Hewlett's Charge

Hewlett's complaint alleges HP used "corporate assets to coerce and induce" Deutsche Bank to switch as many as 17 million of its 25 million votes in favor of the merger at the eleventh hour for reasons "unrelated to the merits" of the deal.

Hewlett charges that two business days before the vote, HP closed a new multibillion-dollar credit facility with Deutsche Bank added as a co-arranger.

"In addition to the inducement provided by the HP credit facility, Deutsche Bank was led to understand that if it did not switch its votes to favor the proposed merger, its future business dealings with HP would be jeopardized," the complaint alleges. The papers were filed in the Court of Chancery for the state of Delaware in Wilmington last Thursday.

Hewlett is asking the court to declare "invalid Deutsche Bank's final proxy cards" and all proxies voted in favor of the merger. The complaint also asks the court to either declare the merger vote defeated or require

"a new vote after the re-solicitation of proxies." It also requests the court "preliminarily and permanently" enjoin HP from "taking any steps to implement or consummate the issuance of HP shares in connection with the proposed merger."

The complaint also alleges that "the way the integration was going, either higher revenues were going to have to be found, other costs were going to have to be cut, or 24,000, not 15,000, HP employees would have to be laid off."

In a statement issued last Thursday, HP said, "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."

The uncertainty is slowly taking its toll on business, said Dhruv Gulati, executive vice president of Lilien Systems, a Mill Valley, Calif., HP solution provider. "It's a pain," Gulati said. "We're still doing business. But we could do a whole lot more."

The toughest part is trying to close new business, he said, as clients are shying away from committing to HP and Compaq purchases.