Hewlett-Packard (HPQ)

Settled and Concluded Litigation and Proceedings

        Gateway Litigation.    On March 1, 2006, HP announced that it had entered into a binding term sheet with Gateway, Inc. ("GW"), eMachines, a wholly-owned subsidiary of Gateway ("eMachines"), and Amiga Development LLC, renamed AD Technologies ("ADT" and, collectively with GW and eMachines, "Gateway"), pursuant to which the parties agreed to negotiate and execute a definitive settlement agreement and a definitive patent cross-license agreement to memorialize the terms of their agreement to fully and finally resolve and settle the claims brought against one another and their

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affiliated entities in various patent infringement and related lawsuits in California and Texas and in proceedings before the United States International Trade Commission ("ITC"). In May 2006, the parties entered into the definitive settlement agreement and the definitive patent cross-license agreement. As part of the overall settlement, and in consideration of the releases and dismissals under the settlement agreement and the benefits under the patent cross-license agreement, Gateway agreed to pay HP a total of $47 million, $25 million which has been paid and $22 million to be paid not later than January 10, 2007. According to the terms of the definitive patent cross-license agreement, each party was granted a limited cross-license to the patents of the other party covering specified products in specified product categories, which license will terminate after a period of seven years with respect to all but seven of the cross-licensed patents and will continue for the life of the remaining seven patents. The lawsuits and proceedings described below have been resolved by the settlement:

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A lawsuit filed against GW by HP and HP's wholly-owned subsidiary, Hewlett-Packard Development Company, LP ("HPDC"), on March 24, 2004 in the United States District Court for the Southern District of California alleging infringement of patents relating to various notebook, desktop and enterprise computer technologies and seeking an injunction, unspecified monetary damages, interest and attorneys' fees. The lawsuit included counterclaims brought by GW alleging infringement of various patents relating to computerized television, wireless, computer monitoring and computer

expansion card technologies and seeking an injunction, unspecified monetary damages, interest and attorneys' fees. This lawsuit was dismissed without prejudice following a joint motion by the parties.

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A complaint filed by HP and HPDC with the ITC on May 6, 2004 alleging that GW infringed various computer technology patents and seeking an injunction. This investigation was terminated by the ITC following a joint motion by the parties.



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A lawsuit against eMachines filed by HPDC on October 21, 2004 in the United States District Court for the Western District of Wisconsin (and subsequently transferred to the Southern District of Texas) alleging infringement of various HPDC patents relating to personal and desktop computers and seeking an injunction, unspecified monetary damages, interest and attorneys' fees. This lawsuit was dismissed without prejudice following a joint motion by the parties.



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A lawsuit against eMachines filed by HP and HPDC on June 6, 2005 in the Superior Court of California for the County of Santa Clara alleging that eMachines failed to observe its contractual obligations under the terms of its royalty-bearing license to HP and HPDC and seeking specific performance, specified costs and attorneys' fees. This lawsuit was dismissed without prejudice following a joint motion by the parties.



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A complaint filed by HPDC with the ITC on July 6, 2005 alleging infringement by both GW and eMachines of five computer technology patents and seeking to enjoin GW and eMachines from importing certain personal computers found to infringe the HPDC patents. This investigation was terminated by the ITC following a joint motion by the parties.



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A complaint filed by GW with the ITC on July 2, 2004 alleging HP's infringement of various patents relating to audio control, imaging and computerized television technologies and seeking an injunction against HP's importation of its media center PCs and digital entertainment centers,

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among other similar multimedia products. This investigation was terminated by the ITC following a joint motion by the parties.

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A lawsuit against HP filed by ADT on July 2, 2004 in the United States District Court for the Eastern District of Texas alleging infringement of patents relating to computer monitoring, imaging and decoder technologies and seeking an injunction, unspecified monetary damages, interest and attorneys' fees. The lawsuit included counterclaims brought by HP and HPDC alleging infringement by ADT and GW of HPDC patents related to personal computer technology. This lawsuit was dismissed without prejudice following a joint motion by the parties.



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A declaratory relief action against HPDC filed by GW on August 18, 2004 in the United States District Court for the Southern District of California (and subsequently consolidated into the litigation commenced in that court in March 2004) seeking a declaration of non-infringement and invalidity of HPDC's patents relating to personal computer technology. HP and HPDC answered and counterclaimed alleging infringement of the same patents and seeking an injunction, unspecified monetary damages, interest and attorneys' fees. This lawsuit was dismissed without prejudice following a joint motion by the parties.

        Hanrahan v. Hewlett-Packard Company and Carleton Fiorina was a lawsuit filed on November 3, 2003 in the United States District Court for the District of Connecticut on behalf of a putative class of persons who sold common stock of HP during the period from September 4, 2001 through November 5, 2001. The lawsuit sought unspecified damages and generally alleged that HP and Ms. Fiorina violated the federal securities laws by making statements during this period that were misleading in failing to disclose that Walter B. Hewlett would oppose the proposed acquisition of Compaq by HP prior to Mr. Hewlett's disclosure of his opposition to the proposed transaction. The case was subsequently transferred to the United States District Court for the Northern District of California. On June 16, 2006, the Court dismissed the plaintiff's complaint with prejudice. The plaintiff did not appeal the dismissal.