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TANDEM COMPUTERS INCORPORATED
1997 STOCK PLAN
1. Establishment, Purpose, and Definitions.
(a) There is hereby adopted the 1997 Stock Plan (the "Plan") of TANDEM
COMPUTERS INCORPORATED (the "Company").
(b) The purpose of the Plan is to provide a means whereby eligible
individuals (as defined in paragraph 4, below) can acquire common
stock of the Company (the "Stock"). The Plan provides employees
(including officers and directors who are employees) of the
Company and of Subsidiaries an opportunity to purchase shares of
Stock pursuant to options which may qualify as incentive stock
options under Section 422 of the Internal Revenue Code, as amended
(referred to as "incentive stock options"), and employees
(including officers and directors who are employees), directors
who are not employees ("Non-Employee Directors"), independent
contractors, and consultants of the Company and of Affiliates an
opportunity to purchase shares of Stock pursuant to options which
are not described in Section 422 or 423 of the Internal Revenue
Code (referred to as "nonqualified stock options"). The Plan also
provides for the transfer or sale of Stock to eligible individuals
in connection with the performance of services for the Company or
Affiliates.
(c) The term "Subsidiary" as used in the Plan means any corporation at
least 50 percent of the voting stock of which is owned, directly
or indirectly, by the Company. The term "Affiliates" refers to
Subsidiaries and any entity which has a business relationship with
the Company. The terms "Subsidiaries" and "Affiliates" include
entities which become Subsidiaries or Affiliates after the
adoption of the Plan.
2. Administration of the Plan.
(a) The Plan shall be administered by the Committee. The Committee
shall consist exclusively of two or more directors of the Company,
who shall be appointed by the Board. In addition, the compensation
of the Committee shall satisfy:
(i) Such requirements as the Securities and Exchange
Commission may establish for administrators acting under plans
intended to qualify for exemption under Rule 16b-3 (or its
successor) under the Exchange Act; and
(ii) Such requirements as the Internal Revenue Service may
establish for outside directors acting under plans intended to
qualify for exemption under section 162(m)(4)(C) of the Code.
The Board may also appoint one or more separate committees of the
Board, each composed of one or more directors of the Company who
need not satisfy the foregoing requirements, who may administer
the Plan with respect to Employees and Consultants who are not
considered officers or directors of the Company under section 16
of the Exchange Act, may grant Awards under the Plan to such
Employees and Consultants and
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may determine all terms of such Awards.
(b) The Committee shall determine which eligible individuals (as
defined in paragraph 4, below) shall be granted options under
the Plan, the timing of such grants, the terms thereof
(including any restrictions on the Stock), and the number of
shares for which an option or options shall be granted to an
optionee. The Committee may establish a standard schedule of
options to be granted automatically on an eligible
individual's date of hire and date of promotion.
(c) The Committee may amend the terms of any outstanding option
granted under this Plan, but any amendment which would
adversely affect the optionee's rights under an outstanding
option shall not be made without the optionee's written
consent. The Committee may cancel any outstanding stock option
or accept any outstanding stock option in exchange for a new
option.
(d) The Committee shall also determine which eligible individuals
(as defined in paragraph 4, below) shall be issued Stock under
the Plan, the timing of such grants, the terms thereof
(including any restrictions), and the number of shares to be
granted. The Stock shall be issued for such consideration as
the Committee deems appropriate, including past services;
provided, however, that such consideration shall have a fair
market value at least equal to fifty percent (50%) of the fair
market value of the Stock on the date of issuance. Stock
issued subject to restrictions shall be evidenced by a written
agreement (the "Restricted Stock Agreement"). The Committee
may amend any Restricted Stock Agreement, but any amendment
which would adversely affect the individual's rights to the
Stock shall not be made without his or her written consent.
(e) The Committee shall have the sole authority, in its absolute
discretion, to adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable in the
adminis tration of the Plan, to construe and interpret the
Plan, the rules and the regulations, and the instruments
evidencing options or Stock granted under the Plan and to make
all other determinations deemed necessary or advisable for the
administration of the Plan. All decisions, determinations and
interpretations of the Committee shall be binding on all
optionees.
(f) Notwithstanding the foregoing, the Committee shall have no
discretion as to certain grants to Non-Employee Directors
pursuant to paragraph 7 below, including the Non- Employee
Directors to whom options are to be granted, the timing of
such grants, the number of shares subject to any such option,
and the exercise price of any such option, which, in each
case, shall be as provided pursuant to paragraph 7.
3. Stock Subject to the Plan.
(a) The number of shares of Stock available for the grant of
options or the issuance of Stock under the Plan to eligible
individuals shall be equal to the sum of (i) 1,115,000 shares
plus (ii) the number of shares remaining available for
issuance under the Tandem Computers Incorporated 1989 Stock
Plan (the "Prior Plan") as of January 28, 1997. If an option
granted under this Plan or the Prior Plan for any reason
ceases to be exercisable in whole or in part (including
options cancelled in exchange for new grants), the shares
which were subject to such option but as to which the option
had not been exercised shall continue to
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be available under this Plan. Shares of Stock repurchased by
the Company pursuant to repurchase rights retained under this
Plan or the Prior Plan and shares of Stock withheld by the
Company under paragraph 12 to satisfy applicable tax
obligations shall not be available for subsequent option
grants or Stock issuances under this Plan.
(b) In the event of a subdivision of the outstanding shares of
Stock, a declaration of a dividend of more than two percent
payable in shares of Stock, a declaration of a dividend
payable in a form other than shares of Stock in an amount that
has a material effect of the price of shares of Stock, a
combination or consolidation of the outstanding shares of
Stock (by reclassification or otherwise) into a lesser number
of shares of Stock, a recapitalization, a spin-off or a
similar occurrence, the Committee shall make such adjustments
as it, in its sole discretion, deems appropriate in one or
more of the (i) the number of shares of Stock available for
future grants under paragraph 3(a), above, (ii) the limitation
set forth in paragraph 6(e), below, (iii) the number of shares
of Stock covered by each outstanding option, (iv) the exercise
price under each outstanding option and (v) the number of
options to be granted to Non-Employee Directors under
paragraph 7, below. Except as provided in this paragraph 3(b),
a participant shall have no rights by reason of any issue by
the Company of stock of any class or securities convertible
into stock of any class, any subdivision or consolidation of
shares of Stock of any class, the payment of any stock
dividend or any other increase or decrease in the number of
shares of Stock of any class.
(c) In the event that the Company is a party to a merger or other
reorganization, outstanding options and shares subject to a
Restricted Stock Agreement shall be subject to the agreement
of merger or reorganization. Such agreement may provide,
without limitation, for the assumption of outstanding grants
by the surviving corporation or its parent, for their
continuation by the Company (if the Company is a surviving
corporation), for accelerated vesting and accelerated
expiration, or for settlement in cash.
4. Eligible Individuals.
Individuals who shall be eligible to have granted to them the options
or Stock provided for by the Plan shall be such employees (including
officers and directors who are bona fide employees), Non-Employee
Directors, independent contractors, and consultants of the Company or
an Affiliate as the Committee, in its discretion, shall designate from
time to time. Only employees of the Company or a Subsidiary shall be
eligible to receive incentive stock options.
5. The Option Price.
(a) The exercise price of the Stock covered by each incentive
stock option shall be not less than the per share fair market
value of such Stock on the date the option is granted. The
exercise price of the Stock covered by each nonqualified stock
option shall be as determined by the Committee, but in no
event shall such price be less than fifty percent (50%) of the
per share fair market value of the Stock on the date the
option is granted. Notwithstanding the foregoing, in the case
of an incentive stock option granted to a person possessing
more than ten percent of the combined voting power of the
Company or a Subsidiary, the exercise price shall be not less
than 110 percent of the fair market value of the Stock on the
date the option is granted. The exercise price of an option
shall be subject to adjustment to the extent provided in
paragraph 3(b), above.
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(b) For purposes of paragraph 5(a) above and for all other
valuation purposes under the Plan, the fair market value per
share of Stock on any relevant date shall be the closing
selling price per share of Stock on the New York Stock
Exchange on the date in question, as such price is quoted on
the composite tape of transactions on such exchange. If there
is no reported sale of the Stock on the New York Stock
Exchange on the date in question, then the fair market value
shall be the closing selling price on such exchange on the
last preceding date for which such quotation exists.
6. Terms and Conditions of Options.
(a) Each option granted pursuant to the Plan will be evidenced by
a written Stock Option Agreement executed by the Company and
the person to whom such option is granted.
(b) The Committee shall determine the term of each option granted
under the Plan which shall not be for more than ten years;
provided, however, that in the case of an option granted to a
person possessing more than ten percent of the combined voting
power of the Company or a Subsidiary the term of each
incentive stock option shall be for no more than five years.
(c) The Stock Option Agreement may contain such other terms,
provisions, and conditions as may be determined by the
Committee (not inconsistent with this Plan). If an option, or
any part thereof is intended to qualify as an incentive stock
option, the Stock Option Agreement shall contain those terms
and conditions which are necessary to so qualify it.
(d) Notwithstanding any provision of the Plan to the contrary, the
Stock Option Agreement evidencing options granted to an
employee who is a "French Employee" (as that term is defined
in Appendix A to the Plan) or a "Dutch Employee" (as that term
is defined in Appendix B to the Plan) shall include the
provisions set forth in Appendix A or B, respectively.
(e) Options granted to any employee in a single fiscal year shall
in no event cover more than 700,000 shares of stock, subject
to adjustment in accordance with paragraph 3(b), above.
7. Additional Terms and Conditions of Options Granted to Non-Employee
Directors.
(a) On February 15, 1996, each person who was a Non-Employee
Director as of February 15, 1996 shall automatically receive
an option for 15,000 shares of Stock. In addition, on February
15, 1996, each person who was both a Non-Employee Director and
the chairman of the Audit Committee, the Compensation/Option
Committee and/or the Nominating Committee as of February 15,
1996 shall automatically receive an option for 10,000 shares
Stock with respect to each chairmanship.
(b) On the date that a person first becomes a Non-Employee
Director (other than a person who previously had been an
employee) which occurs after February 15, 1996, such person
shall automatically receive an option for 15,000 shares of
Stock.
(c) On the date that a Non-Employee Director first becomes the
chairman of the Audit Committee, the Compensation/Option
Committee and/or the Nominating Committee which occurs after
February 15, 1996, such Non-Employee Director shall
automatically receive an option for 10,000 shares of Stock
with respect to each chairmanship.
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(d) Each option granted to Non-Employee Directors pursuant to the
Plan shall be evidenced by a written Stock Option Agreement
executed by the Company and the person to whom such option is
granted.
(e) The term of each option granted to Non-Employee Directors
pursuant to the Plan shall be ten years.
(f) The exercise price of the Stock covered by each option granted
to Non-Employee Directors pursuant to the Plan shall be equal
to the per share fair value of such Stock on the date the
option is granted.
(g) On the date that a Non-Employee Director ceases to be a member
of the Board for any reason (the "Cessation Date"), all
unexercisable options held by the Non-Employee Director as of
the Cessation Date shall immediately terminate and all
exercisable options held by the Non-Employee Director as of
the Cessation Date shall terminate at the earlier of (i) the
end of the 12-month period following the Cessation Date or
(ii) the date the option would otherwise expire, pursuant to
paragraph 7(e), above. Notwithstanding the foregoing, an
option granted to a Non-Employee Director pursuant to the Plan
within the six-month period that ends on the Cessation Date
shall automatically and immediately terminate on the Cessation
Date.
(h) The Stock Option Agreement may contain such other terms,
provisions, and conditions as may be determined by the
Committee (not inconsistent with this Plan).
8. Use of Proceeds.
Any cash proceeds realized from the sale of Stock pursuant to options
granted or Stock issued under the Plan shall constitute general funds
of the Company.
9. Amendment, Suspension or Termination of the Plan.
(a) The Board or the Committee may at any time amend, suspend or
terminate the Plan as it deems advisable; provided, however,
except as provided in paragraph 3(b), above, the Board or the
Committee shall not amend the Plan without the consent of
stockholders to the extent required by applicable law,
regulation or rule.
(b) No option may be granted nor any Stock issued under the Plan
during any suspension or after the termination of the Plan,
and no amendment, suspension or termination of the Plan shall,
without the affected individual's consent, alter or impair any
rights or obligations under any option previously granted
under the Plan. The Plan shall terminate on February 15, 2006
unless previously terminated by the Board pursuant to this
paragraph 9.
10. Assignability.
Each option granted pursuant to the Plan shall, during the optionee's
lifetime, be exercisable only by him, and neither the option nor any
right thereunder shall be transferable by the optionee by operation of
law or otherwise, other than by will or the laws of descent and
distribution. Stock subject to a Restricted Stock Agreement shall be
transferable only as provided in such Agreement.
11. Payment Upon Exercise.
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Payment of the purchase price upon exercise of any option granted under
this Plan shall be made (i) in cash, (ii) with shares of Stock owned by
the optionee, (iii) by delivery of an irrevocable direction to a
securities broker approved by the Committee to sell shares and deliver
all or a portion of the proceeds to the Company in payment for the
Stock, (iv) by delivery of the optionee's promissory note with such
recourse, interest, security and redemption provisions as the Committee
in its discretion determines appropriate, or (v) in any combination of
the foregoing. Any Stock used to exercise options shall be valued at
its fair market value on the date of the exercise of the option.
12. Withholding of Shares.
To the extent permitted by the option agreement, an optionee may
satisfy federal, state and local tax obligations incident to the
exercise of stock options under the Plan, or other purchase or receipt
of Stock under the Plan, with shares of the Company's Common Stock
(whether acquired through exercise of a stock option or otherwise).
13. Restrictions on Transfer of Shares.
The Stock acquired pursuant to the Plan shall be subject to such
restrictions and agreements regarding sale, assignment, encumbrances,
or other transfer as are in effect among the stockholders of the
Company at the time such Stock is acquired, as well as to such other
restrictions as the Committee shall deem advisable.
14. Stockholder Approval.
This Plan shall become effective upon its approval by a majority of the
stockholders voting (in person or by proxy) at a stockholders' meeting
held within 12 months of the Board's adoption of the Plan. The
Committee may grant options under the Plan prior to the stockholders'
meeting, but until stockholder approval of the Plan is obtained, Stock
shall not be issued pursuant to the Plan (whether or not for
consideration) and no option shall be exercisable.
15. Change in Control.
Upon the actual consummation of a Change in Control, all outstanding
repurchase rights of the Company shall automatically expire and cease
to have effect with respect to any and all shares of Stock purchased
under the Plan. Upon the actual consummation of a Change in Control,
all outstanding options shall immediately become exercisable in full.
The foregoing not withstanding, the Board may otherwise provide in
connection with such Change in Control or any attempt to effect such
Change in Control.
For purposes of applying the vesting acceleration provisions of this
paragraph 15, the following provisions shall be controlling:
A "Change in Control" shall be deemed to be effected upon:
(i) the acquisition by any Person, other than the Company or one
or more persons controlling, controlled by or under common
control with the Company, of bene ficial ownership (as
determined pursuant to Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of eighty-five percent (85%)
or more of the Company's outstanding voting securities
pursuant to a transaction which the
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majority of the Continuing Directors does not at any time
recommend the Company's stockholders to accept or approve, or
(ii) a change in the composition of the Board over any period of
thirty-six (36) consecutive months or less such that a
majority of the Board members (determined by rounding up the
next whole number) cease to be comprised of individuals who
either (A) were Continuing Directors at the start of such
period or (B) were elected or nominated for election as Board
members during such period by at least a majority of the
Continuing Directors in office at the time such election or
nomination was approved by the Board.
Continuing Director shall mean any member of the Board who has served
continuously as such Board member from and before the commencement of
the transaction resulting in the Change in Control.
Person shall mean any individual, firm, partnership, corporation or
other entity and shall include any successor of such entity and all
Affiliates, Associates and Subsidiaries (as such terms are defined in
Rule 12b-2 of the Securities Exchange Act of 1934, as amended) of such
entity.
The 85% test in subparagraph (i) of the Change in Control definition
shall be measured at the time the transaction resulting in the Change
in Control first commences, and there shall be excluded from such
calculation, to the extent provided pursuant to Section 203 (or any
successor provision) of the Delaware General Corporation Law, shares
owned by (i) persons who are both officers and directors of the Company
and (ii) employee stock plans in which employee-participants do not
have the right to determine confidentially whether shares held subject
to the plan are to be tendered in a tender or exchange offer.
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APPENDIX A
OPTION GRANTS TO FRENCH EMPLOYEES
This Appendix A to the Tandem Computers Incorporated 1997 Stock Plan
(the "Plan") sets forth special rules under which options shall be granted to
individuals who are employees of Tandem Computers Europe Incorporated or of a
Tandem Subsidiary in France (collectively referred to as the "French Companies")
and whose salary is paid in French currency on the date of the grant. To the
extent the rules in this Appendix A are not consistent with the provisions of
the Plan, this Appendix A shall govern. To the extent that there is no
inconsistency between the provisions of the Plan and this Appendix A, the
provisions of the Plan shall govern.
1. ELIGIBILITY. Options shall not be granted to French Employees
possessing shares representing ten percent (10%) or more of
Tandem's capital stock.
2. VESTING. Options granted shall vest daily over a four-year
period that begins on the effective date of the option and
ends on the earlier of (i) the fourth (4th) anniversary of the
effective date or (ii) the date the French Employee terminates
employment with the French Companies.
3. OPTION PRICE. The purchase price of the shares of stock
covered by an option shall not be less than eighty percent
(80%) of the closing stock price on the NYSE, averaged over a
period of twenty (20) consecutive trading days ending on the
date of grant. The option price shall not be changed and shall
be adjusted only upon the occurrence of the events specified
under the July 24, 1966 corporate law, section 208-5, in
accordance with French law.
4. EXERCISE OF OPTIONS.
(a) When Exercisable. An option cannot be exercised by a
French Employee unless it is vested pursuant to
paragraph 2 above.
(b) Death. Upon the death of a French Employee, his or
her options shall remain exercisable for a period of
six (6) months following the date of death to the
extent that such options were vested pursuant to
paragraph 2 above on the date of death.
(c) Method of Exercise. An option is exercisable by a
French Employee upon written notice to Tandem. This
written notice must state the number of shares being
exercised and must be accompanied by full payment for
the stock being purchased. Payment may be in the form
of cash, check or money order.
5. TERM OF PLAN.
No options with respect to treasury shares shall be granted to
French Employees more than five (5) years after the date when
the stockholders of Tandem approve the Plan.
6. DEFINITIONS.
(a) "French Employee" shall mean an individual who is an
employee of Tandem Computers Europe Incorporated or
of a Tandem Subsidiary or Affiliate, in France, and
whose salary is paid in French currency on the date
the option is granted.
(b) "Tandem Subsidiary" shall mean a company in which
Tandem has a fifty percent
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(50%) or greater equity interest, directly or
indirectly, or a corporation of which Tandem owns
fifty percent (50%) or more of the voting shares,
either directly or indirectly.
(c) "Tandem Affiliate" shall mean a company with which
Tandem has a business relationship.
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APPENDIX B
OPTION GRANTS TO DUTCH EMPLOYEES
This Appendix B to the Tandem Computers Incorporated 1997 Stock Plan
(the "Plan") sets forth special rules under which options shall be granted to
individuals who are employees of Tandem Computers Europe Incorporated or a
Tandem Subsidiary in The Netherlands (collectively referred to as the "Dutch
Companies") whose salary is paid in Dutch currency on the date of grant. To the
extent the rules in this Appendix B are not consistent with the provisions of
the Plan, this Appendix B shall govern.
To the extent that there is no inconsistency between the provisions of the Plan
and this Appendix B, the provisions of the Plan shall govern.
1. VESTING. Options granted to a Dutch Employee will vest
immediately upon grant.
2. RIGHT OF REPURCHASE. If a Dutch Employee ceases to be employed
by the Dutch Companies before the fourth anniversary of the
Effective Date, Tandem shall have the right to repurchase a
limited number of shares from the Dutch Employee. The
repurchase price shall be the option price. The number of
shares to which this right of repurchase applies shall be
determined according to the following formula:
(Total Number of Shares Purchased) minus [(Total Number of Shares Under
Option) x (Number of Days of Continuous Employment Following the
Effective Date) x (0.000685)]
3. EXERCISE OF OPTIONS. An option granted to a Dutch Employee
cannot be exercised after the fifth anniversary of the date of
grant.
4. DEFINITIONS.
(a) "Dutch Employee" shall mean an individual who is an
employee of Tandem Computers Europe Incorporated or
of a Tandem Subsidiary or Affiliate, in the
Netherlands, and whose salary is paid in Dutch
currency on the date the option is granted.
(b) "Tandem Subsidiary" shall mean a company in which
Tandem has a 50 percent equity interest, directly or
indirectly or a corporation of which Tandem owns 50
percent or more of the voting shares, either directly
or indirectly.
(c) "Tandem Affiliate" shall mean a company with which
Tandem has a business relationship.
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