HP 2008 Annual Report Download - page 102

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 2: Stock-Based Compensation (Continued)
The ESPP activity as of October 31 during each fiscal year was as follows:
2008 2007 2006
In millions, except
weighted-average purchase
price
Compensation expense, net of taxes ................................ $ 58 $ 56 $ 53
Shares purchased ............................................. 9.68 8.74 11.08
Weighted-average purchase price .................................. $ 36 $ 39 $ 30
2008 2007 2006
In thousands
Employees eligible to participate .................................. 164 161 147
Employees who participated ..................................... 50 51 53
Incentive Compensation Plans
HP stock option plans include principal plans adopted in 2004, 2000, 1995 and 1990 (‘‘principal
option plans’’), as well as various stock option plans assumed through acquisitions under which stock
options are outstanding. Employees meeting certain employment qualifications were eligible to receive
stock options in fiscal 2008. There were approximately 109,000 employees holding options under one or
more of the option plans as of October 31, 2008. Options granted under the principal option plans are
generally non-qualified stock options, but the principal option plans permit some options granted to
qualify as ‘‘incentive stock options’’ under the U.S. Internal Revenue Code. The exercise price of a
stock option is equal to the fair market value of HP’s common stock on the option grant date (as
determined by the reported sale prices of HP’s common stock when the market closes on that date).
The contractual term of options granted since fiscal 2003 was generally eight years, while the
contractual term of options granted prior to fiscal 2003 was generally ten years. Under the principal
option plans, HP may choose, in certain cases, to establish a discounted exercise price at no less than
75% of fair market value on the grant date. HP has not granted any discounted options since fiscal
2003.
Under the principal option plans, HP granted certain employees cash, restricted stock awards, or
both. Restricted stock awards are nonvested stock awards that may include grants of restricted stock or
grants of restricted stock units. Cash and restricted stock awards are independent of option grants and
are generally subject to forfeiture if employment terminates prior to the release of the restrictions.
Such awards generally vest one to three years from the date of grant. During that period, ownership of
the shares cannot be transferred. Restricted stock has the same cash dividend and voting rights as other
common stock and is considered to be currently issued and outstanding. Restricted stock units have
dividend equivalent rights equal to the cash dividend paid on restricted stock. Restricted stock units do
not have the voting rights of common stock, and the shares underlying the restricted stock units are not
considered issued and outstanding. HP expenses the fair market value of restricted stock awards as
determined on the date of grant, ratably over the period during which the restrictions lapse.
In fiscal 2008, HP implemented a program that provides for the issuance of performance-based
restricted units (‘‘PRUs’’) representing hypothetical shares of HP common stock that may be issued
under the Hewlett-Packard Company 2004 Stock Incentive Plan. PRU awards may be granted to
eligible employees, including HP’s principal executive officer, principal financial officer and other
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