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HP sees raises for execs in new company

update Hewlett Packard's SEC filing says new employment agreements would include salary increases for CEO Carly Fiorina and other executives if the Compaq merger is approved.

update Hewlett-Packard CEO Carly Fiorina and other key executives are likely to get raises if the HP-Compaq Computer merger is approved.

See special coverage: A Fight to the Finish In its annual proxy statement filed with the U.S. Securities and Exchange Commission on Thursday, HP said a committee would negotiate new employment agreements with Fiorina, Compaq CEO Michael Capellas and other executives if the merger goes through.

"It is currently expected that the employment agreements will include increases to the executives' current salaries to reflect their expanded responsibilities within the combined company," HP said in its SEC filing. There is potential for a bonus "that may be equal to or greater than the executives' base salaries."

HP also said the new employment contracts are likely to include new stock option grants tied to meeting goals.

The company confirmed that Fiorina received a $1 million salary and didn't receive a bonus, and that she was granted 1 million options during the past fiscal year. Those options have an exercise price of $35.13, meaning they are currently underwater, or value-less, as HP is trading at less than half that price. Fiorina also received other annual compensation of $74,811, down from $205,113 a year earlier.

Chief Financial Officer Robert Wayman was paid $925,000 in 2001; Computing Systems President Duane Zitzner was paid $725,000; HP Services President Ann Livermore was paid $700,000; and Consumer Business President Pradeep Jotwani was paid $625,000. All four are expected to get raises if the Compaq acquisition is completed.

Wayman, Zitzner, Livermore and Jotwani did not receive bonuses but did get 350,000 stock options at the same exercise price granted to Fiorina.

The compensation for key executives was a flashpoint in the company's proxy fight with director Walter Hewlett. The proxy filing discusses the fact that HP and Hewlett disagree about the nature of discussions the HP board had with regard to future compensation plans.

Among other items, the document touches on Hewlett's ongoing lawsuit seeking to overturn the shareholder vote and mentions that the merger itself remains up in the air as HP awaits a final tally of votes.

HP also outlined its decision not to nominate Hewlett again as a company director. The proxy also covered shareholder proposals encouraging the company to adopt stricter business practices in China to encourage human rights improvements. It also discussed another measure that would require the company to explore offering a way for consumers to recycle their old technology gear.

In many respects, HP's disclosure was old news for shareholders, who have already seen much of the information in the proxy during the course of the company's bitter fight to win approval of the Compaq merger. Both HP and merger opponent Hewlett bombarded shareholders with filings in the final weeks leading up to the March 19 shareholder vote.