This excerpt taken from the HPQ 10-Q filed Jun 8, 2007.
VI. TERMS, CONDITIONS AND FORM OF OPTIONS
Each option granted under this Plan shall be authorized by action of the Committee and shall be evidenced by a written agreement in such form as the Committee shall from time to time approve, which agreements shall comply with and be subject to the following terms and conditions:
A. Options Non-Transferable. Each option granted under the Plan by its terms shall not be transferable by the optionee otherwise than by will, or by the laws of descent and distribution, and shall be exercised during the lifetime of the optionee only by him. No option or interest therein may be transferred, assigned, pledged or hypothecated by the optionee during his lifetime, whether by operation of law or otherwise, or be made subject to execution, attachment or similar process.
B. Period of Option. The Committee may specify, at the time of grant a vesting schedule for any option. If no vesting schedule is specified, no option may be exercised before the first anniversary of the date upon which it was granted, nor may it be exercised as to more than one-fourth of the number of shares covered thereby before the second anniversary of such date, nor as to more than one-half of the number of shares covered thereby before the third anniversary of such date, nor as to more than three-fourths of the number of shares covered thereby before the fourth anniversary of such date. Any option granted pursuant to the Plan shall become exercisable in full upon the retirement of the optionee because of age or total and permanent disability or upon the death of the optionee. Except as provided in this subsection B, no option shall be exercisable after the expiration of 10 years from the date upon which such option is granted. However, the Committee may, at the time an option is granted to any employee who is not subject to Section 16 of the Exchange Act, specify a different term for the option up to a maximum term of 10.5 years. Each option shall be subject to termination before its date of expiration as hereinafter provided.
C. Exercise of Options. Options may be exercised only by written notice to the Company at its head office accompanied by payment in cash of the full consideration for the shares as to which they are exercised, and, with respect to nonstatutory options, by payment of all applicable U.S. withholding taxes upon such exercise. In addition, if and to the extent authorized by the Committee, optionees may make all or any portion of any payment due to the Company upon exercise of an option by delivery of any property (including securities of the Company) other than cash, as long as such property constitutes valid consideration for the stock under applicable law.
The Committee may permit the payment of required tax withholding due upon exercise of an option by the withholding of shares otherwise issuable upon exercise of the option. Option shares withheld in payment of such taxes shall be valued at the fair market value of the stock on the date of exercise. Fair market value shall mean, unless the Committee deems otherwise, as of any date, the closing sales price for such Common Stock as of such date (or if no sales were reported on such date, the closing sales price on the last preceding day on which a sale was made) as reported in such source as the Committee deems reliable. The Committee may impose special restrictions on the use of option shares as payment for withholding taxes by individuals subject to Section 16(b) of the Exchange Act.
No option may be exercised while the optionee is on any leave of absence from the Company other than an approved medical leave. Options will continue to vest during any authorized leave of absence, and may be exercised to the extent permitted by subsection VI(B) above upon the optionees return to active employment status.
D. Termination of Options. All rights of an employee in an option, to the extent that it has not been exercised, shall terminate upon the termination of his employment for any reason other than the death of the employee or retirement because of age or total and permanent disability and in case of such retirement three years from the date thereof with respect to nonstatutory options and three months from the-retirement date with respect to ISOs. In the event of the death of the employee, the option shall terminate upon failure of his designated representative to exercise the option in accordance with the time period provided in subsection VI(E) below. The Committee may authorize the continuation of options held by terminating employees who, at the Companys request or with the Companys consent, are terminating to accept employment with not-for-profit corporations, governmental agencies or industry associations. Such approval must be obtained from the Committee prior to termination of employment in order to prevent termination of options.
Notwithstanding the foregoing, if an employee terminates because of a divestiture by the Company, the Committee may, in its sole discretion, amend any option previously granted to such employee pursuant to the Plan such that the option becomes exercisable in full and/or permits the employee to exercise such option which has not already been exercised until the earlier of: (i) three months from the closing date of the divestiture, or such longer date, if any which the committee may authorize, or (ii) the expiration of the option. The Committee may, in its sole discretion, delegate its authority under this subsection to the Executive Committee.
(2) Voluntary Severance Program.
Notwithstanding the foregoing, if an employee who is not a Section 16 officer terminates as a result of participation in a Company voluntary severance program approved by the Executive Committee, any option granted pursuant to the Plan shall become exercisable in full, and the employee may exercise any such option which has not already been exercised until the earlier of (i) three months from the employees termination date, or (ii) the expiration of the option.
E. Exercise by Representative Following Death of Employee. The employee, by written notice to the Company, may designate one or more persons (and from time to time change such designation) including his legal representative, who, by reason of his death, shall acquire the right
to exercise all or a portion of the option. If the person or persons so designated wish to exercise any portion of the option, they must do so within one year after the death of the employee or retired employee, as the case may be. All rights of the representative(s) in the option shall terminate upon failure to exercise the option within the time period set forth in this subsection VI(E). Any exercise by a representative shall be subject to the provisions of this Plan.