______________________
NOTICE
OF
ANNUAL MEETING
OF STOCKHOLDERS
AND PROXY STATEMENT
_________________________
SPACE IN OUR AUDITORIUM IS LIMITED
Stockholders will be seated in the auditorium as long as space
is available. Remaining stockholders are invited to participate via closed
circuit television from other locations in our Conference Center.
Beneficial owners of stock held by banks, brokers or investment
plans ("in street name") will need proof of ownership to be admitted
to the meeting. A recent brokerage statement or a letter from
the broker or bank are examples of proof of ownership.
COMPAQ LOGO!
_______________________________________________________________________________
<PAGE>
Compaq Computer Corporation 20555 SH 249
P.O. Box 692000 Houston, TX 77070-2698
Houston, TX 77269-2000 Tel 713-370-0670
COMPAQ LOGO!
March 10, 1994
Dear Stockholder:
Compaq Computer Corporation's annual meeting of stockholders will be held
Thursday, April 21, 1994, at 10:00 a.m. at the Conference Center, CCA5, Compaq
Computer Corporation, 20555 SH 249, Houston, Texas.
Details of the business to be conducted at the annual meeting are provided
in the enclosed Notice of Annual Meeting of Stockholders and Proxy Statement.
On behalf of the Board of Directors and employees of Compaq, I cordially
invite all stockholders to attend the annual meeting.
Sincerely,
Eckhard Pfeiffer
President and Chief
Executive Officer
<PAGE>
Compaq Computer Corporation 20555 SH 249
P.O. Box 692000 Houston, TX 77070-2698
Houston, TX 77269-2000 Tel 713-370-0670
COMPAQ LOGO!
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held April 21, 1994
To the Stockholders of
Compaq Computer Corporation:
Notice is hereby given that the annual meeting of stockholders of Compaq
Computer Corporation, a Delaware corporation (the "Company"), will be held at
the Conference Center, CCA5, Compaq Computer Corporation, 20555 SH 249,
Houston, Texas, on Thursday, April 21, 1994, at 10:00 a.m., Houston time,
for the following purposes, as more fully described in the accompanying Proxy
Statement:
(1) To elect eight directors.
(2) To act upon such other business as may properly come before the
meeting.
The close of business on February 23, 1994, has been fixed as the record
date for determining the stockholders entitled to notice and to vote at the
annual meeting.
By Order of the Board of Directors
Wilson D. Fargo,
Secretary
March 10, 1994
It is important that your stock be represented at the meeting regardless of the
number of shares you hold. Please complete, sign, and mail the enclosed Proxy
in the accompanying envelope even if you intend to be present at the meeting.
Returning the proxy will not limit your right to vote in person or to attend
the annual meeting, but will ensure your representation if you cannot attend.
The Proxy is revocable at any time prior to its use.
_______________________________________________________________________________
<PAGE>
COMPAQ COMPUTER CORPORATION
20555 SH 249
Houston, Texas 77070
PROXY STATEMENT
for
Annual Meeting of Stockholders
To Be Held April 21, 1994
VOTING AT THE MEETING AND PROXIES
On March 11, 1994, Compaq Computer Corporation, a Delaware corporation (the
"Company"), will begin to send this Proxy Statement to stockholders entitled to
vote at the Company's Annual Meeting of Stockholders on April 21, 1994.
Stockholders of record at the close of business on February 23, 1994, will be
entitled to vote at the meeting and will receive a copy of this Proxy Statement,
furnishing information relating to the business to be transacted at the meeting.
On February 23, 1994, there were 85,238,656 shares of the Company's common
stock, $.01 par value (the "Common Stock") outstanding. Each share of Common
Stock entitles the holder to one vote on each matter presented at the meeting.
The 2,258,403 shares of Common Stock held in the Company's treasury will not be
voted.
A proxy card is enclosed for your use. YOU ARE SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS TO SIGN, DATE AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE, which is postage-paid if mailed in the United States.
The only matter to be voted upon at the meeting is the election of
directors. You have three choices in this election: By checking the
appropriate box on your proxy card you may (i) vote for all of the director
nominees as a group; (ii) withhold authority to vote for all director nominees
as a group; or (iii) vote for all director nominees as a group except those
nominees you identify in the appropriate area. See "General Information" under
Election of Directors.
You may revoke your proxy at any time before it is actually voted at the
Annual Meeting by (i) delivering written notice of revocation to the Secretary
of the Company, (ii) submitting a subsequently dated proxy, or (iii) attending
the meeting and withdrawing the proxy. You may also be represented by another
person present at the meeting through executing a form of proxy designating such
person to act on your behalf. Each unrevoked proxy card properly executed and
received prior to the close of the voting will be voted as indicated. Where
specific instructions are not indicated, the proxy will be voted for the
election of all directors as nominated.
The expense of preparing, printing and mailing this Proxy Statement will be
paid by the Company. To assist in the solicitation of proxies, the Company
has engaged Corporate Investor Communications, Inc. ("CIC") at a fee of $9,000
plus reimbursement of its out-of-pocket expenses. In addition to the use of the
mail, proxies may be solicited personally or by telephone by regular employees
of the Company without additional compensation as well as by employees of CIC.
The Company will reimburse banks, brokers and other custodians, nominees, and
fiduciaries for their costs in sending the proxy materials to the beneficial
owners of the Common Stock.
ELECTION OF DIRECTORS
General Information
Directors elected at the Annual Meeting will hold office until the next
Annual Meeting and their successors are duly chosen and qualify, or until their
earlier resignation or removal. The Board of Directors has inquired of each
nominee and learned that each will serve if elected. In the event that any of
these nominees should become unavailable for election, the Board of Directors
may designate substitute nominees, in which event the shares represented by the
proxy cards returned will be voted for such substitute nominees unless an
instruction to the contrary is indicated on the proxy card. Each of the
nominees other than Mr. Larson and Mr. Heilmeier was elected by the stockholders
at the last Annual Meeting. Mr. Larson and Mr. Heilmeier were appointed to the
Board in April 1993 and February 1994, respectively.
Information Concerning Nominees
BENJAMIN M. ROSEN Director since 1982
Benjamin M. Rosen, age 61, has been Chairman of the Board of Sevin Rosen
Management Company, a venture capital firm, since 1981. Mr. Rosen is a director
of several privately held technology companies. He is also Vice Chairman of the
Board of Trustees of the California Institute of Technology. He was appointed
Chairman of the Board of the Company in 1983.
ECKHARD PFEIFFER Director since 1991
Eckhard Pfeiffer, age 52, was elected President and Chief Executive Officer and
appointed a director of the Company in October 1991. He joined the Company in
September 1983 as Vice President, Europe and was elected Senior Vice President,
International Operations in January 1986, President, Europe and International
Division in May 1989, and Executive Vice President and Chief Operating Officer
in January 1991.
ROBERT TED ENLOE, III Director since 1986
Robert Ted Enloe, III, age 55, has served as President and Chief Executive
Officer of Liberte Investors since 1975. He was President and a director of L&N
Housing Corp. from 1981 to April 1992 and he remains a director of that entity,
now known as LNH Reit, Inc. From 1975 to September 1991 he served as the
President of Lomas Financial Corporation, and as a director of that company from
1970 to 1991. Mr. Enloe also serves as a trustee of Liberte Investors and as a
director of Leggett & Platt, Inc., and Sixx Holdings, Incorporated.
GEORGE H. HEILMEIER Director since 1994
George H. Heilmeier, age 57, has served as President and Chief Executive Officer
of Bell Communications Research, Inc. (Bellcore), since 1991. He was Senior
Vice President and Chief Technical Officer of Texas Instruments, Inc. from 1983
to 1991. He is a member of the Defense Science Board, the President's National
Security Telecommunications Advisory Committee and the National Academy of
Engineering. Dr. Heilmeier also serves as a member of the board of directors of
TRW, Inc.
GEORGE E.R. KINNEAR II Director since 1988
George E.R. Kinnear II, age 66, currently serves as Chairman of the Board of the
Retired Officers Association of the United States. From November 1988 to
January 1992 he served as Executive Vice President of the University of New
Hampshire (and as interim President from February 1990 to August 1990). From
1982 to 1988, he served as a vice president for Grumman Corporation or its
subsidiaries, last serving as
2
Senior Vice President, Washington Operations. He also serves as a member of
the board of directors for Precisions Standard Corporation and The Aerospace
Corporation.
PETER N. LARSON Director since 1993
Peter N. Larson, age 54, has served as Chairman of the Consumer Sector Operating
Committee and a member of the Executive Committee of Johnson & Johnson since
August 1992. He joined Johnson & Johnson as a Company Group Chairman in 1991.
Prior to joining Johnson & Johnson in 1991, he was a member of a partnership
managing consumer businesses. He previously had been employed by Kimberly-Clark
Corporation since 1978 in a variety of assignments, including President of its
Health Care Sector and a member of its Board of Directors.
KENNETH L. LAY Director since 1987
Kenneth L. Lay, age 51, has served as Chairman of the Board and Chief Executive
Officer of Enron Corp., a diversified energy company, since February 1986. In
addition to Enron Corp., he serves as a director of Eli Lilly & Company, Trust
Company of the West, and Enron Oil and Gas Company.
KENNETH ROMAN Director since 1991
Kenneth Roman, age 63, provides management consulting services. From 1988 to
1989 he served as Chairman and Chief Executive Officer of The Ogilvy Group (and
from 1985 to 1989 as Chairman of Ogilvy & Mather Worldwide). He was Executive
Vice President of American Express in charge of corporate affairs and
communications from 1989 to 1991. He serves as a director of IBJ Schroder Bank
and Trust Company and PennCorp Financial Group, Inc.
These eight persons will be placed in nomination for election to the Board of
Directors. The shares represented by the proxy cards returned will be voted FOR
the election of these nominees unless you specify otherwise.
Board Organization and Meetings
During 1993 the Board of Directors met nine times and various committees of
the Board met a total of fourteen times. Attendance at Board meetings averaged
95% and attendance at committee meetings averaged 91%. Each of the directors
attended at least 75% of the meetings of the Board of Directors and the
committees on which he served.
The Audit Committee consists of five non-employee directors: Mr. Lay
(Chair) and Messrs. Enloe, Kinnear, Larson, and Rosen. This Committee is
responsible for engaging the Company's independent accountants, and reviews with
them (i) the scope and timing of their audit services and any other services
they may be asked to perform, (ii) their report on the Company's consolidated
financial statements following completion of the audit, and (iii) the Company's
policies and procedures with respect to internal accounting and financial
controls. This Committee meets separately with representatives of the Company's
independent accountants and with representatives of senior management and the
internal auditors. The Audit Committee held five meetings during 1993.
The Compensation Committee consists of five non-employee directors: Mr.
Roman (Chair) and Messrs. Enloe, Kinnear, Larson, and Lay. The Committee
reviews and makes recommendations to the Board of Directors concerning the
compensation of officers and other employees and is responsible for
administering the Company's employee equity incentive plans. During 1993 this
Committee held seven meetings.
3
The Nominating Committee consists of six non-employee directors: Mr. Enloe
(Chair) and Messrs. Kinnear, Larson, Lay, Roman, and Rosen. The Committee is
responsible for establishing procedures for the selection and retention of
members of the Board of Directors, evaluating Board nominees and members, and
recommending nominees. This Committee will consider nominees recommended by
stockholders. Any such recommendations should be forwarded to the Secretary of
the Company with pertinent background information regarding the proposed
nominee. The Nominating Committee met on two occasions during 1993.
Directors' Compensation
Board members other than those employed by the Company receive an annual
fee of $30,000 ($50,000 for the Chairman), and a fee of $1,000 for each Board
meeting attended in person. Each Committee chairman receives an additional fee
of $5,000 annually. Directors are reimbursed for travel and certain other
expenses incurred in connection with their duties as a director of the Company.
In connection with his role as Chairman of the Board of Directors, the Company
retained Mr. Rosen to perform certain consulting services for the Company. In
1993 he received $154,500 in consulting fees from the Company.
The Company has adopted a stock option plan for non-employee directors (the
"Director Plan"), which authorizes 500,000 shares of Common Stock for issuance
pursuant to stock options granted to non-employee directors. Under the Director
Plan, (i) each newly appointed director is granted an option to purchase 10,000
shares of Common Stock at an exercise price equal to the market value of the
Common Stock on the date of the grant; (ii) each year upon re-election to the
Board each non-employee director receives an option grant to acquire 4,000
shares of Common Stock or, in the case of the director named as Chairman of the
Board, an option to acquire 5,000 shares of Common Stock with an exercise price
equal to market value on the day of grant; and (iii) six months prior to each
annual meeting each non-employee director may file an election to receive stock
options in lieu of all or a portion of the annual retainer to be earned
following his election. Upon his appointment to the Board on April 23, 1993,
Mr. Larson received an option grant with an exercise price of $48.75 per share.
On April 23, 1993, Messrs. Rosen, Enloe, Kinnear, Lay and Roman each received an
annual option grant upon re-election with an exercise price of $48.75 per share;
and, Messrs. Rosen, Kinnear, and Lay were granted options to purchase 2,051
shares, 615 shares, and 1,231 shares, respectively, at an exercise price of
$24.38, as the result of their elections to receive options in lieu of a portion
of annual fees.
As part of its overall program to promote charitable giving, the Company
has established a directors' charitable donation program funded by life
insurance policies on directors. Upon the death of an individual who has served
as a director for three years, the Company will donate $1 million to one or more
qualifying charitable organizations recommended by the individual director and
subsequently will be reimbursed by life insurance proceeds. Individual
directors derive no financial benefit from this program since all charitable
donations are made by the Company. The program does not result in any material
cost to the Company.
Executive Officers
The Board elects executive officers annually at its first meeting following
the annual meeting of stockholders. Certain information concerning the
Company's executive officers is set forth below, except that information
concerning Mr. Pfeiffer is set forth above under "Election of Directors."
Andreas Barth, age 49, was elected Senior Vice President, Europe, in
December 1991. He joined the Company in February 1988 as Managing Director of
Compaq Computer GmbH, the Company's German subsidiary, was appointed Vice
President, Central Europe in December 1990, and Vice President, Europe in
January 1991.
Hugh Barnes, age 48, was elected Senior Vice President, Peripherals
Division, in February 1993. He joined the Company in April 1984 as director of
engineering for portable computers and was appointed Vice President, General
Engineering in January 1986 and Vice President, Product Development in December
1989.
Ross A. Cooley, age 53, was elected Senior Vice President, North America in
December 1991. He joined the Company in February 1984 as a regional sales
manager, and was appointed Vice President, Sales in
4
April 1987, Vice President, Sales and Service in September 1989, and Vice
President, North America in January 1991.
Wilson D. Fargo, age 49, was elected Senior Vice President, General Counsel
and Secretary of the Company in May 1989. He joined the Company in September
1984 as Vice President and General Counsel and he was appointed Secretary of the
Company in October 1984.
James W. Hartzog, age 47, was elected Senior Vice President, Portable PC
Division of the Company in July 1993. He joined the Company as director of
profit improvement in January 1989 and was appointed Vice President Engineering,
PC Division in May 1992.
Gregory E. Petsch, age 43, was elected Senior Vice President, Corporate
Operations in April 1993. He joined the Company in September 1983 as director
of manufacturing control and was named Vice President, CPU Manufacturing in May
1989 and Vice President, Manufacturing in November 1991.
John T. Rose, age 48, joined the Company as Senior Vice President, Desktop
PC Division, in July 1993. Prior to his arrival at the Company, he was Vice
President of Digital Equipment Corporation's Personal Computing Systems
Business, which he established in 1985.
Gary Stimac, age 42, was elected Senior Vice President, Systems Division,
in October 1991. He joined the Company in February 1982 as a systems engineer
and was elected Vice President, Engineering in January 1986, Vice President,
Systems Engineering in May 1987, and Senior Vice President, Systems Engineering
in May 1989.
Daryl J. White, age 46, was elected Senior Vice President, Finance and
Chief Financial Officer in May 1989. He joined the Company in January 1983 as
Director of Information Management and was elected Corporate Controller in May
1984, Vice President and Corporate Controller in January 1986, and Vice
President, Finance and Chief Financial Officer, in October 1988.
Gian Carlo Bisone, age 47, was elected Vice President, North America
Marketing, in May 1992. He joined the Company in April 1990 as Vice President,
Marketing, Europe, and was appointed Vice President, Corporate Marketing, in
October 1991. Before joining the Company, Mr. Bisone was Vice President,
Marketing for Olivetti. He was employed by Olivetti for 18 years and served in
a number of positions.
Steven H. Hamblin, age 45, was elected Vice President, Worldwide Logistics
in December 1992. Mr. Hamblin joined the Company in October 1984 as Corporate
Operations Controller and was appointed Managing Director of Singapore
Manufacturing Operations in March 1987, Managing Director, Asia/Pacific in
February 1991, and Vice President, Asia/Pacific in October 1991.
David J. Schempf, age 38, was elected Vice President, Corporate Finance,
Corporate Controller, and Treasurer in November 1992. He joined the Company in
October 1982 as accounting manager and later served as controller of the office
and personal computer divisions and was elected Vice President and Corporate
Controller in May 1989.
Robert W. Stearns, age 43, joined the Company as Vice President of
Corporate Development in July 1993. Prior to his arrival at the Company, he was
employed as a consultant focusing on high technology issues with McKinsey & Co.
from August 1992 to July 1993 and as Vice President, Corporate Marketing with
Motorola/Codex from September 1986 to August 1992.
Jerry Welch, age 55, was elected Vice President, Human Resources in January
1991. He joined the Company in August 1985 as Director of Human Resources of
its telecommunications subsidiary and was appointed Director, International
Human Resources in September 1986 and Director, Human Resources for Engineering
and Administration in January 1988.
John W. White, age 55, was elected Vice President and Chief Information
Officer upon his joining the Company in February 1994. Before joining the
Company, Mr. White was Vice President of Texas Instruments, Inc., and President
of its Information Technology Group. He was employed by Texas Instruments for
28 years and served in a number of positions.
5
Stock Ownership
The following table sets forth information regarding the ownership of
the Company's Common Stock by (i) each beneficial owner of more than 5% of the
outstanding Common Stock, (ii) each director, (iii) the Chief Executive Officer
and the four most highly compensated other executive officers, and (iv) the
executive officers and directors as a group. Unless otherwise indicated, each
of the stockholders has sole voting and investment power with respect to the
shares beneficially owned. The Company had 85,341,971 shares of Common Stock
outstanding at February 28, 1994.
<PAGE>
Name of Owner or Number of Shares Percent of
Identity of Group Options<F1> Total<F1> Outstanding
Twentieth Century
Companies, Inc.
4500 Main Street, 4,868,900 <F2> 5.71 %
Kansas City, MO
64141-9210
FMR Corp.
82 Devonshire Street
Boston, MA 02109 9,075,138 <F3> 10.63
Benjamin M. Rosen 60,428 566,416 *
Eckhard Pfeiffer 419,670 420,230 <F4> *
Robert Ted Enloe, III 22,000 22,000 *
George E.R. Kinnear II 8,615 14,615 *
George H. Heilmeier 0 100 *
Peter N. Larson 10,000 10,200 *
Kenneth L. Lay 7,231 34,919 *
Kenneth Roman 12,000 14,000 *
Andreas Barth 98,631 98,961 *
Ross Cooley 19,666 21,735 <F5> *
Gary Stimac 165,749 190,208 <F6> *
Daryl J. White 16,166 16,949 *
All executive officers
and directors as a group 987,197 1,571,365 <F7> 1.84
[FN]
* Less than 1%
<F1> Includes Company stock options that are exercisable or will become
exercisable by April 29, 1994.
<F2> Based on information provided in Schedule 13G and amendments thereto filed
with the Securities and Exchange Commission February 10, 1994, these shares are
beneficially held by Twentieth Century Companies, Inc. ("TCC"), Investors
Research Corporation ("IRC"), and James E. Stowers, Jr., each of the reported
address. IRC, a registered investment adviser and a wholly-owned subsidiary of
TCC, manages the investments of Twentieth Century Investors, Inc. among other
accounts. Twentieth Century Investors, Inc. owns 4,480,000 of the reported
ownership. Mr. James E. Stowers, Jr., controls TCC by virtue of his ownership
of approximately 60% of the voting stock of TCC. The reported shares include
11,500 shares in which Twentieth Century Companies, Inc. shares voting power.
<F3> Based on information provided in Schedule 13G and amendments thereto
filed with the Securities and Exchange Commission February 11, 1994, these
shares are beneficially held by FMR Corporation ("FMR") and certain of its
affiliates and associates. Fidelity Management & Research Company ("FMRC"), a
registered investment adviser and a wholly owned subsidiary of FMR, is the
beneficial owner of 8,451,660 shares as a result of acting as investment adviser
to the Fidelity Funds, voting power over which resides with the Funds' Boards of
Trustees. Edward C. Johnson 3d owns 34% of the outstanding voting stock of FMR
and serves as Chairman. In his Schedule 13G dated November 10, 1993, Mr.
Johnson reported that he had sole voting power over 13,500 shares, sole
dispositive power over 8,741,052 shares and shared voting and dispositive power
over 11,250 shares.
<F4> Includes 560 shares held by daughter and in custody for a minor child.
<F5> Includes 2,069 shares of Common Stock credited to Mr. Cooley's account in
the Company's Investment Plan.
<F6> Includes 1,395 shares of Common Stock credited to Mr. Stimac's account in
the Company's Investment Plan.
<F7> Includes 14,875 shares of Common Stock credited to executive officers'
accounts in the Company's Investment Plan.
EXECUTIVE COMPENSATION
The following Tables I through III present information concerning the cash
compensation and stock options provided to Messrs. Pfeiffer, Barth, Cooley,
Stimac, and White. The notes to these tables provide more specific information
regarding compensation. Table IV sets forth the anticipated retirement benefits
6
to be received by Mr. Pfeiffer and Mr. Barth under the defined benefit
retirement plan of the Company's German subsidiary. The Company's compensation
policies are discussed in the Compensation Committee Report.
<TABLE>
TABLE I
SUMMARY COMPENSATION
<CAPTION>
Long-Term
Annual Compensation <F1> Compensation
________________________ ____________
Securities
Principal Other Annual Underlying All Other
Position Year Salary Bonus Compensation Options Compensation
____________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Eckhard Pfeiffer 1993 $1,000,000 $1,500,000 -- 120,000 --
Chief 1992 921,400 800,000 $1,166,404<F2> 120,000 --
Executive 1991<F3> 664,842 400,000 -- 260,000 --
Officer
Andreas Barth 1993 380,573 350,590 -- 40,000 --
Senior Vice 1992 352,158 247,693 -- 40,000 --
President 1991 274,328 158,174 -- 70,000 --
Europe
Ross Cooley 1993 321,766 450,000 -- 40,000 $8,994<F4>
Senior Vice 1992 300,159 225,000 -- 30,000 8,728<F4>
President 1991 270,000 130,000 -- 60,000 --
North America
Gary Stimac 1993 430,000 450,000 -- 40,000 8,994<F4>
Senior Vice 1992 410,000 250,000 -- 40,000 8,728<F4>
President 1991 375,000 150,000 -- 100,000 --
Systems Division
Daryl White 1993 365,000 400,000 -- 40,000 8,994<F4>
Chief 1992 345,000 250,000 -- 40,000 8,728<F4>
Financial 1991 310,000 150,000 -- 100,000 --
Officer
<FN>
<F1> Amounts shown include cash compensation earned by executive officers as
well as amounts earned but deferred. Management believes that the value of any
other benefits to any officer during 1993 or to any officer other than Mr.
Pfeiffer during 1992 did not exceed $50,000 or fall within any other category
requiring inclusion.
<F2> In accordance with the employment agreement between the Company and Mr.
Pfeiffer, the Company paid these funds to Mr. Pfeiffer to reimburse him for U.S.
taxes incurred in 1992 upon his exercise of certain stock options.
<F3> From January 1991 to October 1991, Mr. Pfeiffer served as the Company's
Executive Vice President and Chief Operating Officer.
<F4> Amounts contributed to the Company's defined contribution plan on behalf
of the named executive officer.
</TABLE>
<TABLE>
TABLE II
1993 OPTION EXERCISES
AND YEAR-END OPTION VALUES
<CAPTION>
Number of Unexercised Value of Unexercised
Options at in-the-Money Options
1993 Stock Option Exercises December 31, 1993 at December 31, 1993
Shares Value Realized Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Eckhard Pfeiffer 0 $ 0 372,336 387,664 $16,216,977 $13,020,620
Andreas Barth 0 0 84,900 117,100 3,442,172 3,686,417
Ross Cooley 74,667 1,493,825 5,000 113,000 176,280 3,347,329
Gary Stimac 120,000 4,409,534 143,751 156,249 5,128,108 5,192,400
Daryl White 134,300 2,329,819 35,950 149,750 1,416,174 4,980,243
</TABLE>
7
TABLE III
1993 STOCK OPTION GRANTS
Gains based on
Assumed Rates
of Stock Price
Appreciation
1993 Stock Option Grants for Option Term <F1>
-------------------------------------------------------
% of Exercise
1993 /Base
Employee Price Assumed Assumed
Options Option per Expiration Rate Rate
Granted<F2> Grants Share Date 5% 10%
NAME 9/23/93
- --------------------------------------------------------------------------------
Eckhard Pfeiffer 120,000 5.62% $58.75 9/23/03 $4,433,710 $11,235,881
Andreas Barth 40,000 1.87 58.75 9/23/03 1,477,903 3,745,293
Ross Cooley 40,000 1.87 58.75 9/23/03 1,477,903 3,745,293
Gary Stimac 40,000 1.87 58.75 9/23/03 1,477,903 3,745,293
Daryl White 40,000 1.87 58.75 9/23/03 1,477,903 3,745,293
All Shareholders: N/A N/A $58.75 N/A $3.05 $7.74
82,611,071 shares billion billion
outstanding
9/30/93
Named officers gain
gain as % of N/A N/A N/A N/A .34% .34%
All Shareholders'
gain
[FN]
<F1> The potential gain is calculated from the closing price of Common Stock on
September 23, 1993, the date of grants to executive officers. These amounts
represent certain assumed rates of appreciation only. Actual gains, if any, on
stock option exercises and Common Stock holdings are dependent on the future
performance of the Common Stock and overall market conditions. There can be no
assurance that the amounts reflected in this table will be achieved.
<F2> Option grants generally vest over 60 months from the date of grant and
expire ten years from date of grant.
TABLE IV
GERMAN PENSION PLAN
Final Annual Pension Benefits without Reductions
Eckhard Average for Anticipated Social Security and Prior
Pfeiffer Base Employment Pension Benefits
Salary
____________________________________________________________________________
Years of 15 20 25 30 35
Service
____________________________________________________________________________
$ 800,000 $313,043 $417,391 $480,000 $480,000 $480,000
900,000 352,174 469,565 540,000 540,000 540,000
1,000,000 391,304 521,739 600,000 600,000 600,000
1,100,000 430,435 573,913 660,000 660,000 660,000
1,200,000 469,565 626,087 720,000 720,000 720,000
Final Base Annual Pension Benefits without Reduction
Andreas Salary for Anticipated Social Security Benefits
Barth
____________________________________________________________________________
Years of 15 20 25 30 35
Service
____________________________________________________________________________
$300,000 $ 90,000 $120,000 $150,000 $180,000 $210,000
400,000 120,000 160,000 200,000 240,000 280,000
500,000 150,000 200,000 250,000 300,000 350,000
600,000 180,000 240,000 300,000 360,000 420,000
700,000 210,000 280,000 350,000 420,000 490,000
Table IV indicates anticipated benefits at age 65 assuming the years of service
with the Company shown. At December 31, 1993, Mr. Pfeiffer and Mr. Barth had
ten years and five years of vested service, respectively. Benefits for Mr.
Pfeiffer are calculated based on a formula under which he receives benefits
equal to sixty percent of his average base salary over his final three years of
employment. Any benefit is offset by U.S. and German social security benefits,
pension payments from previous employers, and any amounts contributed by the
Company to the U.S. defined contribution plan. Benefits for Mr. Barth are
calculated based on a formula under which he receives an annual retirement
benefit equal to two percent of his final base salary times his years of
service. This benefit will be offset by German social security benefits. The
Company's executive officers in the United States are eligible to participate in
the Company's defined contribution plan. Amounts contributed to the defined
contribution plan are included in Table I.
8
Stock Performance Graph
The following graph compares the Company's five-year cumulative total
return to the S&P 500 and the S&P Computer Systems Composite Index over a five-
year period, beginning December 31, 1988, and ending December 31, 1993. The
total stockholder return assumes $100 invested at the beginning of the period in
Compaq Common Stock, the S&P 500, and the S&P Computer Systems Composite Index.
It also assumes reinvestment of all dividends. Past financial performance
should not be considered to be a reliable indicator of future performance, and
investors should not use historical trends to anticipate results or trends in
future periods.
TABLE
Comparison of Five-Year Cumulative Total Return
{Linear graph with coordinates indicated in the table below}
1988 1989 1990 1991 1992 1993
________________________________________________
Compaq Computer 100 133 189 88 163 248
Corporation
S&P 500 Composite 100 132 128 166 179 197
S&P Computer Systems 100 83 93 83 61 63
Composite
Executive Officer Agreements
Effective January 1, 1992, the Company entered into an employment
agreement with Mr. Pfeiffer (the "CEO Agreement"). The CEO Agreement sets forth
certain of the terms of Mr. Pfeiffer's employment, including Mr. Pfeiffer's
right to receive a severance payment equal to four times his base salary
(excluding bonuses) upon (i) termination of employment without cause, or (ii)
his resignation following his removal as Chief Executive Officer or a change of
control of the Company. In such events, the CEO Agreement also calls for Mr.
Pfeiffer to vest in all his outstanding stock options and to have a two-year
period to exercise options granted before 1989. Mr. Pfeiffer's right to receive
the severance payment, accelerated stock option vesting, and an extension of the
period to exercise his options is subject to his execution of a release of any
claims against the Company and his agreement not to compete with the Company or
solicit its employees for 24 months following termination of employment. The
CEO Agreement also sets forth the Company's agreement to indemnify Mr. Pfeiffer
for certain personal income taxes related to his relocation to the United States
in 1991. The agreement set forth Mr. Pfeiffer's base compensation for 1992 and
calls for Mr. Pfeiffer and the Company to renegotiate Mr. Pfeiffer's base salary
on an annual basis. The CEO Agreement governs the terms and conditions of Mr.
Pfeiffer's
9
employment with the Company until he resigns or his employment is terminated
at any time by the Company, with or without cause.
The Company has entered into severance arrangements with Messrs.
Barth, Cooley, Stimac and White. The Company has agreed with each of these
officers that upon (i) termination of employment without cause, (ii) resignation
following a material change in the officer's duties, (iii) a change of control,
disability, or a reduction in pay greater than 25%, or (iv) the Company's
failure to renew the agreement, such officer would receive a severance payment
equal to eighteen months of base compensation. The Company's obligation to make
such payment is subject to the officer's execution of a release and
noncompetition and nonsolicitation agreement.
The Company's stock option plans provide for full vesting of
outstanding options in the event there is a change of control of the Company.
Compensation Committee Report
The Compensation Committee of the Board of Directors, composed of
independent outside directors, is responsible for setting the policies that
govern the Company's compensation programs, administering the Company's equity
compensation plans, and establishing the cash compensation of executive
officers. The Committee's objective is to establish compensation programs
designed to attract, retain, and reward executives who will lead the Company in
achieving its business goals in a highly competitive and rapidly changing
industry. The compensation mix for executive officers consists of base
salaries, an annual cash bonus system, and stock option awards. As a result,
much of an executive officer's compensation is based upon the financial
performance of the Company.
The Committee makes its compensation decisions based on an analysis of the
Company's performance and an evaluation of comparative compensation information.
Comparative performance data in 1993 was based on a group of 35 industry
competitors, which included all of the companies in the S&P Computer Systems
Index. The peer group is recommended to the Committee by an outside consulting
firm, which analyzes companies for similar product lines, size, and financial
structure. In 1993, the Company's performance placed the Company above the 90th
percentile in the peer group based on an evaluation of return on total capital
and revenue growth, which are highly correlated with long-term shareholder value
creation.
Comparative compensation data in 1993 was derived from analysis of several
independent surveys of compensation practices by the Company and outside
consultants. Information from the computer and electronics industry segments
are used wherever available. Survey sources include an equity compensation
survey conducted by Hewitt Associates, in which each of the companies utilized
for comparative performance data are invited to participate. The Committee
believes these sources provide the appropriate information to evaluate the pay
practices of the companies with which the Company competes to hire and retain
executives.
The Committee annually establishes each executive officer's base salary
based on the Committee's evaluation of the officer's performance and
contribution in the previous year and on competitive pay practices. The Company
targets executive base salary range midpoints at the 62nd percentile of relevant
market data. The Committee determined each executive officer's base
compensation for 1993, including the CEO's, based upon an appraisal of the
officer's contribution to the Company's results in 1992, and on the officer's
position and responsibilities for 1993. The criteria used in this appraisal
varied based upon the officer's sphere of responsibility, but generally focused
on measures such as revenue growth in marketing and sales divisions, an
assessment of the product road map in product divisions, expense control, and
asset management.
At the end of each year, the Committee establishes a cash bonus fund based
on the Company's performance relative to the industry peer group. In 1993 the
Committee evaluated comparative compensation data to determine the aggregate
amount required to pay bonuses that would result in average total cash
compensation payments to executives at the 90th percentile level, in line with
the Company's performance in 1993. The Committee then determined the amount of
the award for each executive officer by reviewing comparative data for each
executive officer's position at the 90th percentile total cash compensation
levels and
10
evaluating this information in light of individual contribution
levels, succession plans, prospective future contributions, and retention
requirements. In establishing Mr. Pfeiffer's bonus for 1993, the Committee
considered the effective strategies that were initiated and executed by Mr.
Pfeiffer, which resulted in record-setting financial performance in 1993,
including an annual sales increase to $7.2 billion from $4.1 billion in 1992, an
increase in earnings per share to $5.35 from $2.58 in 1992, and 98 percent
growth in the number of unit shipments worldwide, and, in particular, the
market's confidence in Mr. Pfeiffer's leadership. The Committee authorizes the
Chief Executive Officer to allocate the remainder of the bonus fund to key
employees other than executive officers based on competitive pay practices and
individual performance and contributions.
The Compensation Committee and the Board of Directors believe that
management's ownership of a significant equity interest in the Company is a
major incentive in building shareholder wealth and aligning the long-term
interests of management and stockholders. Stock options, therefore, are granted
by the Committee at option prices not less than the fair market value of the
Company's common stock on the grant date and generally vest over sixty months.
Thus stock options have no value unless the share price increases over the fair
market value on the date of grant. Option awards contribute to the retention of
key executives since they realize the benefits of options only as they vest
based on tenure after the grant. The Compensation Committee determines which
employees receive stock option grants by evaluating the responsibilities and
relative positions of key employees in comparison to like or similar positions
at competitor companies. The Committee draws upon the equity compensation
survey performed by Hewitt Associates for guidance in determining grants.
Based on the Company's performance in comparison to the peer group, the
Committee determined that options should be awarded to Mr. Pfeiffer and other
key executives at levels above the 90th percentile of comparative grant
practices reflected in the equity compensation survey. The Committee uses peer
group data to determine an appropriate range of awards for similar positions and
makes awards within this range based on an evaluation that takes into
consideration the employee's past and prospective contributions to the success
of the Company as well as the projected value of outstanding unvested shares and
proposed awards. To evaluate projected values, the Committee uses stock price
projections two years in the future that are based on Value Line predictions of
the industry share growth rate.
In its tax year beginning December 1, 1994, the Company will be subject to
U.S. tax legislation adopted in 1993 that could limit the deductibility of
certain compensation payments to its executive officers. The Company believes
that any compensation realized in connection with the exercise of stock options
granted by the Company will continue to be deductible as performance-based
compensation. The Committee will continue to evaluate the impact of this
legislation on its cash compensation programs and submit any appropriate
proposals to its stockholders at future meetings.
Compensation Committee
Kenneth Roman, Chair Kenneth L. Lay
Robert Ted Enloe, III Peter N. Larson
George E.R. Kinnear II
GENERAL INFORMATION
Price Waterhouse, independent accountants, has served as the
independent accountants of the Company since 1982, the year of the Company's
incorporation, and has been appointed to audit the Company's consolidated
financial statements for 1994. The Board has not proposed that any formal
action be taken at the meeting with respect to the employment of Price
Waterhouse inasmuch as no such action is legally required. Representatives of
Price Waterhouse plan to attend the annual meeting and will be available to
answer appropriate questions. Its representatives will have the opportunity to
make a statement at the meeting if they so desire.
Proposals of stockholders that are intended to be presented at the
Company's 1995 annual meeting of stockholders must be received by the Company no
later than November 10, 1994, to be included in the proxy statement and proxy
relating to that meeting.
Your vote is important! Please sign and return your proxy in the enclosed
envelope.
11
______________________________________________________________________________
Graphic and Image Information Appendix
A performance graph showing five year cumulative total return among the
Company, the S&P 500 Composite Index and the S&P Computer Systems Composite
Index appears on page 9. The coordinates used in the graph also appear on
page 9.
<PAGE>
COMPAQ COMPUTER CORPORATION
Annual Meeting of Stockholders to be held April 21, 1994
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Daryl J. White and
Wilson D. Fargo, and each of them, with full power of
substitution, proxies of the undersigned to vote all shares of
Common Stock of Compaq Computer Corporation (the "Company")
which the undersigned is entitled to vote at the annual
meeting of stockholders to be held April 21, 1994, and all
adjournments thereof, with all the powers the undersigned
would possess if personally present, and particularly, without
limiting the generality of the foregoing, to vote and act on
the following matters and in their discretion upon such other
business as may properly come before the meeting or any
adjournment thereof:
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE
ELECTION OF EACH DIRECTOR NOMINEE NAMED HEREIN AND "FOR" THE
OTHER MATTERS DESCRIBED HEREIN.
(Continued, and to be signed, on the reverse side)
The Board of Directors recommends a vote FOR the Proposal
Proposal: Election of eight directors of the Company:
Nominees:Benjamin M. Rosen; Eckhard Pfeiffer; Robert
Ted Enloe III; George H. Heilmeier; George E.R.
Kinnear, II; Peter N. Larson, Kenneth L. Lay; and
Kenneth Roman
For Withheld
All From All
Nominees Nominees
_______ _______
___ To withhold authority to vote for any individual
nominee(s), mark this box and strike name from the listing
above.
Please sign as name appears. Joint owners should each
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such. If signer is a corporation, please
sign with the full corporation name by authorized
officer or officers. Please fill in date.
Signature ______________________________________
Date ____________________
Signature ______________________________________
Date ____________________
MARK HERE FOR ADDRESS CHANGE AND NOTE AT
/ / LEFT.
