Hewlett-Packard (HPQ)

Accounting and Tax Effects

        The impact of accounting treatment is considered in developing and implementing HP's compensation programs generally, including the accounting treatment as it applies to amounts awarded or paid to HP's executives. In this regard, the fact that the accounting treatment aligns more closely with the amount of the payouts was among the factors considered in adopting the PRU Program, and in reducing the number of stock options awarded generally.

        The impact of federal tax laws on HP's compensation programs is also considered, including the deductibility of compensation paid to the NEOs, as limited by Section 162(m) of the Internal Revenue Code (the "Code"). Most of HP's compensation programs are designed to qualify for deductibility under Section 162(m), but to preserve flexibility in administering compensation programs, not all amounts paid under all of HP's compensation programs qualify for deductibility. Mr. Hurd's base pay above $1 million is not deductible. In addition, in determining to award additional bonus amounts to the NEOs for fiscal 2009, the Committee considered the fact that such amounts would not be deductible and would result in loss of the deductibility of amounts paid from the PfR Plan to "covered employees" within the meaning of Section 162(m). If stockholder approval is not received with respect to the performance metrics used for purposes of Section 162(m) of the Code, amounts awarded with respect to certain grants made under the HP 2004 Stock Incentive Plan may not be deductible.

        Likewise, the impact of Section 409A of the Code is taken into account, and HP's executive plans and programs are, in general, designed to comply with the requirements of that section so as to avoid possible adverse tax consequences that may result from non-compliance.

Accounting and Tax Effects

        The impact of accounting treatment is considered in developing and implementing HP's compensation programs generally, including the accounting treatment as it applies to amounts awarded or paid to HP's executives. In this regard, the fact that the accounting treatment aligns more closely with the amount of the payouts was among the factors considered in introducing the PRU Program for long-term incentive awards in 2008, and in reducing the number of stock options awarded generally.

        The impact of federal tax laws on HP's compensation programs is also considered, including the deductibility of compensation paid to the NEOs, as limited by Section 162(m) of the Internal Revenue Code (the "Code"). Most of HP's compensation programs are designed to qualify for deductibility under Section 162(m), but to preserve flexibility in administering compensation programs, not all amounts paid under all of HP's compensation programs qualify for deductibility. Mr. Hurd's base pay above $1 million is not deductible. In addition, in determining to award additional bonus amounts to the NEOs for fiscal 2008, the Committee considered the fact that such amounts would not be deductible and would impair the deductibility of amounts paid from the PfR Plan to "covered employees" within the meaning of Section 162(m).

        Likewise, the impact of Section 409A of the Code is taken into account, and HP's executive plans and programs are, in general, designed to comply with the requirements of that section so as to avoid possible adverse tax consequences that may result from non-compliance.

Accounting and Tax Effects

        The impact of accounting treatment is considered in developing and implementing our compensation programs generally, including the accounting treatment as it applies to amounts awarded or paid to our executives. In this regard, the fact that the accounting treatment aligns more closely with the amount of the payouts was among the factors considered in introducing the new PRU Program for long-term incentive awards.

        The impact of federal tax laws on our compensation programs is also considered, including the deductibility of compensation paid to the NEOs, as regulated by Section 162(m) of the Code. Most of HP's compensation programs are designed to qualify for deductibility under Section 162(m), but to preserve flexibility in administering compensation programs, not all amounts paid under all of HP's compensation programs qualify for deductibility.

        Likewise, the impact of Section 409A of the Code is taken into account, and HP's executive plans and programs are, in general, designed to comply with the requirements of that section so as to avoid possible adverse tax consequences that may result from noncompliance with Section 409A.