Hewlett Loses Bid to Thwart HP/Compaq

Dissident Hewlett-Packard Co. Director Walter Hewlett lost his day in court Tuesday afternoon, as Delaware Chancery
Court Judge William Chandler ruled in favor of the computer maker and cleared the path for its merger with Compaq Computer Corp.

Hewlett said in a statement late Tuesday, that he would not stand in the way of the deal.

“As I stated when this suit was filed, our goal was to make sure that the outcome of the HP stockholder vote on March 19th was determined in a full, fair and lawful manner,” said Hewlett. “After reviewing the Court’s opinion, we have decided not to appeal the decision to the Supreme Court of Delaware. Additionally, we have decided to discontinue the review and challenge period of the preliminary vote count and permit the vote to be certified.

But the man who spent nearly $40 million said his involvement with HP is far from over.

“As Chairman of The William and Flora Hewlett Foundation and as a trustee of The William R. Hewlett Revocable Trust, I represent two major stockholders and I will continue to monitor the company’s performance to ensure that it acts in the best interests of all stockholders,” said Hewlett.

The San Francisco office of the Securities and Exchange Commission and the U.S. Attorney’s Office for the Southern District of New York are still expected to continue their investigations. However, it is unlikely that it will break up the deal.

The ruling comes five days after the end of the
three-day trial
initiated by Hewlett on March 28, when he claimed HP management used strong-arm techniques
and intimidation to sway shareholders to vote for the proposed $18.4 billion merger.

The March 19 proxy vote ended with HP claiming
initial success and later confirming the win through a preliminary estimate from an independent auditing firm.

The vote tally, prepared by IVS Associates showed that HP shareowners voted in favor of the merger by a margin of approximately 45 million shares.

Much of Hewlett’s case centered on whether HP had influenced the vote of Deutsche Bank’s Deutsche Asset Management arm which holds
1.3 percent of HP stock and was entitled to 20 million votes. In the closing days of the proxy battle, Deutsche Asset Management
helped HP prepare a new $4 billion credit facility in case the merger is successful.

Hewlett had alleged that HP had threatened to withdraw future investment banking business with Deutsche Bank, if the bank did not
vote in favor of the merger. He also claimed HP had withheld information which showed a large potential financial downside to the

Siding with HP, Judge Chandler said Hewlett had “failed to prove that H-P disseminated materially false information about its integration efforts or about financial data provided to its shareholders.”

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