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Hewlett, HP In Legal Battle

4/15/2002 02:00:00 AM Eastern

Hewlett-Packard and Walter Hewlett traded blows during the past few weeks with Hewlett taking HP to court over alleged irregularities during the shareholder vote on the proposed HP/Compaq merger and HP deciding to not reappoint Hewlett to its board.

In late March Hewlett filed a complaint in the Delaware Chancery Court citing concerns over the process by which HP solicited votes for the approval of the proposed merger with Compaq, particularly from large institutional stockholders, including Deutsche Bank. The William R. Hewlett Revocable Trust was listed as co-complainant.

In a written release HP called the legal action baseless and the company then unsuccessfully tried to have the legal proceedings blocked.

"We believe this suit is completely without merit and intend to vigorously defend it. We find it regrettable that Mr. Hewlett has chosen to resort to baseless claims without regard to the impact of his false accusations on HP's business reputation and employees. We continue our progress in planning for a successful integration of our merger with Compaq. We look forward to the receipt of the certified vote result from the HP shareowner meeting, which we expect within a few weeks."

However, Judge William B. Chandler on April 8 dismissed HP's motion, allowing the case to be heard in court. A three-day trial is slated to begin on April 23.

The final results of the HP shareholder vote could be in as early as this week.

On HP's part, the company's board of directors nominating committee said it met with Hewlett, son of HP co-founder William Hewlett and a vigorous opponent of the merger, on March 19 and March 27 in order to re-establish a good working relationship, but was unsuccessful.

"The board's decision not to nominate Walter Hewlett is based on his ongoing adversarial relationship with the company, as evidenced by his recent litigation against HP, as well as concerns about his lack of candor and issues of trust," the board stated in a written release.

Hewlett could not be reached for comment and the web site he established to fight the merger, www. votenohpcompaq.com, did not have a response to the board's decision posted.

HP shareholders went to the polls on March 19 to vote on the $21 billion deal that would have HP absorb arch rival Compaq, but the vote was too close to call and a final count is still being conducted. HP CEO Carly Fiorina has declared victory, albeit by only a few percentage points, while Hewlett said it is too close to call. Compaq's shareholders passed the deal on March 20.