Hewlett-Packard (HPQ)

Plan Funding

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The HR and Compensation Committee of the HP Board of Directors has final approval of recommended funding



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Plan funding is at the discretion of executive management to recommend, is based on operational performance and takes into account our earnings commitments



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If targets are exceeded, any additional funding is at the discretion of executive management to recommend and is based primarily on gross margin improvement, in addition to net profit, revenue, and TCE results



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Funding between threshold and target is distributed formulaically



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Funding above target is distributed 50% formulaically and 50% by management discretion, except for Section 16 Officers for whom distribution is determined formulaically



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Maximum payout cannot exceed 300% of targeted bonus opportunity

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Exhibit 10(b)(b)

Plan Funding

For H1'05, ASPIRE goals have been aligned with analyst expectations. As a result, when ASPIRE is reached, PfR will now pay approximately half of the bonus target, which is the level at which PfR had funded in prior periods when analyst expectations were met.

For performance below ASPIRE goals, assuming that threshold has been met, there will be a modest payout. If we exceed ASPIRE goals, executive management will have the discretion to determine additional plan funding based primarily on gross margin improvement, in addition to revenue, net profit and TCE results. Gross margin is defined as total net revenue less cost of products, cost of services, and financing interest and is a key metric in all variable pay plans for FY05, including sales plans.

There are two conditions that must be met in order for the Plan to pay out: a) the Company Performance Bonus (CPB) must pay out, and b) the PfR net profit threshold must be met (at HP or HP Region level). Additionally, threshold level on each metric must be met before that individual metric funds.