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HP board to drop Hewlett
Board says it was prepared to include son of co-founder until his lawsuit over Compaq proxy vote.
April 1, 2002: 1:58 PM EST

NEW YORK (CNN/Money) - Hewlett-Packard Co.'s board of directors did not renominate Walter Hewlett for his seat, citing the adversarial relation between the company and the son of its co-founder.

Hewlett was the leader of the proxy fight to block the purchase of Compaq Computer by HP. That proposed purchase was narrowly approved in a preliminary count of proxy votes, according to HP, although the final vote has yet to be certified. Hewlett filed a lawsuit challenging the vote last week.

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The statement by the HP board said that despite the proxy fight it initially had voted unanimously to renominate Hewlett for a seat on the board of the combined company.

"My fellow board members and I were therefore shocked when just hours later Walter Hewlett filed a spurious lawsuit against the company, continuing his assault on the integrity of the HP board and management team," Sam Ginn, chairman of the board's nominating and governance committee, said. "His recent actions have again violated basic principles of trust, and his ongoing adversarial relationship with the company undermines the board's ability to effectively conduct business."

The company's statement said the nominations to the combined company's board will be current HP board members Ginn, HP CEO Carly Fiorina, as well as Philip Condit, Patricia Dunn, Richard Hackborn, George Keyworth II and Robert Knowling. Compaq board members who will be nominated to the board include Compaq CEO Michael Capellas as well as Lawrence Babbio Jr., Sanford Litvack, Thomas Perkins and Lucille Salhany. The statement did not say who would not have been nominated if Hewlett had been renominated.

"This board has always operated on the important governance principles of independence, deliberation and respect for a diversity of views," Fiorina said. "The board recognizes the importance of shareowner voices. We will reach out to shareowners, including our institutions and foundations, to determine the best way to assure they continue to be heard."

Hewlett issued a statement saying he was disappointed by the board's action and that he believed the board had done shareholders a disservice by excluding him from their slate of nominees.

"It is unfortunate that the HP board has seemingly missed what the company's stockholders have clearly recognized: that dissent is not disloyalty, that healthy boards need not agree on every issue and that while the management and board may run a company, the stockholders are the true owners of a company," he said.

He also said that despite his continued challenge to the merger, that if it does eventually close, "I will do everything I can to support the successful implementation of the merger."

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Hewlett spokesman Todd Glass said the deadline for Hewlett to seek shareholder votes for a seat on the HP board without the board's nomination has already passed.

Hewlett's suit last week charged that executives of HP used "corporate assets to entice and coerce" Deutsche Bank to vote in favor of the proposed deal by threatening to lock the company out of its future investment banking business if it voted no. Deutsche Bank originally voted its 25 million HP shares against the $21 billion deal, but changed its vote at the last moment. HP denied that allegation when the suit was filed and again in its statement Monday.

Shares of both HP (HWP: up $0.02 to $17.96, Research, Estimates) and Compaq (CPQ: up $0.03 to $10.48, Research, Estimates) were slightly lower in midday trading Monday.  Top of page