HP 2015 Annual Report Download - page 128

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HP's stock-based incentive compensation plans include equity plans adopted in 2004 and 2000, as amended ("principal equity plans"), as well as various
equity plans assumed through acquisitions under which stock-based awards are outstanding. Stock-based awards granted from the principal equity plans
include restricted stock awards, stock options and performance-based awards. Employees meeting certain employment qualifications are eligible to receive
stock-based awards.
Restricted stock awards are non-vested stock awards that may include grants of restricted stock or restricted stock units. Restricted stock awards and cash-
settled awards are generally subject to forfeiture if employment terminates prior to the lapse of the restrictions. Such awards generally vest one to three years
from the date of grant. During the vesting period, ownership of the restricted stock cannot be transferred. Restricted stock has the same dividend and voting
rights as common stock and is considered to be issued and outstanding upon grant. The dividends paid on restricted stock are non-forfeitable. Restricted
stock units do not have the voting rights of common stock, and the shares underlying restricted stock units are not considered issued and outstanding upon
grant. However, shares underlying restricted stock units are included in the calculation of diluted net EPS. Restricted stock units have forfeitable dividend
equivalent rights equal to the dividend paid on common stock. HP expenses the fair value of restricted stock awards ratably over the period during which the
restrictions lapse.
Stock options granted under the principal equity plans are generally non-qualified stock options, but the principal equity plans permit some options
granted to qualify as incentive stock options under the U.S. Internal Revenue Code. Stock options generally vest over three to four years from the date of
grant. The exercise price of a stock option is equal to the closing price of HP's stock on the option grant date. The majority of stock options issued by HP
contain only service vesting conditions. However, starting in fiscal 2011, HP began granting performance-contingent stock options that vest only on the
satisfaction of both service and market conditions prior to the expiration of the awards.
In connection with the Separation and in accordance with the Employee Matters Agreement, HP will make certain adjustments to the exercise price and
number of share-based compensation awards with the intention of preserving the intrinsic value of the awards prior to the separation. Exercisable and non-
exercisable stock options will be converted to similar awards of the entity where the employee is working post-separation. Restricted stock unit awards and
performance-contingent awards will be adjusted to provide holders restricted stock units and performance-contingent awards in the company that employs
such employee following the separation.
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Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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