III. PARTICIPATION IN THE PLAN

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

III.           Participation in the Plan

Each member of the Board who is not an employee of HP or any of its subsidiaries or affiliates and who is providing service to HP as a member of the Board at the beginning of the Plan Year shall be eligible to receive an Annual Retainer (as defined in Section XII below) under the Plan.

Any member of the Board who enters service after the beginning of the Plan Year may be eligible to receive a prorated Annual Retainer under the Plan as the Board or the Committee determines in its discretion.

III.    Participation in the Plan

        Each member of the Board who is not an employee of the Company or any of its subsidiaries or affiliates and who is providing service to the Company as a member of the Board at the beginning of the Plan Year shall be eligible to receive an Annual Retainer (as defined in Section XII below) under the Plan.

        Any member of the Board who enters service after the beginning of the Plan Year may be eligible to receive a prorated Annual Retainer under the Plan as the Board or the Committee determines in its discretion.

Section 2.    Participation in the Plan.

        2.1    General.    All Eligible Employees are eligible to defer Bonuses under the Plan. Eligible Employees are eligible to defer Base Pay under the Plan so long as their Base Pay, as of the first day of October preceding the calendar year within which the deferral is to be made, is equal to or in excess of the sum of (1) the amount defined in Code section 401(a)(17), which is in effect on January 1 of the calendar year to which the deferral election pertains, as adjusted by the Secretary of the Treasury under Code section 415(d), plus (2) $6,000.

        2.2    Cessation of Status of Eligible Employee.    If an Eligible Employee with a Base Pay Deferred Amount and/or Bonus Deferred Amount election in effect for a particular year ceases to be an Eligible Employee during such year, and does not reestablish eligibility prior to the first day in October prior to the next calendar year, his election with respect to a Base Pay Deferred Amount shall terminate effective as of the close of the calendar year during which he ceases to be an Eligible Employee. Such Employee's election with respect to his Bonus Deferred Amount shall continue in effect for any Bonus attributable to the fiscal year during which the Participant ceases to be an Eligible Employee. The provisions in the preceding two sentences relate only to the discontinuance of the Deferred Amount elections after the end of the year in which the Employee terminates employment or otherwise ceases to be an Eligible Employee. Amounts credited to such person's Deferral Account under any such election prior to its discontinuance shall be payable pursuant to the terms of such election, subject to the provisions of Section 2.

        2.3    Suspension or Termination of Participation.    Notwithstanding anything in this Plan to the contrary, in the event the Committee may determine, in its sole and absolute discretion, that an individual's participation in the Plan may jeopardize the status of the Plan as an unfunded and unsecured nonqualified deferred compensation plan under the Code or ERISA or may cause other Participants in the Plan to have their Deferral Accounts includable in their taxable income, the Committee may suspend or terminate such individual's status as an Eligible Employee.

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III.    Participation in the Plan

        Each member of the Board who is not an employee of the Company or any of its subsidiaries or affiliates and who is providing service to the Company as a member of the Board at the beginning of the Plan Year shall be eligible to receive an Annual Retainer (as defined in Section XII below) under the Plan.

        Any member of the Board who enters service after the beginning of the Plan Year may be eligible to receive a prorated Annual Retainer under the Plan as the Board or the Committee determines in its discretion.