Hewlett-Packard (HPQ)

Director Election Majority Vote Standard Proposal

        Resolved:    That the shareholders of Hewlett-Packard Company ("Company") hereby request that the Board of Directors initiate the appropriate process to amend the Company's governance documents (certificate of incorporation or bylaws) to provide that director nominees shall be elected by the affirmative vote of the majority of votes cast at an annual meeting of shareholders.

        Supporting Statement:    Our Company is incorporated in Delaware. Delaware law provides that a company's certificate of incorporation or bylaws may specify the number of votes that shall be necessary for the transaction of any business, including the elections of directors. (DGCL, Title 8, Chapter 1, Subchapter VII, Section 216.) The law provides that if the level of voting support necessary for a specific action is not specified in a corporation's certificate or bylaws, directors "shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors."

        Our Company presently uses the plurality vote standard to elect directors. This proposal requests that the Board initiate a change in the Company's director election vote standard to provide that nominees for the board of directors must receive a majority of the vote cast in order to be elected or re-elected to the Board.

        We believe that a majority vote standard in director elections would give shareholders a meaningful role in the director election process. Under the Company's current standard, a nominee in a director election can be elected with as little as a single affirmative vote, even if a substantial majority of the votes cast are "withheld" from the nominee. The majority vote standard would require that a director receive a majority of the vote cast in order to be elected to the Board.

        The majority vote proposal received high levels of support last year, winning majority support at Advanced Micro Devices, Freeport McMoRan, Marathon Oil, Marsh and McClennan, Office Depot, Raytheon, and others. Leading proxy advisory firms recommended voting in favor of the proposal.

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        Some companies have adopted board governance policies requiring director nominees that fail to receive majority support from shareholders to tender their resignations to the board. We believe that these policies are inadequate for they are based on continued use of the plurality standard and would allow director nominees to be elected despite only minimal shareholder support. We contend that changing the legal standard to a majority vote is a superior solution that merits shareholder support.

        Our proposal is not intended to limit the judgment of the Board in crafting the requested governance change. For instance, the Board should address the status of incumbent director nominees who fail to receive a majority vote under a majority vote standard and whether a plurality vote standard may be appropriate in director elections when the number of director nominees exceeds the available board seats.

        We urge your support for this important director election reform.

MANAGEMENT STATEMENT IN OPPOSITION TO STOCKHOLDER PROPOSAL

        This proposal requests that HP adopt a majority voting standard for director elections so that stockholders have a meaningful role in the director election process. As noted in the proposal, HP, a Delaware company, uses a plurality voting standard, the default under Delaware law. The plurality voting standard provides that the nominees who receive the most affirmative votes are elected to serve as HP directors. Most large public companies that are incorporated in Delaware and elsewhere use a plurality voting standard.

        After careful consideration, we recommend a vote against this proposal because HP has already implemented a policy (described below) that addresses the proponent's concerns. Moreover, the plurality voting standard is compatible with HP's cumulative voting provisions, which allow stockholders to aggregate their votes for a single director nominee, and therefore provide stockholders a meaningful ability to express their preferences in the election of directors.

        As announced on November 2, 2005, HP has adopted a policy whereby any director nominee who receives a greater number of votes "withheld" from his or her election than votes "for" such election will tender his or her resignation for consideration by the Nominating and Governance Committee. HP believes that this policy is effective in giving stockholders a meaningful role in the election of directors and in removing a director opposed by stockholders. Under HP's policy, a nominee and incumbent director who receives a majority of withheld votes would tender his or her resignation and could be removed from the Board. By contrast, the majority voting standard requested by the proposal only addresses the voting requirement for being elected to the Board. It does not remove incumbent directors who have not received a majority vote because under Delaware law, an incumbent director who is not re-elected "holds over" and continues to serve with the same voting rights and powers until his or her successor is elected and qualified. Therefore, even if the proposal were adopted, HP could not force a director who failed to receive a majority vote to leave the Board until the next annual meeting.

        The HP policy also gives stockholders a meaningful role in the director election process without interfering with cumulative voting. The ability to cumulate votes in director elections is universally recognized as protecting stockholder rights. A majority voting standard may raise difficult issues in the context of cumulative voting. While the rules governing plurality voting are well understood, majority voting at companies that have cumulative voting presents technical and legal issues for which there is no precedent. These difficulties have led the American Bar Association Committee on Corporate Laws, the Council of Institutional Investors and the Institutional Shareholder Services Institute for Corporate Governance to indicate that majority voting should not apply to companies that allow cumulative voting. HP's voting system must be a reliable process for the election of qualified directors to represent the interests of all of our stockholders. In the absence of uniform, workable standards that can be consistently applied by all companies and that take into account the special circumstances of companies with cumulative voting, HP believes it would be inappropriate to adopt a majority voting standard.

        For the reasons described above, the Board recommends a vote AGAINST this proposal.

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PROPOSAL NO. 5

STOCKHOLDER PROPOSAL ENTITLED
RECOUP UNEARNED MANAGEMENT BONUSES

        HP has received a stockholder proposal from Mr. Nick Rossi, custodian for Katrina Wubbolding, P.O. Box 249, Boonville, California, 95415. Mr. Rossi has requested that HP include the following proposal and supporting statement in its proxy statement for the 2006 annual meeting of stockholders, and if properly presented this proposal will be voted on at the annual meeting. Mr. Rossi beneficially owns 206 shares of HP common stock. The stockholder proposal is quoted verbatim in italics below.

        Management of HP does not support the adoption of the resolution proposed below and asks stockholders to consider management's response, which follows the stockholder proposal.

        Our Board recommends a vote AGAINST Proposal No. 5.