
was the number of Shares covered by your assumed stock option or
restricted stock unit. If you received a stock option or restricted stock unit
prior to the EDS Merger, then the grant price of your stock option or
restricted stock unit has been adjusted as a result of the EDS Merger. The
per share grant price of each stock option or restricted stock unit was
determined as follows: The original grant price per EDS share (as shown in
your stock option or restricted stock unit agreement) was divided by 0.5519.
The result, rounded up to the nearest whole cent, was the stock options or
restricted stock unit grant price per Share.
Each assumed stock option or restricted stock unit continues to have, and
remains subject to, substantially the same terms and conditions as in effect
immediately before the EDS Merger, except as described in this prospectus
and the letter regarding the conversion of you stock award.
87. What else should I know about this prospectus?
HP may update this prospectus in the future by furnishing you with an appendix, memorandum,
notice or replacement page containing updated information. New prospectuses will not be
delivered, except upon request. Accordingly, you should keep this prospectus for future
reference.
You should rely only on the information incorporated by reference or provided in this prospectus
or any prospectus supplement. HP has not authorized anyone to provide you with different or
additional information. HP is not making an offer to sell any stock in any state or country where
the offer is not permitted. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the front of this
prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows companies to incorporate by reference the information they file with the SEC,
which means that HP can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered part of this prospectus, and
information filed with the SEC later will update and supersede this information. The following
documents and any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), until the plans are
terminated, are incorporated by reference:
33
HP’s annual report filed on Form 10-K for the year ended October 31, 2015, filed
December 16, 2015;
Any reports filed by HP pursuant to Sections 13(a) or 15(d) of the Exchange Act
since the end of the fiscal year covered by the Form 10-K for the year ended October
31, 2016;
The description of our common stock contained in our registration statement on Form
8-A/A filed with the Commission on June 23, 2006, and any amendment or report
filed with the Commission for the purposes of updating such description.
The documents incorporated by reference may be obtained via at hp.com under Investor
Relations or at the SEC’s website at sec.gov. A copy of any or all of the documents incorporated
by reference in this prospectus and in the registration statements on Form S-8 filed with the SEC
relating to the plans, except for any exhibits to these documents, including HP’s annual report,
and copies of other reports, proxy statements, and communications distributed to HP’s
stockholders may also be obtained by calling or writing:
Assistant Secretary, Legal Department
HP Inc.
1501 Page Mill Road, m/s 1560
Palo Alto, CA 94304
Telephone: 650-857-1501