NOTICE
OF
ANNUAL MEETING
STOCKHOLDERS
AND
PROXY STATEMENT
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 letter from your
broker or bank are examples of proof of ownership.
COMPAQ LOGO!
Compaq Computer Corporation 20555 SH 249
PO Box 692000 Houston, Texas 77070-2698
Houston, Texas 77269-2000 Tel 713-370-0670
COMPAQ LOGO!
March 9, 1995
Dear Stockholder:
Compaq Computer Corporation's annual
meeting of stockholders will be held Wednesday,
April 26, 1995, 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 and
hope you will be able to attend in person. If
you are unable to attend in person, please sign
and promptly return the enclosed proxy card in
the enclosed prepaid return envelope. Your
shares will be voted at the annual meeting in
accordance with your proxy. If you plan to
attend the meeting in person, please remember
to bring your identification as a stockholder.
Sincerely,
Eckhard Pfeiffer
President and Chief
Executive Officer
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held April 26, 1995
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 SH249,
Houston, Texas, on Wednesday, April 26, 1995, 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 amend the Company's Restated
Certificate of Incorporation, as amended,
increasing the number of authorized shares of
the Company's common stock, $ .01 par value,
from 400,000,000 shares to 1,000,000,000
shares;
(3) To approve the 1995 Equity
Incentive Plan;
(4) To approve the Compaq Computer
Corporation Bonus Incentive Plan; and
(5) To act upon such other business as
may properly come before the meeting.
The close of business on February 28, 1995,
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 9, 1995
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. If you have shares in more than one name,
or if your stock is registered in more than one
way, you may receive more than one copy of the
proxy material. If so, please sign and return
each of the proxy cards you receive so that all of
your shares may be voted. The Proxy is revocable
at any time prior to its use.
COMPAQ COMPUTER CORPORATION
20555 SH 249
Houston, Texas 77070
PROXY STATEMENT
for
Annual Meeting of Stockholders
To Be Held April 26, 1995
VOTING AT THE MEETING AND PROXIES
On March 10, 1995, Compaq Computer Corporation, a Delaware
corporation (the "Company"), will mail this Proxy Statement to
stockholders entitled to vote at the Company's Annual Meeting
of Stockholders on April 26, 1995. Stockholders of record at
the close of business on February 28, 1995, 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 28, 1995, there were
261,495,187 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 1,487,129 shares of Common Stock held in
the Company's treasury will not be voted. All references to
number of shares cited in this Proxy Statement reflect an
adjustment following the Company's three-for-one stock split in
the form of a stock dividend in May 1994.
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.
Regarding the election of directors, you have three
choices: 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.
Abstentions and broker non-votes will be counted as
present for purposes of determining the existence of a quorum
at the Annual Meeting. Abstentions will be treated as shares
present and entitled to vote for purposes of any matter
requiring affirmative vote of a majority or other proportion of
the shares present and entitled to vote. With respect to
shares relating to any proxy as to which a broker non-vote is
indicated on a proposal, those shares will not be considered
present and entitled to vote with respect to any such proposal.
With respect to any matter brought before the Annual Meeting
requiring the affirmative vote of a majority or other
proportion of the outstanding shares, an abstention or non-vote
will have the same effect as a vote against the matter being
voted upon.
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 and for
all proposals recommended by the Board of Directors.
Compaq Computer Corporation's Summary Annual Report to
Stockholders and Form 10-K for the year ended December 31,
1994, including consolidated financial statements, are being
mailed to all stockholders entitled to vote at the Annual
Meeting. These reports do not constitute a part of the proxy
soliciting material.
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 $9,500 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 as well as by
employees of CIC without additional compensation other than
reimbursement of out-of-pocket expenses. 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.
Proposal 1
ELECTION OF DIRECTORS
General Information
Directors elected at the Annual Meeting will hold office
until the next Annual Meeting at which 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.
The nominees receiving a plurality of the affirmative vote will
be elected. Each of the nominees was elected by the
stockholders at the last Annual Meeting.
Information Concerning Nominees
BENJAMIN M. ROSEN Director since 1982
Benjamin M. Rosen, age 62, was appointed Chairman of the Board
of Directors of the Company in 1983. He has been Chairman of
Rosen Motors, which designs and will manufacture hybrid
electric automobiles, since 1993. He has served as Chairman of
the Board of Sevin Rosen Management Company, a venture capital
firm, since 1981. Mr. Rosen is a director of NoMac Energy
Systems, a privately held technology company. He is also Vice
Chairman of the Board of Trustees of the California Institute
of Technology.
ECKHARD PFEIFFER Director since 1991
Eckhard Pfeiffer, age 53, 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. Mr.
Pfeiffer also serves as a director of the U.S. Advisory Board
of Bayerische Motoren Werke AG (BMW).
ROBERT TED ENLOE, III Director since 1986
Robert Ted Enloe, III, age 56, 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 58, 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 boards of directors of Automatic Data
Processing, Inc. ("ADP") and TRW, Inc.
GEORGE E.R. KINNEAR II Director since 1988
George E.R. Kinnear II, age 67, is Chairman Emeritus 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 Senior Vice President,
Washington Operations. He also serves as a member of the board
of directors of Precision Standard Corporation and The
Aerospace Corporation.
PETER N. LARSON Director since 1993
Peter N. Larson, age 55, has served as Worldwide Chairman of
the Consumer and Personal Care Group of Johnson & Johnson and
as a director and member of the Executive Committee of the
Board of Directors of that company since October 1994. He
rejoined 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 52, 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 64, served as Chairman and Chief Executive
Officer of The Ogilvy Group from 1988 to 1989 (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,
PennCorp Financial Group, Inc., and CIA Group PLC (U.K.).
These eight persons will be placed in nomination for
election to the Board of Directors. Directors will be elected
by a plurality of the affirmative votes cast. 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 1994 the Board of Directors met ten times and
various committees of the Board met a total of seventeen times.
Attendance at Board meetings averaged 97% for regular Board
meetings and 93% for all Board meetings, including two
telephonic meetings. Attendance at committee meetings averaged
96%. 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 six non-employee
directors: Mr. Kinnear (Chair) and Messrs. Enloe, Heilmeier,
Larson, Lay, and Rosen. The primary purpose of the Audit
Committee is to provide independent and objective oversight of
the Company's accounting functions and internal controls and to
assure the objectivity of the Company's financial statements.
The Committee also reviews and advises the Board with respect
to the Company's insurance coverage and tax policies. The
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
four meetings during 1994.
The Compensation Committee consists of six non-employee
directors: Mr. Enloe (Chair) and Messrs. Heilmeier, Kinnear,
Larson, Lay, and Roman. The Committee advises the Board with
respect to the compensation of the Company's directors and
executive officers and with respect to employee benefit plans.
The Committee also is responsible for administering the
Company's employee equity incentive plans and executive bonus
program. During 1994 this Committee held seven meetings.
The Nominating Committee consists of seven non-employee
directors: Mr. Larson (Chair) and Messrs. Enloe, Heilmeier,
Kinnear, Lay, Roman, and Rosen. The primary purpose of the
Nominating Committee is to establish procedures for the
selection and retention of a Board of Directors that will
perform its functions objectively and responsibly, evaluate
Board nominees and members, and recommend nominees. The
Committee is also responsible for recommending procedures that
will assure a smooth and orderly transition in the Company's
management, when the need arises. This Committee will consider
nominees for the Board of Directors recommended by
stockholders. Any such recommendation should be forwarded to
the Secretary of the Company with pertinent background
information regarding the proposed nominee. The Nominating
Committee held six meetings during 1994.
DIRECTORS' COMPENSATION
Board members other than those employed by the Company
receive an annual fee of $30,000 ($50,000 for the Chairman), a
fee of $1,000 for each Board meeting attended in person, and a
fee of $500 for each Board or committee special meeting held by
telephone. 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 directors 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 1994 he received $152,000 in consulting fees from the
Company.
The Company has adopted a stock option plan for non-
employee directors (the "Director Plan"), which authorizes
1,500,000 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 30,000 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
12,000 shares of Common Stock or, in the case of the director
named as Chairman of the Board, an option to acquire 15,000
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 in lieu of all or a portion of the following year's
annual retainer a stock option grant, for which the number of
shares and the exercise price are based upon 50% of the closing
price of Common Stock on the day of the annual meeting. Upon
his appointment to the Board on February 24, 1994, Mr.
Heilmeier received an option grant with an exercise price of
$33.50 per share. On April 21, 1994, Messrs. Rosen, Enloe,
Kinnear, Larson, Lay and Roman each received an option grant
upon re-election with an exercise price of $36.25 per share.
Mr. Rosen was granted an option to purchase 2,757 shares and
Messrs. Kinnear, Lay and Roman each were granted options to
purchase 1,656 shares, at an exercise price of $18.12, as a
result of their elections to receive options in lieu of annual
retainer 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 50, was elected Senior Vice President,
Europe, Middle East and Africa 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 49, was elected Senior Vice President,
Portable PC Division, in April 1994. He joined the Company in
April 1984 as director of engineering for portable computers
and was appointed Vice President, General Engineering, in
January 1986, Vice President, Product Development, in December
1989, and Senior Vice President, Peripherals Division, in
February 1993.
Ross A. Cooley, age 54, 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 April 1987, Vice President, Sales and
Service, in September 1989, and Vice President, North America,
in January 1991.
Wilson D. Fargo, age 50, 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 was appointed Secretary of
the Company in October 1984.
Hans W. Gutsch, age 51, was elected Senior Vice President,
Human Resources, in November 1994. He joined the Company in
1988 as director of human resources for Europe and was
appointed Vice President, Human Resources, Europe, in June
1992, and Vice President, Human Resources and Environment,
Europe, Middle East and Africa, in January 1993.
Gregory E. Petsch, age 44, was elected Senior Vice
President, Corporate Operations, in July 1993. He joined the
Company in September 1983 as director of manufacturing control
and was named Vice President, CPU Manufacturing, in May 1989,
Vice President, Manufacturing, in November 1991, and Senior
Vice President, Personal Computer Division, Manufacturing, in
April 1993.
John T. Rose, age 49, was elected Senior Vice President,
Desktop PC Division, upon his joining the Company 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 43, 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 47, 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 48, 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.
David J. Schempf, age 39, 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 44, was elected Vice President,
Corporate Development, upon his joining the Company 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.
John W. White, age 56, 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.
STOCK OWNERSHIP
The following table sets forth information regarding the
ownership of the Company's Common Stock as of January 31, 1995,
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 261,306,079 shares of
Common Stock outstanding at January 31, 1995.
<TABLE>
<CAPTION>
Name of Owner or Number of Shares Percent of
Identity of Group Options<F1> Total<F1> Outstanding
<S> <C> <C> <C>
FMR Corp.
82 Devonshire Street
Boston, MA 02109 28,727,964<F2> 10.99%
Benjamin M. Rosen 188,784 1,706,748 *
Eckhard Pfeiffer 1,311,016 1,312,696<F3> *
Robert Ted Enloe, III 72,000 72,000 *
George E.R. Kinnear II 19,845 46,845 *
George H. Heilmeier 30,000 30,300 *
Peter N. Larson 30,000 30,600 *
Kenneth L. Lay 12,000 110,757<F4> *
Kenneth Roman 36,000 46,500 *
Andreas Barth 321,102 322,092 *
Ross A. Cooley 48,504 54,711<F5> *
Gary Stimac 112,756 178,933<F6> *
Daryl J. White 66,506 68,855 *
All executive officers and
directors as a group 2,693,346 4,455,692(7) 1.71%
* Less than 1%
<FN>
<F1> Includes Company stock options that are exercisable or
will become exercisable by April 1, 1995.
<F2> Based on information provided in Schedule 13G and
amendments thereto filed with the Securities and Exchange
Commission dated February 9, 1995, these shares are
beneficially held by FMR Corporation ("FMR") and certain of its
affiliates and associates. Fidelity Management & Research
Company ("Fidelity"), a registered investment adviser and a
wholly owned subsidiary of FMR, is the beneficial owner of
26,876,380 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 and Abigail P.
Johnson each own 24.9% of the outstanding voting stock of FMR,
of which Mr. Johnson serves as Chairman. The Schedule 13G
dated February 9, 1995, reports that Mr. Johnson has sole
voting power over 36,300 shares, and shared voting and
dispositive power over 30,850 shares.
<F3> Includes 1,680 shares held by daughter and in custody for
a minor child.
<F4> Includes 98,757 shares held by limited partnership.
<F5> Includes 6,207 shares of Common Stock credited to Mr.
Cooley's account in the Company's defined contribution plan.
<F6> Includes 4,185 shares of Common Stock credited to Mr.
Stimac's account in the Company's defined contribution plan.
Includes 38,474 shares of Common Stock credited to the
executive officers' accounts in the Company's defined
contribution plan.
</FN>
</TABLE>
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 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 that begins on page 10.
<TABLE>
TABLE I
SUMMARY COMPENSATION
<CAPTION>
Annual Compensation <F1> Long Term
Compensation
Other Securities
Principal Annual Underlying All other
Position Year Salary Bonus Compensation Options<F2> Compensation
<S> <C> <C> <C> <C> <C> <C>
Eckhard Pfeiffer 1994 $1,050,000 $2,500,000 $1,500,019<F3> 290,000 $750,000<F4>
Chief Executive 1993 1,000,000 1,500,000 -- 360,000 --
Officer 1992 921,400 800,000 1,166,404<F3> 360,000 --
Andreas Barth 1994 431,672 482,626 -- 85,000 128,480<F4>
Senior Vice President 1993 380,573 350,590 -- 120,000 --
EMEA 1992 352,158 247,693 -- 120,000 --
Ross A. Cooley 1994 340,000 550,000 -- 85,000 229,500<F5>
Senior Vice President 1993 321,766 450,000 -- 120,000 8,994<F6>
North America 1992 300,159 225,000 -- 90,000 8,728<F6>
Gary Stimac 1994 450,000 550,000 -- 85,000 252,000<F7>
Senior Vice President 1993 430,000 450,000 -- 120,000 8,994<F6>
Systems Division 1992 410,000 250,000 -- 120,000 8,728<F6>
Daryl J. White 1994 385,000 450,000 -- 85,000 223,100<F8>
Chief Financial 1993 365,000 400,000 -- 120,000 8,994<F6>
Officer 1992 345,000 250,000 -- 120,000 8,728<F6>
<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 1994 and 1992 did not exceed $50,000 or fall within any
other category requiring inclusion.
<F2> All figures in this column reflect number of shares
adjusted to reflect the Company's three-for-one stock split in
1994.
<F3> In accordance with the employment agreement between
the Company and Mr. Pfeiffer executed in 1992, the Company paid
these funds to Mr. Pfeiffer to reimburse him for U.S. taxes
incurred in 1992 and 1994 upon exercise of certain stock
options.
<F4> Amount reflects a deferred unfunded bonus, the
payment of which is subject to conditions established by the
Compensation Committee of the Board of Directors.
<F5> Amount shown includes $4,500 contributed to the
Company's defined contribution plan on behalf of Mr. Cooley and
a $225,000 deferred unfunded bonus, the payment of which is
subject to conditions established by the Compensation Committee
of the Board of Directors.
<F6> Amount contributed to the Company's defined
contribution plan on behalf of the named executive officers.
<F7) Amount shown includes $27,000 contributed to the
Company's defined contribution plan and deferred compensation
and supplemental savings plan on behalf of Mr. Stimac and a
$225,000 deferred unfunded bonus, the payment of which is
subject to conditions established by the Compensation Committee
of the Board of Directors.
<F8> Amount shown includes $23,100 contributed to the
Company's defined contribution plan and deferred compensation
and supplemental savings plan on behalf of Mr. White and a
$200,000 deferred unfunded bonus, the payment of which is
subject to conditions established by the Compensation Committee
of the Board of Directors.
</FN>
</TABLE>
<TABLE>
TABLE II
1994 OPTION EXERCISES
AND YEAR-END OPTION VALUES
<CAPTION>
Number of Unexercised Value of Unexercised
Options at in-the-Money Options
1994 Stock Option Exercises at December 31, 1994
Value
Name Shares Realized Exercisable Unexercisable Unexercisable Exercisable
<S> <C> <C> <C> <C> <C> <C>
Eckhard Pfeiffer 300,000 $ 9,642,236 1,198,015 1,071,985 $33,071,971 $21,292,478
Andreas Barth 78,000 2,233,379 288,301 324,699 7,686,569 6,350,345
Ross Cooley 114,498 2,708,956 16,004 308,498 401,949 5,821,163
Gary Stimac 540,000 14,227,809 68,255 376,745 1,607,867 7,829,798
Daryl White 246,349 5,430,078 23,505 372,246 621,241 7,711,857
</TABLE>
<TABLE>
TABLE III
1994 STOCK OPTION GRANTS
<CAPTION>
Gains based on Assumed Rates
of Stock Price Appreciation
1994 Stock Option Grants for option term <F1>
-------------------------------------------------------------------------------
% of 1994 Exercise/Base Assumed Assumed
Name Granted Employee Price per share Expiration Rate Rate
<F2> Option Grants 9/22/94 Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Eckhard Pfeiffer 290,000 5.11% $35.38 9/22/04 $6,452,584 $16,352,116
Andreas Barth 85,000 1.49 35.38 9/22/04 1,891,275 4,792,862
Ross Cooley 85,000 1.49 35.38 9/22/04 1,891,275 4,792,862
Gary Stimac 85,000 1.49 35.38 9/22/04 1,891,275 4,792,862
Daryl White 85,000 1.49 35.38 9/22/04 1,891,275 4,792,862
All Stockholders:
258,390,613
shares outstanding
9/22/94 N/A N/A $35.38 N/A $5.8 billion $14.6 billion
Named officers
gain as % of all
Stockholders'gain N/A N/A N/A N/A .24% .24%
<FN>
<F1> The potential gain is calculated from the closing
price of Common Stock on September 22, 1994, 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.
</FN>
</TABLE>
<TABLE>
TABLE IV
GERMAN PENSION PLAN
<CAPTION>
Final Average Annual Pension Benefits without Reductions
Eckhard Pfeiffer Base Salary for Anticipated Social Security and Prior Employer Pension Benefits
Years of Service 15 20 25 30 35
<S> <C> <C> <C> <C> <C> <C>
$ 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
1,300,000 508,696 678,261 780,000 780,000 780,000
</TABLE>
<TABLE>
<CAPTION>
Final Base Annual Pension Benefits without Reduction
Andreas Barth Salary for Anticipated Social Security Benefits
Years of Service 15 20 25 30 35
<S> <C> <C> <C> <C> <C> <C>
$ 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
800,000 240,000 320,000 400,000 480,000 560,000
</TABLE>
Table IV indicates anticipated benefits at age 65 assuming
the years of service with the Company shown. At December 31,
1994, Mr. Pfeiffer and Mr. Barth had eleven years and six 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
on his behalf 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 and
defined contribution and supplemental savings plan. Amounts
contributed to the defined contribution plan and defined
contribution and supplemental savings plan are included in
Table I.
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 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 also set forth
the Company's agreement to indemnify Mr. Pfeiffer for certain
personal income taxes related to his relocation to the United
States in 1991, which obligation has been fulfilled. The CEO
Agreement governs the terms and conditions of Mr. Pfeiffer's
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 or (ii) resignation following a
material change in the officer's duties, a change of control,
disability, a reduction in pay greater than 25%, or the Compa
ny'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 objectives are 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 and
to ensure that management compensation is reasonable in light
of the Company's objectives, compensation for similar personnel
in other companies, and other relevant criteria. 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 1994 was based on a group of 35 industry competitors,
which included all of the companies in the S&P Computer Systems
Index as well as certain other companies. 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 1994, the Company's performance placed
the Company at about the 90th percentile in the peer group
based on an evaluation of return on total capital and sales
growth, which are highly correlated with long-term stockholder
value creation.
Comparative compensation data in 1994 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 is used
wherever available. Nearly all of the companies in the
comparative performance analysis are included in one or more of
the surveys used to assess comparative compensation practices.
The Committee believes these sources provide the appropriate
information to evaluate the cash and equity compensation 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 1994, including the Chief
Executive Officer's, based upon an appraisal of the officer's
contribution to the Company's results in 1993 and the officer's
position and responsibilities for 1994. The criteria used in
this appraisal varied based upon the officer's sphere of
responsibility, but generally focused on measures such as sales
growth in marketing and sales divisions, an assessment of plans
for existing and new products 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 1994 the Committee evaluated
comparative compensation data to determine the aggregate amount
required to pay bonuses that would result in average total cash
compensation to executives at the 90th percentile level, in
line with the Company's performance in 1994. 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 evaluating this information in light of
individual contribution levels, succession plans, prospective
future contributions, and retention requirements. In
establishing Mr. Pfeiffer's bonus for 1994, the Committee
considered the effective strategies that were initiated and
executed by Mr. Pfeiffer, which resulted in record-setting
financial performance in 1994, including an annual sales
increase to $10.9 billion from $7.2 billion in 1993, an
increase in earnings per share to $3.21 from $1.78 in 1993,
more than 50 percent growth in the number of unit shipments
worldwide, and, in particular, the industry and financial
community'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 executives 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 uses competitive market data and historical
option grant practices 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. Based on the Company's performance
in comparison to the peer group, the Committee determined that
in 1994 options should be awarded to Mr. Pfeiffer and other key
executives at levels above the 90th percentile of comparative
grant practices reflected in the various survey sources.
In its tax year beginning December 1, 1994, the Company is
subject to Internal Revenue Code Section 162(m), which 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 has evaluated
the impact of this legislation on its cash and equity
compensation programs and has adopted two additional
compensation plans that are being submitted for approval by the
stockholders of the Company in April 1995. The Company
believes that compensation paid under the new Bonus Incentive
Plan and that compensation realized in connection with grants
under the 1995 Equity Incentive Plan should qualify for full
deductibility under Section 162(m). The Company generally
intends to comply with the requirements of Section 162(m);
however, it also intends to weigh the burdens of such
compliance against the benefits to be obtained by the Company
from such compliance, and in the future may pay compensation
that is not fully deductible if it determines that such
payments are in the Company's best interests.
Compensation Committee
Robert Ted Enloe, III, Chair Peter N. Larson
George H. Heilmeier Kenneth L. Lay
George E.R. Kinnear II Kenneth Roman
Stock Performance Graph
The following graph compares the Company's cumulative
total return to the S&P 500 and the S&P Computer Systems
Composite Index over a five-year period, beginning December 31,
1989, and ending December 31, 1994. 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 V
Comparison of Five-Year Cumulative Total Return
(Linear graph with coordinates indicated in the table below)
1989 1990 1991 1992 1993 1994
Compaq Computer Corporation 100 142 66 123 186 298
S&P 500 Composite 100 97 126 136 150 152
S&P Computer Systems Composite 100 112 100 73 76 98
Proposal 2
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
At the meeting, stockholders will be asked to consider and
vote upon a proposal to amend the Company's Restated
Certificate of Incorporation, as amended, increasing the number
of shares of authorized Common Stock, $.01 par value, from
400,000,000 to 1,000,000,000. Such amendment was declared
advisable and unanimously approved by the Board of Directors in
January 1995.
The Company's Restated Certificate of Incorporation, as
amended, currently authorizes the issuance of 410,000,000
shares of capital stock composed of 400,000,000 shares of
Common Stock and 10,000,000 shares of preferred stock, $.01 par
value. The proposed amendment would increase the Company's
total authorized capital stock by 600,000,000 shares, from
410,000,000 shares to 1,010,000,000 shares. If the amendment
is authorized, the text of Article 4.A., as amended from time
to time, would be amended to read as follows:
"A. Authorized Shares and Classes of Stock: The
total number of shares of stock that the
Corporation shall have the authority to issue is
1,010,000,000 shares composed of (i) 1,000,000,000
shares of Common Stock, par value $.01 per share
(Common Stock); and (ii) 10,000,000 shares of
Preferred Stock, par value $.01 per share
(Preferred Stock)."
At January 31, 1995, there were 261,306,079 shares of
Common Stock outstanding and 48,117,425 shares of unissued
Common Stock reserved for issuance under the Company's employee
and director equity compensation plans. In addition, as
described in "Proposal 3" below, the Board of Directors has
proposed to reserve an additional 13,000,000 shares for
issuance under the proposed 1995 Equity Incentive Plan.
Assuming the 1995 Equity Incentive Plan is adopted, the Company
will have 61,117,425 shares of authorized Common Stock reserved
for future issuance under such plans. The Board of Directors
has determined that the number of authorized shares of Common
Stock should be increased to provide the Company with the
flexibility to conduct the Company's future operations,
including the issuance, distribution, exchange, or reservation
of shares of Common Stock for stock dividends, acquisitions,
financings, and employee equity compensation plans.
In May 1994, the Company issued 174,994,320 shares of
Common Stock as the result of a three-for-one stock split
effected in the form of a stock dividend. The Board of
Directors currently has no specific plans to issue additional
Common Stock except as provided in the Company's employee and
director equity compensation plans. Under certain
circumstances, an increase in the number of authorized shares
of a corporation's capital stock can provide management with a
means of discouraging an unsolicited change in control.
Although the proposed amendment may allow the Board of
Directors to issue additional shares of Common Stock in the
event of an unsolicited attempt to acquire control of the
Company as a means of discouraging a hostile bidder, the
Company's Board of Directors has no present intention of using
the additional shares for such a purpose, except to the extent
such an issuance could occur under the Company's Shareholder
Rights Plan. The Board of Directors is not presently aware of
any plans to acquire control of the Company.
Holders of Common Stock do not have preemptive rights to
subscribe to additional securities that may be issued by the
Company, which means that the current stockholders do not have
a prior right to purchase any new issue of capital stock of
Compaq Computer Corporation in order to maintain their
proportionate ownership. However, stockholders wishing to
maintain their interests may be able to do so through normal
market purchases.
Approval
Approval of the proposed amendment to the Company's
Restated Certificate of Incorporation requires the affirmative
vote of the holders of a majority of the shares of Common Stock
outstanding. Proxies solicited by management will be voted FOR
this proposal unless a vote against this proposal or abstention
is specifically indicated.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE AMENDMENT TO THE RESTATED CERTIFICATE OF
INCORPORATION.
Proposal 3
APPROVAL OF THE 1995 EQUITY INCENTIVE PLAN
In January 1995, the Board of Directors declared advisable
and unanimously adopted, subject to stockholder approval at the
Annual Meeting, the Compaq Computer Corporation 1995 Equity
Incentive Plan (the "1995 Equity Plan"). If approved by
stockholders, the 1995 Equity Plan will provide for the
granting of stock options and other stock and cash awards in
order to facilitate the attraction, retention, and motivation
of key employees, as well as enabling such employees to
participate in the long-term growth and financial success of
the Company.
Shares Reserved under the 1995 Equity Plan
The initial number of shares of Common Stock that may be
purchased under the 1995 Equity Plan shall not exceed 13
million, subject to adjustment in the event of stock dividends,
stock splits, combination of shares, recapitalizations, or
other changes in the outstanding Common Stock. Such
adjustments may be made by the Committee. The shares issuable
under the 1995 Equity Plan may be drawn from either authorized
but previously unissued shares of Common Stock or from
reacquired shares of Common Stock, including shares purchased
by the Company on the open market and held as treasury shares.
Material Features of the 1995 Equity Plan
The following brief description of the material features
of the 1995 Equity Plan is qualified in its entirety by
reference to the full text of the Plan that is attached to this
Proxy Statement as Exhibit A.
The 1995 Equity Plan shall be administered by a Committee
designated by the Board of Directors and composed of at least
the minimum number of persons required by Rule 16b-3, each of
whom, as may be required by Rule 16b-3, is a "disinterested
person" within the meaning of this rule. Currently the
Compensation Committee is this Committee. The Committee shall
have, among other powers, the power to interpret, waive, amend,
establish, or suspend rules and regulations of the 1995 Equity
Plan in its administration of the 1995 Equity Plan.
The Committee shall have sole and complete authority to
grant to eligible participants one or more equity awards,
including incentive stock options and/or nonqualified stock
options, stock appreciation rights, restricted stock and
restricted stock units, performance awards, other stock-based
awards, or any combination thereof. The Committee shall have
the sole discretion to determine the number or amount of
shares, units, cash, or other rights or awards to be awarded to
any participant; however, subject to adjustment as provided in
the 1995 Equity Plan, no executive officer may receive awards
under the plan in any calendar year that relate to more than
500,000 shares, except that a new employee who begins service
as Chief Executive Officer may receive awards that relate to up
to 1,000,000 Shares in the calendar year in which employment
with the Company begins.
Subject to the restrictions described below, the Committee
in its sole discretion shall establish the exercise price,
grant price, or value of awards. Should the Committee
establish a program under which restoration options are granted
to employees utilizing options to pay the exercise price of
outstanding options, such options shall have a per share
exercise price of not less than 100% of the per share fair
market value on the date of grant. Restricted stock and
restricted stock units shall have a value equal to the fair
market value of a share of Common Stock, as determined in the
Committee's discretion. Each award will be evidenced by an
award agreement that will be delivered to the participant
specifying the terms and conditions of the award and any rules
applicable to such award.
Upon a change in control as defined in, and subject to
certain limitations under, the 1995 Equity Plan, all
outstanding awards will vest, become immediately exercisable or
payable or have all restrictions lifted as may apply to the
type of award granted. Awards are nontransferable; however, an
award may be transferable under the 1995 Equity Plan to the
extent set forth in the applicable award agreement if such
award agreement provisions do not disqualify such award for
exemption under Rule 16b-3 or if such award is not intended to
qualify for exemption under Rule 16b-3. Awards may be made
under the 1995 Equity Plan until the number of shares available
for grant has been exhausted; provided, however, no incentive
stock option (as defined in Section 422 of the Internal Revenue
Code of 1986) shall be granted after December 31, 2005.
Eligible Participants
Under the 1995 Equity Plan, and as designated by the
Committee, any employee of the Company or the Company's
affiliates who is not a member of the Committee may participate
in the plan and receive award(s) thereunder. This includes the
Chief Executive Officer, who is a director, thirteen other
executive officers, and approximately 14,500 other employees.
Nature of Amendments Allowed to the 1995 Equity Plan Without
Stockholder Action
The Board of Directors may amend, alter, suspend,
discontinue, or terminate the 1995 Equity Plan or any portion
thereof at any time, provided that no such action will be made
without stockholder approval if such approval is necessary to
comply with any tax or regulatory requirement with which the
Board deems it necessary or desirable to comply.
New Plan Benefits
No benefits or amounts have been allocated under the 1995
Equity Plan; nor are any such benefits or amounts now
determinable. For comparison purposes, please refer to the
grants and awards that were made under the Company's existing
stock option plans in 1994, shown in the 1994 stock option
grants table on page 8 of this Proxy Statement. In addition to
the data shown in that table, in 1994, 1,356,000 stock options
were granted to all current executive officers as a group and
4,211,225 stock options were granted to all other employees as
a group. The Company's existing employee plans, like the 1995
Equity Plan, do not allow awards to non-employee directors.
The Company grants stock options to non-employee directors
under the "Director Plan," which is described in the section
"Directors' Compensation" above.
Discussion of Federal Income Tax Consequences
Set forth below is a summary of the federal income tax
consequences relating to awards granted under the 1995 Equity
Plan. The 1995 Equity Plan has been designed to meet the
requirements in Section 162(m) of the Internal Revenue Code of
1986 (the "Code").
Incentive Stock Options
No taxable income is recognized by the optionee upon the
grant or exercise of an incentive stock option ("ISO") that
meets the requirements of Section 422 of the Code. However,
the exercise of an ISO may result in alternative minimum tax
liability for the optionee. If no disposition of shares issued
to an optionee pursuant to the exercise of an ISO is made by
the optionee within two years from the date of grant or within
one year after the date of exercise, then upon sale of such
shares, any amount realized in excess of the exercise price
(the amount paid for the shares) will be taxed to the optionee
as a long-term capital gain and any loss sustained will be a
long-term capital loss, and no deduction will be allowed to the
Company for federal income tax purposes.
If shares of Common Stock acquired upon the exercise of an
ISO are disposed of prior to the expiration of the two-year and
one-year holding periods described above (a "disqualifying
disposition"), generally the optionee will recognize ordinary
income in the year of disposition in an amount equal to the
excess (if any) of the fair market value of the shares on the
date of exercise (or, if less, the amount realized on an arm's
length sale of such shares) over the exercise price of the
underlying options, and the Company will be entitled to deduct
such amount. Any gain realized from the shares in excess of
the amount taxed as ordinary income will be taxed as capital
gain and will not be deductible by the Company.
An ISO will not be eligible for the tax treatment
described above if it is exercised more than three months
following termination of employment, except in certain cases
where the ISO is exercised after the death or permanent and
total disability of the optionee. If an ISO is exercised at a
time when it no longer qualifies for the tax treatment
described above, the option is treated as an nonqualified stock
option ("NQO").
Nonqualified Stock Options
No taxable income is recognized by the optionee at the
time an NQO is granted under the 1995 Equity Plan. Generally,
on the date of exercise of an NQO, ordinary income is
recognized by the optionee in an amount equal to the difference
between the exercise price and the fair market value of the
shares on the date of exercise, and the Company receives a tax
deduction for the same amount. Upon disposition of the shares
acquired, an optionee generally recognizes the appreciation or
depreciation on the shares after the date of exercise as either
short-term or long-term capital gain or loss depending on how
long the shares have been held.
If the stock received upon exercise of an option or stock
appreciation right is subject to a substantial risk of
forfeiture, the income and the deduction, if any, associated
with such award may be deferred in accordance with the rules
described below for restricted stock.
Stock Appreciation Rights
No income will be recognized by an optionee in connection
with the grant of a stock appreciation right ("SAR"). When the
SAR is exercised, the optionee will generally be required to
include as taxable ordinary income in the year of such exercise
an amount equal to the amount of cash received and the fair
market value of any stock received. The Company will generally
be entitled to a deduction equal to the amount includable as
ordinary income by such optionee.
Restricted Stock
A recipient of restricted stock generally will be subject
to tax at ordinary income rates on the excess of the fair
market value of the stock (measured at the time the stock is
either transferable or is no longer subject to forfeiture) over
the amount, if any, paid for such stock. However, a recipient
who elects under Section 83(b) of the Code within 30 days of
the date of issuance of the restricted stock to be taxed at the
time of issuance of the restricted stock will recognize
ordinary income on the date of issuance equal to the fair
market value of the shares of restricted stock at that time
(measured as if the shares were unrestricted and could be sold
immediately), minus any amount paid for such stock. If the
shares subject to such election are forfeited, the recipient
will be entitled to a capital loss for tax purposes only for
the amount paid for the forfeited shares, not the amount
recognized as ordinary income as a result of the Section 83(b)
election. The holding period to determine whether the
recipient has long-term or short-term capital gain or loss upon
sale of shares begins when the forfeiture period expires (or
upon issuance of the shares, if the recipient elected immediate
recognition of income under Section 83(b) of the Code).
Approval
Approval of the 1995 Equity Plan requires the affirmative
vote of the holders of a majority of the shares of Common Stock
represented at the meeting. Broker non-votes will not be
treated as shares present or represented and entitled to vote
at the Annual Meeting. The Board of Directors believes that
the approval of this Plan is in the best interests of the
Company since it will facilitate the Company's attraction,
motivation and retention of key employees, while maintaining
the Company's ability to fully deduct its performance-based
compensation under Section 162(m) of the Internal Revenue Code.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF 1995 EQUITY INCENTIVE PLAN. Proxies solicited by
management will be voted FOR this proposal unless a vote
against this proposal or abstention is specifically indicated.
Proposal 4
APPROVAL OF THE COMPAQ COMPUTER CORPORATION
BONUS INCENTIVE PLAN
In January 1995 the Board of Directors declared advisable
and unanimously adopted, subject to stockholder approval at the
Annual Meeting, the Compaq Computer Corporation Bonus Incentive
Plan (the "Bonus Plan"). If approved by stockholders, the
Bonus Plan will provide incentives for senior executives and
other key employees whose performance in fulfilling the
responsibilities of their positions can have a major impact on
the profitability and future growth of the Company and its
subsidiaries.
Material Features of the Bonus Incentive Plan
The following summary description of the material terms of
the Bonus Plan is qualified in its entirety by reference to the
full text of the Plan that is attached to this Proxy Statement
as Exhibit B.
The Bonus Plan shall be administered by a Committee of two
or more "outside" directors designated by the Board of
Directors. Currently the Compensation Committee is this
Committee. The Committee will have full authority to interpret
the Bonus Plan and to adopt such rules and regulations deemed
necessary by the Committee to effect the purposes of the Bonus
Plan. The Committee, however, may not exercise any such
authority if such action would have the effect of increasing
the amount of an award under the Bonus Plan to any officer
defined as a "covered employee" ("Covered Employee") under
Section 162(m) of the Code, which generally includes executive
officers listed in the compensation tables of the Company's
proxy statement for the annual meeting following the year in
which such compensation is paid. The Committee has the sole
discretion to select officers or other employees of the Company
or the Company's subsidiaries who will be eligible to earn
awards under the Bonus Plan for that calendar year. The
Committee also has the authority to determine the amount of
such awards and any conditions under which they may be earned.
Annual bonus awards will be paid in the form of cash, and
participants in the U.S. may have any or all of such awards
deferred into the Compaq Computer Corporation Deferred
Compensation and Supplemental Savings Plan. Such awards are
nontransferable and nonassignable other than by will or by the
laws of descent and distribution or pursuant to a qualified
domestic relations order prior to the payment of an award.
Subject to the discretion of the Committee, the amount of any
award to any Covered Employee shall be 15% of the plan funding
amount for the award year. The plan funding amount is equal to
6% of pretax operating income for the applicable award year.
Payments to a Covered Employee are contingent upon the
Committee's certifying the plan funding amount for the
applicable award year. Where special factors are present, the
Committee, at its sole discretion, may adjust net income as it
is used to determine payments under the Bonus Plan, except that
such adjustments shall be disregarded for purposes of
calculating the amount that may be paid to a Covered Employee
under the Bonus Plan. The Committee may reduce or eliminate an
award amount to a covered officer.
Eligible Participants
Under the Bonus Plan, and as designated by the Committee,
any employee of the Company or the Company's subsidiaries may
participate in the Plan and receive award(s) thereunder. This
includes the Chief Executive Officer, who is a director,
thirteen other executive officers, and approximately 14,500
other employees.
Nature of Amendments Allowed to the Bonus Incentive Plan
Without Stockholder Action
The Board of Directors may terminate or amend, in whole or
in part, the Bonus Plan. However no such action may adversely
affect the rights of any participant under any awards deferred
by such participant into the Compaq Computer Corporation
Deferred Compensation and Supplemental Savings Plan. Upon such
whole or partial termination of the Bonus Plan the Committee
may, in its sole discretion, direct the payment to participants
of any awards not already paid out prior to the respective
dates upon which payments would otherwise be made, in a lump
sum or installments. The Board of Directors may delegate to
the Committee any or all of its authority relating to amending
or terminating the Bonus Plan. However, any amendment to the
Bonus Plan that would affect any Covered Employee shall be
approved by the Company's stockholders if required by Section
162(m) of the Internal Revenue Code.
New Plan Benefits
The benefits to be received for 1995 performance under the
Bonus Plan are not yet determinable. However, the maximum
amounts that could have been received by or allocated to each
of the following for 1994 if the plan had been in effect,
without giving effect to the discretionary authority of the
Committee to reduce such amounts, are shown below in the New
Plan Benefits table.
<TABLE>
TABLE VI
NEW PLAN BENEFITS
Compaq Computer Corporation Bonus Incentive Plan
<CAPTION>
Name and Principal Position Dollar Value ($) of
Payments/Deposits <F1>
<S> <C>
Eckhard Pfeiffer,Chief Executive Officer $ 10,548,000
Andreas Barth, Senior Vice President, EMEA 10,548,000
Ross Cooley, Senior Vice President, North America 10,548,000
Gary Stimac, Senior Vice President, Systems Division 10,548,000
Daryl White, Chief Financial Officer 10,548,000
Executive Officer Group 70,320,000
Non-Executive Director Group 0
Non-Executive Officer Employee Group 0 <F2>
<FN>
<FN1> Amounts shown would have been subject to reduction in
the sole discretion of the Committee and would have been been
paid at such times and upon such additional conditions as the
Committee established.
<FN2> Maximum amount this group could have received was
$70,320,000, reduced by amounts paid to executive officers.
</FN>
</TABLE>
Discussion of Federal Income Tax Consequences
The Revenue Reconciliation Act of 1993 added Section
162(m) to Code. Section 162(m) limits the corporate income tax
deduction for publicly held companies to $1,000,000 in any tax
year for compensation paid to each of the Chief Executive
Officer and the four highest paid executive officers apart from
the Chief Executive Officer. This rule applies to all
deductible compensation including the deduction arising from
the payment of annual bonuses. Various forms of compensation
are exempted from this deduction limitation, including payments
that are (a) subject to the attainment of pre-established
objective performance goals, (b) established and administered
by outside directors, and (c) approved by the stockholders.
The Board of Directors believes payments made under the Bonus
Plan will qualify for exemption from the operation of Section
162(m) and, therefore, will qualify as deductible by the
Company.
Approval
Approval of the Compaq Computer Corporation Bonus
Incentive Plan requires the affirmative vote of the holders of
a majority of the shares of Common Stock represented and
entitled to vote at the Annual Meeting. Broker non-votes will
not be treated as shares present or represented and entitled to
vote. The Board of Directors believes that the approval of
this Plan is in the best interests of the Company since it will
facilitate the Company's attraction, motivation and retention
of key executives, while maintaining the Company's ability to
fully deduct its performance based compensation under Section
162(m) of the Internal Revenue Code.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE COMPAQ COMPUTER CORPORATION BONUS INCENTIVE
PLAN. Proxies solicited by management will be voted FOR this
proposal unless a vote against this proposal or abstention is
specifically indicated.
GENERAL INFORMATION
Price Waterhouse LLP, 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 1995.
The Board has not proposed that any formal action be taken at
the meeting with respect to the employment of Price Waterhouse
LLP inasmuch as no such action is legally required.
Representatives of Price Waterhouse LLP plan to attend the
annual meeting and will be available to answer appropriate
questions. Representatives of Price Waterhouse LLP will have
the opportunity to make a statement at the meeting if they so
desire.
Proposals of shareholders that are intended to be present
ed at the Company's 1996 annual meeting of stockholders must be
received by the Company no later than November 16, 1995, 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.
EXHIBIT A
Compaq Computer Corporation
1995 Equity Incentive Plan
SECTION 1.
Purpose. The purposes of the Compaq Computer Corporation 1995
Equity Incentive Plan are to promote the interests of Compaq
Computer Corporation and its stockholders by (i) attracting and
retaining exceptional executive personnel and other key
employees of the Company and its Affiliates, as defined below;
(ii) motivating such employees by means of performance-related
incentives to achieve long-range performance goals; and (iii)
enabling such employees to participate in the long-term growth
and financial success of the Company.
SECTION 2.
Definitions. As used in the Plan, the following terms shall
have the meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or
indirectly, is controlled by the Company and (ii) any entity in
which the Company has a significant equity interest, in either
case as determined by the Committee.
"Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock Award, Performance Award or other Stock-Based
Award.
"Award Agreement" shall mean any written agreement, contract,
or other instrument or document evidencing any Award, which
may, but need not, be executed or acknowledged by a
Participant.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall be deemed to have occurred if: (i)
any "person" as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Company, any trustee or
other fiduciary holding securities under any employee benefit
plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of Stock of the
Company), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding
securities; (ii) during any period of two consecutive years
(not including any period prior to the adoption of the Plan),
individuals who at the beginning of such period constitute the
Board of Directors, and any new director (other than a director
designated by a person who has entered into an agreement with
the Company to effect a transaction described in clause (i),
(iii), or (iv) of this paragraph whose election by the Board of
Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors at
the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for
any reason to constitute at least a majority of the Board of
Directors; (iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such
merger or consolidation; provided, however, that a merger or
consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person acquires
more than 30% of the combined voting power of the Company's
then outstanding securities shall not constitute a Change in
Control of the Company; or (iv) the stockholders of the Company
approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets. If any of the
events enumerated in clauses (i) through (iv) occur, the Board
shall determine the effective date of the Change in Control
resulting therefrom, for purposes of the Plan.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" shall mean a committee of the Board designated by
the Board to administer the Plan and composed of not less than
the minimum number of persons from time to time required by
Rule 16b-3, each of whom, to the extent necessary to comply
with Rule 16b-3 only, is a "disinterested person" within the
meaning of Rule 16b-3. Until otherwise determined by the
Board, the Compensation Committee designated by the Board shall
be the Committee under the Plan.
"Company" shall mean Compaq Computer Corporation, together with
any successor thereto.
"Employee" shall mean an employee of the Company or of any
Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Executive Officer" shall mean, at any time, an individual who
is an executive officer of the Company within the meaning of
Exchange Act Rule 3b-7 as promulgated and interpreted by the
SEC under the Exchange Act, or any successor rule or regulation
thereto as in effect from time to time, or who is an officer of
the Company within the meaning of Exchange Act Rule 16a-1(f) as
promulgated and interpreted by the SEC under the Exchange Act,
or any successor rule or regulation thereto as in effect from
time to time.
"Fair Market Value" shall mean the fair market value of the
property or other item being valued, as determined by the
Committee in its sole discretion.
"Incentive Stock Option" shall mean a right to purchase Shares
from the Company that is granted under Section 6 of the Plan
and that is intended to meet the requirements of Section 422 of
the Code or any successor provision thereto.
"Net After-Tax Amount" shall mean the net amount of
compensation, assuming for this purpose only that all vested
Awards and other forms of compensation subject to vesting upon
such Change of Control are exercised upon such Change in
Control, to be received (or deemed to have been received) by
such Participant in connection with such Change of Control
under any option agreement and under any other plan,
arrangement or contract of the Company to which such
Participant is a party, after giving effect to all income and
excise taxes applicable to such payments.
"Non-Qualified Stock Option" shall mean a right to purchase
Shares from the Company that is granted under Section 6 of the
Plan and that is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-
Qualified Stock Option and shall include a Restoration Option.
"Other Stock-Based Award" shall mean any right granted under
Section 10 of the Plan.
"Participant" shall mean any Employee selected by the Committee
to receive an Award under the Plan.
"Performance Award" shall mean any right granted under Section
9 of the Plan.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated
organization, government or political subdivision thereof or
other entity.
"Plan" shall mean this Compaq Computer Corporation 1995 Equity
Incentive Plan.
"QDRO" shall mean a domestic relations order meeting such
requirements as the Committee shall determine, in its sole
discretion.
"Restoration Option" shall mean an Option granted pursuant to
Section 6(e) of the Plan.
"Restricted Stock" shall mean any Share granted under Section 8
of the Plan.
"Restricted Stock Unit" shall mean any unit granted under
Section 8 of the Plan.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated and
interpreted by the SEC under the Exchange Act, or any successor
rule or regulation thereto as in effect from time to time.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto and shall include the staff thereof.
"Shares" shall mean shares of the common stock, $.0l par value,
of the Company, or such other securities of the Company as may
be designated by the Committee from time to time.
"Stock Appreciation Right" shall mean any right granted under
Section 7 of the Plan.
"Substitute Awards" shall mean Awards granted in assumption of,
or in substitution for, outstanding awards previously granted
by a company acquired by the Company or with which the Company
combines.
SECTION 3.
Administration.
(a) Authority of Committee. The Plan shall be administered by
the Committee. Subject to the terms of the Plan and applicable
law, and in addition to other express powers and authorizations
conferred on the Committee by the Plan, the Committee shall
have full power and authority to: (i) designate Participants;
(ii) determine the type or types of Awards to be granted to an
eligible Employee; (iii) determine the number of Shares to be
covered by, or with respect to which payments, rights, or other
matters are to be calculated in connection with, Awards; (iv)
determine the terms and conditions of any Award; (v) determine
whether, to what extent, and under what circumstances Awards
may be settled or exercised in cash, Shares, other securities,
other Awards or other property, or canceled, forfeited, or
suspended and the method or methods by which Awards may be
settled, exercised, canceled, forfeited, or suspended; (vi)
determine whether, to what extent, and under what circumstances
cash, Shares, other securities, other Awards, other property,
and other amounts payable with respect to an Award shall be
deferred either automatically or at the election of the holder
thereof or of the Committee; (vii) interpret and administer the
Plan and any instrument or agreement relating to, or Award made
under, the Plan; (viii) establish, amend, suspend, or waive
such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and
(ix) make any other determination and take any other action
that the Committee deems necessary or desirable for the
administration of the Plan.
(b) Committee Discretion Binding. Unless otherwise expressly
provided in the Plan, all designations, determinations,
interpretations, and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of
the Committee, may be made at any time and shall be final,
conclusive, and binding upon all Persons, including the
Company, any Affiliate, any Participant, any holder or
beneficiary of any Award, any stockholder and any Employee.
SECTION 4.
Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in
Section 4(b), the number of Shares with respect to which Awards
may be granted under the Plan shall be 13 million. If, after
the effective date of the Plan, any Shares covered by an Award
granted under the Plan or by an award granted under any prior
stock award plan of the Company, or to which such an Award or
award relates, are forfeited, or if such an Award or award is
settled for cash or otherwise terminates or is canceled without
the delivery of Shares, then the Shares covered by such Award
or award, or to which such Award or award relates, or the
number of Shares otherwise counted against the aggregate number
of Shares with respect to which Awards may be granted, to the
extent of any such settlement, forfeiture, termination or
cancellation, shall again become Shares with respect to which
Awards may be granted. In the event that any Option or other
Award granted hereunder or any award granted under any prior
stock award plan of the Company is exercised through the
delivery of Shares or in the event that withholding tax
liabilities arising from such Award or award are satisfied by
the withholding of Shares by the Company, the number of Shares
available for Awards under the Plan shall be increased by the
number of Shares so surrendered or withheld. Notwithstanding
the foregoing and subject to adjustment as provided in Section
4(b), no Executive Officer of the Company may receive Awards
under the Plan in any calendar year that relate to more than
500,000 Shares; provided, however, a new employee who begins
service as Chief Executive Officer may receive Awards that
relate to up to 1,000,000 Shares in the calendar year in which
employment with the Company begins.
(b) Adjustments. In the event that the Committee determines
that any dividend or other distribution (whether in the form of
cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other
securities of the Company, issuance of warrants or other rights
to purchase Shares or other securities of the Company, or other
similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number of
Shares or other securities of the Company (or number and kind
of other securities or property) with respect to which Awards
may be granted, (ii) the number of Shares or other securities
of the Company (or number and kind of other securities or
property) subject to outstanding Awards, and (iii) the grant or
exercise price with respect to any Award, or, if deemed
appropriate, make provision for a cash payment to the holder of
an outstanding Award; provided, in each case, that (A) with
respect to Awards of Incentive Stock Options no such adjustment
shall be authorized to the extent that such authority would
cause the Plan to violate Section 422(b)(1) of the Code, as
from time to time amended and (B) with respect to any Award no
such adjustment shall be authorized to the extent that such
authority would be inconsistent with the Plan's meeting the
requirements of Section 162(m) of the Code, as from time to
time amended.
(c) Substitute Awards. Any Shares underlying Substitute
Awards shall not, except in the case of Shares with respect to
which Substitute Awards are granted to Employees who are
officers or directors of the Company for purposes of Section 16
of the Exchange Act or any successor section thereto, be
counted against the Shares available for Awards under the Plan.
(d) Sources of Shares Deliverable Under Awards. Any Shares
delivered pursuant to an Award may consist, in whole or in
part, of authorized and unissued Shares or of treasury Shares.
SECTION 5. Eligibility. Any Employee, including any
officer or employee-director of the Company or any Affiliate,
who is not a member of the Committee, shall be eligible to be
designated a Participant.
SECTION 6. Stock Options.
(a) Grant. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine
the Employees to whom Options shall be granted, the number of
Shares to be covered by each Option, the option price therefor
and the conditions and limitations applicable to the exercise
of the Option. The Committee shall have the authority to grant
Incentive Stock Options, or to grant Non-Qualified Stock
Options, or to grant both types of options. In the case of
Incentive Stock Options, the terms and conditions of such
grants shall be subject to and comply with such rules as may be
prescribed by Section 422 of the Code, as from time to time
amended, and any regulations implementing such statute.
(b) Exercise Price. Subject to the requirement set forth in
Section 6(e) the Committee in its sole discretion shall
establish the exercise price at the time each option is
granted.
(c) Exercise. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Committee may,
in its sole discretion, specify in the applicable Award
Agreement or thereafter. The Committee may impose such
conditions with respect to the exercise of options, including
without limitation, any relating to the application of federal
or state securities laws, as it may deem necessary or
advisable.
(d) Payment. No Shares shall be delivered pursuant to any
exercise of an Option until payment in full of the option price
therefor is received by the Company. Such payment may be made
in cash, or its equivalent, or, if and to the extent permitted
by the Committee, by exchanging Shares owned by the optionee
(which are not the subject of any pledge or other security
interest), or by a combination of the foregoing, provided that
the combined value of all cash and cash equivalents and the
Fair Market Value of any such Shares so tendered to the Company
as of the date of such tender is at least equal to such option
price.
(e) Restoration Options. In the event that any Participant
delivers Shares in payment of the exercise price of any Option
granted hereunder in accordance with Section 6(d) or of any
option granted under a prior stock award plan of the Company,
or in the event that the withholding tax liability arising upon
exercise of any such Option or option by a Participant is
satisfied through the withholding by the Company of Shares
otherwise deliverable upon exercise of the Option or option,
the Committee shall have the authority to grant or provide for
the automatic grant of a Restoration Option to such
Participant. The grant of a Restoration Option shall be
subject to the satisfaction of such conditions or criteria as
the Committee in its sole discretion shall establish from time
to time. A Restoration Option shall entitle the holder thereof
to purchase a number of Shares equal to the number of such
Shares so delivered or withheld upon exercise of the original
Option or option. A Restoration Option shall have a per share
exercise price of not less than 100% of the per Share Fair
Market Value on the date of grant of such Restoration Option
and such other terms and conditions as the Committee in its
sole discretion shall determine.
SECTION 7. Stock Appreciation Rights.
(a) Grant. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine
the Employees to whom Stock Appreciation Rights shall be
granted, the number of Shares to be covered by each Stock
Appreciation Right Award, the grant price thereof and the
conditions and limitations applicable to the exercise thereof.
Stock Appreciation Rights may be granted in tandem with another
Award, in addition to another Award, or freestanding and
unrelated to another Award. Stock Appreciation Rights granted
in tandem with or in addition to an Award may be granted either
at the same time as the Award or at a later time. Stock
Appreciation Rights shall not be exercisable earlier than six
months after grant, and shall have a grant price as determined
by the Committee on the date of grant.
(b) Exercise and Payment. A Stock Appreciation Right shall
entitle the Participant to receive an amount equal to the
excess of the Fair Market Value of a Share on the date of
exercise of the Stock Appreciation Right over the grant price
thereof, provided that the Committee may for administrative
convenience determine that, with respect to any Stock
Appreciation Right that is not related to an Incentive Stock
Option and that can only be exercised for cash during limited
periods of time in order to satisfy the conditions of Rule 16b-
3, the exercise of such Stock Appreciation Right for cash
during such limited period shall be deemed to occur for all
purposes hereunder on the day during such limited period on
which the Fair Market Value of the Shares is the highest. Any
such determination by the Committee may be changed by the
Committee from time to time and may govern the exercise of
Stock Appreciation Rights granted prior to such determination
as well as Stock Appreciation Rights thereafter granted. The
Committee shall determine whether a Stock Appreciation Right
shall be settled in cash, Shares or a combination of cash and
Shares.
(c) Other Terms and Conditions. Subject to the terms of the
Plan and any applicable Award Agreement, the Committee shall
determine, at or after the grant of a Stock Appreciation Right,
the term, methods of exercise, methods and form of settlement,
and any other terms and conditions of any Stock Appreciation
Right. Any such determination by the Committee may be changed
by the Committee from time to time and may govern the exercise
of Stock Appreciation Rights granted or exercised prior to such
determination as well as Stock Appreciation Rights granted or
exercised thereafter. The Committee may impose such conditions
or restrictions on the exercise of any Stock Appreciation Right
as it shall deem appropriate.
SECTION 8.
Restricted Stock and Restricted Stock Units.
(a) Grant. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine
the Employees to whom Shares of Restricted Stock and Restricted
Stock Units shall be granted, the number of Shares of
Restricted Stock and/or the number of Restricted Stock Units to
be granted to each Participant, the duration of the period
during which, and the conditions under which, the Restricted
Stock and Restricted Stock Units may be forfeited to the
Company, and the other terms and conditions of such Awards.
(b) Transfer Restrictions. Shares of Restricted Stock and
Restricted Stock Units may not be sold, assigned, transferred,
pledged or otherwise encumbered, except, in the case of
Restricted Stock, as provided in the Plan or the applicable
Award Agreements. Certificates issued in respect of Shares of
Restricted Stock shall be registered in the name of the
Participant and deposited by such Participant, together with a
stock power endorsed in blank, with the Company. Upon the
lapse of the restrictions applicable to such Shares of
Restricted Stock, the Company shall deliver such certificates
to the Participant or the Participant's legal representative.
(c) Payment. Each Restricted Stock Unit shall have a value
equal to the Fair Market Value of a Share. Restricted Stock
Units shall be paid in cash, Shares, other securities or other
property, as determined in the sole discretion of the
Committee, upon the lapse of the restrictions applicable
thereto, or otherwise in accordance with the applicable Award
Agreement.
(d) Dividends and Distributions. Dividends and other
distributions paid on or in respect of any Shares of Restricted
Stock may be paid directly to the Participant, or may be
reinvested in additional Shares of Restricted Stock or in
additional Restricted Stock Units, as determined by the
Committee in its sole discretion.
SECTION 9. Performance Awards.
(a) Grant. The Committee shall have sole and complete
authority to determine the Employees who shall receive a
"Performance Award," which shall consist of a right that is (i)
denominated in cash or Shares, (ii) valued, as determined by
the Committee, in accordance with the achievement of such
performance goals during such performance periods as the
Committee shall establish, and (iii) payable at such time and
in such form as the Committee shall determine.
(b) Terms and Conditions. Subject to the terms of the Plan
and any applicable Award Agreement, the Committee shall
determine the performance goals to be achieved during any
performance period, the length of any performance period, the
amount of any Performance Award and the amount and kind of any
payment or transfer to be made pursuant to any Performance
Award.
(c) Payment of Performance Awards. Performance Awards may be
paid in a lump sum or in installments following the close of
the performance period or, in accordance with procedures
established by the Committee, on a deferred basis.
SECTION 10. Other Stock-Based Awards. The Committee shall
have authority to grant to eligible Employees an "Other Stock-
Based Award," which shall consist of any right that is (i) not
an Award described in Sections 6 through 9 above and (ii) an
Award of Shares or an Award denominated or payable in, valued
in whole or in part by reference to, or otherwise based on or
related to, Shares (including, without limitation, securities
convertible into Shares), as deemed by the Committee to be
consistent with the purposes of the Plan; provided that any
such rights must comply, to the extent deemed desirable by the
Committee, with Rule 16b-3 and applicable law. Subject to the
terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of any such
Other Stock-Based Award.
SECTION 11. Termination or Suspension of Employment. The
following provisions shall apply in the event of the
Participant's termination of employment unless the Committee
shall have provided otherwise, either at the time of the grant
of the Award or thereafter.
(a) Nonqualified Stock Options and Stock Appreciation Rights.
(i) Termination of Employment. If the Participant's
employment with the Company or its Affiliates is
terminated for any reason other than death, permanent and
total disability, or retirement, the Participant's right
to exercise any Nonqualified Stock Option or Stock
Appreciation Right shall terminate, and such Option or
Stock Appreciation Right shall expire, on the earlier of
(A) the first anniversary of such termination of
employment or (B) the date such Option or Stock
Appreciation Right would have expired had it not been for
the termination of employment. The Participant shall have
the right to exercise such Option or Stock Appreciation
Right prior to such expiration to the extent it was
exercisable at the date of such termination of employment
and shall not have been exercised.
(ii) Death, Disability or Retirement. If the
Participant's employment with the Company or its
Affiliates is terminated by death, permanent and total
disability, or retirement, the Participant or his
successor (if employment is terminated by death) shall
have the right to exercise any Nonqualified Stock Option
or Stock Appreciation Right to the extent it was
exercisable at the date of such termination of employment
and shall not have been exercised, but in no event shall
such option be exercisable later than the date the Option
would have expired had it not been for the termination of
such employment. The meaning of the terms "total and
permanent disability" and "retirement" shall be determined
by the Committee.
(iii) Acceleration and Extension of Exercisability.
Notwithstanding the foregoing, the Committee may, in its
discretion, provide (A) that an Option granted to a
Participant may terminate at a date earlier than that set
forth above, (B) that an Option granted to a Participant
not subject to Section 16 of the Exchange Act may
terminate at a date later than that set forth above,
provided such date shall not be beyond the date the Option
would have expired had it not been for the termination of
the Participant's employment, and (C) that an Option or
Stock Appreciation Right may become immediately
exercisable when it finds that such acceleration would be
in the best interests of the Company.
(b) Incentive Stock Options. Except as otherwise determined
by the Committee at the time of grant, if the Participant's
employment with the Company is terminated for any reason, the
Participant shall have the right to exercise any Incentive
Stock Option and any related Stock Appreciation Right during
the 90 days after such termination of employment to the extent
it was exercisable at the date of such termination, but in no
event later than the date the option would have expired had it
not been for the termination of such employment. If the
Participant does not exercise such Option or related Stock
Appreciation Right to the full extent permitted by the
preceding sentence, the remaining exercisable portion of such
Option automatically will be deemed a Nonqualified Stock
Option, and such Option and any related Stock Appreciation
Right will be exercisable during the period set forth in
Section 11(a) of the Plan, provided that in the event that
employment is terminated because of death or the Participant
dies in such 90-day period, the option will continue to be an
Incentive Stock Option to the extent provided by Section 421 or
Section 422 of the Code, or any successor provision, and any
regulations promulgated thereunder.
(c) Restricted Stock. Except as otherwise determined by the
Committee at the time of grant, upon termination of employment
for any reason during the restriction period, all shares of
Restricted Stock still subject to restriction shall be
forfeited by the Participant and reacquired by the Company at
the price (if any) paid by the Participant for such Restricted
Stock, provided that in the event of a Participant's
retirement, permanent and total disability, or death, or in
cases of special circumstances, the Committee may, in its sole
discretion, when it finds that a waiver would be in the best
interests of the Company, waive in whole or in part any or all
remaining restrictions with respect to such participant's
shares of Restricted Stock.
(d) Leave Without Pay. Any time spent by a Participant in the
status of "leave without pay" shall be disregarded for purposes
of determining the extent to which any Award or portion thereof
has vested or otherwise becomes exercisable or nonforfeitable.
SECTION 12.
Change in Control. Notwithstanding any other provision of the
Plan to the contrary, upon a Change in Control all outstanding
Awards shall vest, become immediately exercisable or payable or
have all restrictions lifted as may apply to the type of Award
and no outstanding Stock Appreciation Right may be terminated,
amended, or suspended upon or after a Change in Control;
provided, however, that unless otherwise determined by the
Committee at the time of award or thereafter, if it is
determined that the Net After-Tax Amount to be realized by any
Participant, taking into account the accelerated vesting
provided for by this Section as well as all other payments to
be received by such Participant in connection with such Change
in Control, would be higher if Awards did not vest in
accordance with this Section, then and to such extent the
Awards shall not vest. The determination of whether any such
Award should not vest shall be made by a nationally recognized
accounting firm selected by the Company, which shall be
instructed to consider that (i) Awards and other forms of
compensation subject to vesting upon a Change of Control shall
be vested in the order in which they were granted and within
each grant in the order in which they would otherwise have
vested and (ii) unless and to the extent any other plan,
arrangement or contract of the Company pursuant to which any
such payment is to be received provides to the contrary, such
other payment shall be deemed to have occurred after any
acceleration of Awards or other forms of compensation subject
to vesting upon a Change of Control.
SECTION 13. Amendment and Termination.
(a) Amendments to the Plan. The Board may amend, alter,
suspend, discontinue, or terminate the Plan or any portion
thereof at any time; provided that no such amendment,
alteration, suspension, discontinuation or termination shall be
made without stockholder approval if such approval is necessary
to comply with any tax or regulatory requirement, including for
these purposes any approval requirement that is a prerequisite
for exemptive relief from Section 16(b) of the Exchange Act,
for which or with which the Board deems it necessary or
desirable to qualify or comply. Notwithstanding anything to
the contrary herein, the Committee may amend the Plan in such
manner as may be necessary so as to have the Plan conform with
local rules and regulations in any jurisdiction outside the
United States.
(b) Amendments to Awards. The Committee may waive any
conditions or rights under, amend any terms of, or alter,
suspend, discontinue, cancel or terminate, any Award
theretofore granted, prospectively or retroactively; provided
that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation, or termination that would
adversely affect the rights of any Participant or any holder or
beneficiary of any Award theretofore granted shall not to that
extent be effective without the consent of the affected
Participant, holder, or beneficiary.
(c) Adjustment of Awards Upon the Occurrence of Certain
Unusual or Nonrecurring Events. The Committee is hereby
authorized to make adjustments in the terms and conditions of,
and the criteria included in, Awards in recognition of unusual
or nonrecurring events (including, without limitation, the
events described in Section 4(b) hereof) affecting the Company,
any Affiliate, or the financial statements of the Company or
any Affiliate, or of changes in applicable laws, regulations,
or accounting principles, whenever the Committee determines
that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan; provided that no
such adjustment shall be authorized to the extent that such
authority would be inconsistent with the Plan's meeting the
requirements of Section 162(m) of the Code, as from time to
time amended.
(d) Cancellation. Any provision of this Plan or any Award
Agreement to the contrary notwithstanding, the Committee may
cause any Award granted hereunder to be canceled in
consideration of a cash payment or alternative Award made to
the holder of such canceled Award equal in value to the Fair
Market Value of such canceled Award.
SECTION 14. General Provisions.
(a) Dividend Equivalents. In the sole and complete discretion
of the Committee, an Award, whether made as an Other Stock-
Based Award under Section 10 or as an Award granted pursuant to
Sections 6 through 9 hereof, may provide the Participant with
dividends or dividend equivalents, payable in cash, Shares,
other securities or other property on a current or deferred
basis.
(b) Nontransferabilitv. No Award shall be assigned,
alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant, except by will or the laws of
descent and distribution or pursuant to a QDRO, provided,
however, that an Award may be transferable, to the extent set
forth in the applicable Award Agreement, (i) if such Award
Agreement provisions do not disqualify such Award for exemption
under Rule 16b-3 or (ii) if such Award is not intended to
qualify for exemption under such rule.
(c) No Rights to Awards. No Employee, Participant or other
Person shall have any claim to be granted any Award, and there
is no obligation for uniformity of treatment of Employees,
Participants, or holders or beneficiaries of Awards. The terms
and conditions of Awards need not be the same with respect to
each recipient.
(d) Share Certificates. All certificates for Shares or other
securities of the Company or any Affiliate delivered under the
Plan pursuant to any Award or the exercise thereof shall be
subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which such Shares
or other securities are then listed, and any applicable Federal
or state laws, and the Committee may cause a legend or legends
to be put on any such certificates to make appropriate
reference to such restrictions.
(e) Delegation. Subject to the terms of the Plan and
applicable law, the Committee may delegate to one or more
officers or managers of the Company or any Affiliate, or to a
committee of such officers or managers, the authority, subject
to such terms and limitations as the Committee shall determine,
to grant Awards to, or to cancel, modify or waive rights with
respect to, or to alter, discontinue, suspend, or terminate
Awards held by, Employees who are not officers or directors of
the Company for purposes of Section 16 of the Exchange Act, or
any successor section thereto, or who are otherwise not subject
to such Section.
(f) Withholding. A participant may be required to pay to the
Company or any Affiliate and the Company or any Affiliate shall
have the right and is hereby authorized to withhold from any
Award, from any payment due or transfer made under any Award or
under the Plan or from any compensation or other amount owing
to a Participant the amount (in cash, Shares, other securities,
other Awards or other property) of any applicable withholding
taxes in respect of an Award, its exercise, or any payment or
transfer under an Award or under the Plan and to take such
other action as may be necessary in the opinion of the Company
to satisfy all obligations for the payment of such taxes. The
Committee may provide for additional cash payments to holders
of Awards to defray or offset any tax arising from the grant,
vesting, exercise, or payments of any Award.
(g) Award Agreements. Each Award hereunder shall be evidenced
by an Award Agreement that shall be delivered to the
Participant and shall specify the terms and conditions of the
Award and any rules applicable thereto.
(h) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any
Affiliate from adopting or continuing in effect other
compensation arrangements, which may, but need not, provide for
the grant of options, restricted stock, Shares and other types
of Awards provided for hereunder (subject to stockholder
approval if such approval is required), and such arrangements
may be either generally applicable or applicable only in
specific cases.
(i) No Right to Employment. The grant of an Award shall not
be construed as giving a Participant the right to be retained
in the employ of the Company or any Affiliate. Further, the
Company or an Affiliate may at any time dismiss a Participant
from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any
Award Agreement.
(j) No Rights as Stockholder. Subject to the provisions of
the applicable Award, no Participant or holder or beneficiary
of any Award shall have any rights as a stockholder with
respect to any Shares to be distributed under the Plan until he
or she has become the holder of such Shares. Notwithstanding
the foregoing, in connection with each grant of Restricted
Stock hereunder, the applicable Award shall specify if and to
what extent the Participant shall not be entitled to the rights
of a stockholder in respect of such Restricted Stock.
(k) Governing Law. The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan and
any Award Agreement shall be determined in accordance with the
laws of the State of Delaware.
(l) Severability. If any provision of the Plan or any Award
is or becomes or is deemed to be invalid, illegal, or
unenforceable in any jurisdiction or as to any Person or Award,
or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed
or deemed amended to conform to the applicable laws, or if it
cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent
of the Plan or the Award, such provision shall be stricken as
to such jurisdiction, Person or Award and the remainder of the
Plan and any such Award shall remain in full force and effect.
(m) Other Laws. The Committee may refuse to issue or transfer
any Shares or other consideration under an Award if, acting in
its sole discretion, it determines that the issuance or
transfer of such Shares or such other consideration might
violate any applicable law or regulation or entitle the Company
to recover the same under Section 16(b) of the Exchange Act,
and any payment tendered to the Company by a Participant, other
holder or beneficiary in connection with the exercise of such
Award shall be promptly refunded to the relevant Participant,
holder, or beneficiary. Without limiting the generality of the
foregoing, no Award granted hereunder shall be construed as an
offer to sell securities of the Company, and no such offer
shall be outstanding, unless and until the Committee in its
sole discretion has determined that any such offer, if made,
would be in compliance with all applicable requirements of the
U.S. federal securities laws and any other laws to which such
offer, if made, would be subject.
(n) No Trust or Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Company or
any Affiliate and a Participant or any other Person. To the
extent that any Person acquires a right to receive payments
from the Company or any Affiliate pursuant to an Award, such
right shall be no greater than the right of any unsecured
general creditor of the Company or any Affiliate.
(o) No Fractional Shares. No fractional Shares shall be
issued or delivered pursuant to the Plan or any Award, and the
Committee shall determine whether cash, other securities, or
other property shall be paid or transferred in lieu of any
fractional Shares or whether such fractional Shares or any
rights thereto shall be canceled, terminated, or otherwise
eliminated.
(p) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate
reference. Such headings shall not be deemed in any way
material or relevant to the construction or interpretation of
the Plan or any provision thereof.
SECTION 15. Term of the Plan.
(a) Effective Date. The Plan shall be effective as of January
26, 1995, subject to approval by the stockholders of the
Company within one year thereafter.
(b) Expiration Date. No Incentive Stock Option shall be
granted under the Plan after January 25, 2005. Unless
otherwise expressly provided in the Plan or in an applicable
Award Agreement, any Award granted hereunder may, and the
authority of the Board or the Committee to amend, alter,
adjust, suspend, discontinue, or terminate any such Award or to
waive any conditions or rights under any such Award shall,
continue after the authority for grant of new Awards hereunder
has been exhausted.
EXHIBIT B
Compaq Computer Corporation
Bonus Incentive Plan
SECTION 1. Purpose. The purpose of the Compaq Computer
Corporation Bonus Incentive Plan (the "Plan") is to provide
incentives for senior executives and other key employees whose
performance in fulfilling the responsibilities of their
positions can have a major impact on the profitability and
future growth of Compaq Computer Corporation (the "Company")
and its subsidiaries.
SECTION 2. Definitions. For the purposes of the Plan, the
following terms shall have the meanings indicated:
"Award" shall mean the grant of an award by the Committee to a
Participant pursuant to Section 4(a) or Section 4(d).
"Award Year" shall mean any calendar year with respect to the
Company's performance in which an Award is granted.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Committee" shall mean the Committee designated pursuant to
Section 3. Until otherwise determined by the Board of
Directors, the Compensation Committee designated by the Board
of Directors shall be the Committee under the Plan.
"Covered Officer" shall mean at any date (i) any individual
who, with respect to the previous taxable year of the Company,
was a "covered employee" of the Company within the meaning of
Section 162(m), as hereinafter defined; provided, however, that
the term "Covered Officer" shall not include any such
individual who is designated by the Committee, in its
discretion, at the time of any Award or at any subsequent time,
as reasonably expected not to be such a "covered employee" with
respect to the current taxable year of the Company and (ii) any
individual who is designated by the Committee, in its
discretion, at the time of any Award or at any subsequent time,
as reasonably expected to be such a "covered employee" with
respect to the current taxable year of the Company or with
respect to the taxable year of the Company in which any
applicable Award will be paid.
"Net Income" shall mean for any Award Year, operating income
before taxes as determined by the Company's independent
accountants for the Award Year, reduced by the aggregate amount
of dividends on the Company's preferred stock, if any.
"Participant" shall mean a senior executive or other key
employee of the Company selected by the Committee in accordance
with Section 4(a) or Section 4(d) who receives an Award.
"Plan Funding Amount" shall mean with respect to any Award Year
an amount equal to six percent of Net Income for such year.
"QDRO" shall mean a domestic relations order acceptable to the
Committee in its sole discretion.
"Retirement" shall mean retirement from active service to the
Company upon attaining 55 years of age, if the Participant's
age plus years of active service equals at least 65, or as
otherwise determined by the Committee.
"Section 162(m)" shall mean Section 162(m) of the Internal
Revenue Code of 1986 and the rules and other authorities
thereunder promulgated by the Internal Revenue Service of the
Department of the Treasury.
SECTION 3. Administration.
(a) Committee. Subject to the authority and powers of the
Board of Directors in relation to the Plan as hereinafter
provided, the Plan shall be administered by a Committee
designated by the Board of Directors consisting of two or more
members of the Board of Directors each of whom is an "outside
director" within the meaning of Section 162(m). The Committee
shall have full authority to interpret the Plan and from time
to time to adopt such rules and regulations for carrying out
the Plan as it may deem best; provided, however, that the
Committee may not exercise any authority otherwise granted to
it hereunder if such action would have the effect of increasing
the amount of an Award to any Covered Officer.
(b) Committee Determinations. All determinations by the
Committee shall be made by the affirmative vote of a majority
of its members, but any determination reduced to writing and
signed by a majority of the members shall be fully as effective
as if it had been made by a majority vote at a meeting duly
called and held. All decisions by the Committee pursuant to
the provisions of the Plan and all orders or resolutions of the
Board of Directors pursuant thereto shall be final, conclusive
and binding on all persons, including the Participants, the
Company and its subsidiaries, and stockholders.
SECTION 4. Eligibility for and Payment of Awards.
(a) Eligible Employees. Subject to the provisions of the
Plan, in each calendar year the Committee may select officers
or employees (including officers or employees who are also
directors) of the Company or any of its subsidiaries who will
be eligible to earn Awards under the Plan with respect to such
year and determine the amount of such Awards and the conditions
under which they may be earned.
(b) Payment of Awards. Awards that are earned with respect to
any Award Year shall be paid in cash to Participants at such
times and in such amounts as are determined by the Committee.
(c) Deferred Compensation Plan. Notwithstanding the
provisions of Section 4(b), if, prior to any date established
by the Committee for payment of any Award or portion thereof, a
Participant shall so elect, in accordance with procedures
established by the Committee, all or any part of an Award or
portion thereof shall be deferred and paid in one or more
periodic installments in accordance with the Compaq Computer
Corporation Deferred Compensation and Supplemental Savings
Plan.
(d) Awards to Covered Officers.
(i) Notwithstanding the provisions of Sections 4(a),
4(b), and 5(a) hereof, any Award to any Covered Officer
shall be granted in accordance with the provisions of this
Section 4(d). Subject to the discretion of the Committee
as set forth in Section 5(b) hereof, the amount of the
Award that may be granted with respect to any Award Year
to any Covered Officer at the time of such grant shall be
15% of the Plan Funding Amount for such Award Year.
(ii) Any provision of the Plan to the contrary
notwithstanding, no Covered Officer shall be entitled to
any payment of an Award with respect to an Award Year
unless the members of the Committee shall have certified
the Plan Funding Amount for such Award Year.
SECTION 5. General Provisions.
(a) Adjustments to Net Income. If Net Income for any year
shall have been affected by special factors (including material
changes in accounting policies or practices, material
acquisitions or dispositions of property, or other unusual
items) that in the Committee's judgment should or should not be
taken into account, in whole or in part, in the equitable
administration of the Plan, the Committee may, for any purpose
of the Plan, adjust Net Income and make payments accordingly
under the Plan.
(b) No Adjustments for Covered Officers. Notwithstanding the
provisions of subparagraph (a) above, any adjustments made in
accordance with or for the purposes of subparagraph (a) shall
be disregarded for purposes of calculating the Plan Funding
Amount if and to the extent that such adjustments would have
the effect of increasing the Plan Funding Amount. In addition,
the Committee may, in the exercise of its discretion, reduce or
eliminate the amount of an Award to a Covered Officer otherwise
calculated in accordance with the provisions of Section 4(d)
prior to payment thereof.
(c) No Assignment. No portion of any Award under the Plan may
be assigned or transferred otherwise than by will or by the
laws of descent and distribution or pursuant to a QDRO prior to
the payment thereof.
(d) Tax Requirements. All payments made pursuant to the Plan
shall be subject to withholding in respect of income and other
taxes required by law to be withheld, in accordance with
procedures to be established by the Committee.
(e) No Additional Participant Rights. The selection of an
individual for participation in the Plan shall not give such
Participant any right to be retained in the employ of the
Company or any of its subsidiaries, and the right of the
Company or any such subsidiary to dismiss or discharge any such
Participant, or to terminate any arrangement pursuant to which
any such Participant provides services to the Company is
specifically reserved. The benefits provided for Participants
under the Plan shall be in addition to, and shall in no way
preclude, other forms of compensation to or in respect of such
Participants.
(f) Liability. The Board of Directors and the Committee shall
be entitled to rely on the advice of counsel and other experts,
including the independent accountants for the Company. No
member of the Board of Directors or of the Committee or any
officers of the Company or its subsidiaries shall be liable for
any act or failure to act under the Plan, except in
circumstances involving bad faith on the part of such member or
officer.
(g) Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any subsidiary or affiliate
of the Company from adopting or continuing in effect other
compensation arrangements, which arrangements may be either
generally applicable or applicable only in specific cases.
SECTION 6. Amendment and Termination of the Plan. The
Board of Directors may at any time terminate, in whole or in
part, or from time to time amend the Plan, provided that,
except as otherwise provided in the Plan, no such amendment or
termination shall adversely affect the rights of any
Participant under any Awards deferred by such Participant
pursuant to Section 4(c). In the event of such termination, in
whole or in part, of the Plan, the Committee may in its sole
discretion direct the payment to Participants of any Awards not
theretofore paid out prior to the respective dates upon which
payments would otherwise be made hereunder to such
Participants, in a lump sum or installments as the Committee
shall prescribe with respect to each such Participant. The
Board of Directors may at any time and from time to time
delegate to the Committee any or all of its authority under
this Section 6. Any amendment to the Plan that would affect
any Covered Officer shall be approved by the Company's
stockholders if required by and in accordance with Section
162(m).
PROXY COMPAQ COMPUTER CORPORATION
Annual Meeting of Stockholders to be held April 26, 1995
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
Compaq Computer Corporation (the "Company") which the
undersigned is entitled to vote at the annual meeting of
stockholders to be held April 26, 1995, 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" ITEMS 1-4.
(Continued, and to be signed, on the reverse side) SEE REVERSE SIDE
Please mark votes as in this example.
UNLESS OTHERWISE SPECIFIED BELOW, THIS PROXY WILL BE VOTED "FOR" ITEMS 1-4.
THE BOARD OF DIRECTORS RECOMMEND A VOTE "FOR" ALL NOMINEES LISTED BELOW AND
A VOTE "FOR" ITEMS 2-4
1. Election of Directors:
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 ALL NOMINEES
WITHHELD FROM ALL NOMINEES
______________________________
For all nominee(s) except as designated in the blank space above
2. Approval of an amendment to the Company's Restated
Certificate of Incorporation increasing the number of
authorized shares of Common Stock from 400,000,000 shares to
1,000,000,000 shares.
For Against Abstain
3. Approval of the 1995 Equity Plan.
For Against Abstain
4. Approval of the Bonus Incentive Plan.
For Against Abstain
5. To act upon such other business as may properly come before
the meeting.
Please sign exactly as name appears hereon. When shares are
held by joint owners, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please
give title as such. If a corporation or a partnership, please
sign by authorized person.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
Signature:___________________________________Date______________
_
Signature:___________________________________Date______________
_
