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EXHIBIT 10(pp)

PERSONAL & CONFIDENTIAL

October 20, 2000

Mr. Michael D. Capellas
[Street Address]
[City], [State] [Zip]

Dear Michael:

        On behalf of all of your fellow members of the Board of Directors, I
want to congratulate you on being selected to serve as Chairman of the Board and
to thank you for your outstanding contributions over the past months as Chief
Executive Officer. We believe that your vision and continuing leadership will
take Compaq to new heights as we tackle the numerous challenges that face our
industry. The terms and conditions set forth in this employment agreement (the
"Agreement"), which supersedes the agreement you entered into with Compaq on
July 22, 1999 (the "1999 Agreement"), are intended to provide you with the
financial security to focus on continued success as a leader of Compaq and to
compensate you for the additional responsibilities you have assumed as Chairman.

        TERM OF AGREEMENT: This Agreement shall be effective for an initial
three-year term, beginning October 1, 2000 and ending on September 30, 2003, and
will be automatically renewed thereafter on an annual basis for successive
one-year terms unless the Board of Directors of Compaq Computer Corporation or
any successor entity (the "Board of Directors" or the "Board") provides you with
written notice that the Agreement will not be renewed ("Notice of Non-Renewal")
no later than 120 days prior to the expiration of the then-current term.

        DUTIES AND RESPONSIBILITIES: During the term of this Agreement, you will
serve as Chairman of the Board and Chief Executive Officer of Compaq Computer
Corporation ("Compaq" or the "Company"), with all the duties and
responsibilities commensurate with those roles. All other employees of Compaq
will report to you or your designee. You agree to dedicate your full
professional skills, time, and energies to your responsibilities to Compaq and
understand and agree that this will not permit you to engage in other business
activities.

        BASE SALARY: During the term of this Agreement, your base salary, stated
on an annual basis, shall not be less than $1,600,000; provided that if the
Board approves an increase in your base salary during the term of this
Agreement, your base salary shall not thereafter be reduced below that increased
level during the remaining term of this Agreement.

        ANNUAL CASH INCENTIVE OPPORTUNITY: During the term of this Agreement,
you will continue to be eligible to participate in the annual bonus plan, or any
successor plan, available to executive officers on the same terms as other
executive officers of the Company. Under the current program, you will have the
opportunity to earn a target annual bonus of two times your base salary.

        STOCK OPTIONS/OTHER LONG-TERM INCENTIVE OPPORTUNITIES: During the term
of this Agreement, you will have the opportunity to receive stock options and
other long-term incentives on the same basis as other executive officers of
Compaq. The value, on an annual basis, of your total target long-term incentive
opportunities (including stock options and other forms of long-term incentives)
will be seven to ten times your base salary, using a Black-Scholes method of
valuation.

        SPECIAL BONUS: Upon execution of this Agreement, Compaq will pay to you
a special one-time lump sum bonus of $850,000, less applicable tax withholding.

        SPECIAL 1999 STOCK OPTION GRANT: The special one-time Stock Option grant
for one million shares as provided for in the 1999 Agreement (the "Special 1999
Stock Option Grant") shall continue to be governed by the original terms of any
applicable grant notice and the Compaq Computer Corporation 1998 Stock Option
Plan.

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RESTRICTED STOCK:

        2000 GRANT: On October 13, 2000, Compaq granted you an additional
970,000 shares of restricted stock under the 1989 Equity Incentive Plan (the
"2000 Restricted Stock"). The 2000 Restricted Stock shall vest as follows:

        170,000 shares will vest thirty days from the date of the grant;
provided, however, that you agree not to sell, exchange, offer as security,
grant an option on or otherwise dispose of or encumber those shares, except to
defray associated taxes, for a period of one year from the date they vest.
Another 300,000 shares will vest in increments of 100,000 shares each on
November 1, 2001, on November 1, 2002, and on November 1, 2003, provided that
you remain continuously employed by Compaq through the applicable vesting date.

        500,000 shares will vest only upon attainment of certain performance
objectives, as described below:

        During your employment by Compaq, 250,000 shares of the 2000 Restricted
Stock will vest in the quantities listed below the first time between October 1,
2000 and November 1, 2004 that the average closing price of Compaq's stock on
the New York Stock Exchange (or other nationally recognized stock exchange on
which it is listed at the time) for any period of 15 consecutive trading days
equals or exceeds each of the performance targets listed below:

QUANTITY

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  PERFORMANCE TARGET

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50,000   $35 per share 50,000   $40 per share 50,000   $45 per share 50,000  
$50 per share 50,000   $55 per share

        If, however, these targets have not been met by November 1, 2004, you
will no longer be eligible to vest in any portion of these 250,000 shares which
has not previously vested.

        250,000 shares of the 2000 Restricted Stock shall vest based on growth
of Compaq's earnings per share excluding investment gains and losses ("EPS")
when compared to average EPS growth for International Business Machines, Dell
Computer Corporation, and Hewlett-Packard or any successor entities (the "Index
Companies"). Specifically, these 250,000 shares shall vest over three
performance periods of four quarters each (4th calendar quarter 2000 through 3rd
calendar quarter 2001, 4th calendar quarter 2001 through 3rd calendar quarter
2002, and 4th calendar quarter 2002 through 3rd quarter 2003), using the fiscal
quarters for each company that most closely correspond to the time period
covered by the relevant performance period. You will have the opportunity to
vest in up to 83,333 shares based on relative EPS growth during each performance
period as follows:

•If Compaq's EPS growth over the performance period is equal to the average EPS
growth of the Index Companies for the performance period, you will vest in
50,000 shares.

•If Compaq's EPS growth over the performance period is equal to or greater than
1.1 times the average EPS growth of the Index Companies for that performance
period, you will vest in 83,333 shares of the 2000 Restricted Stock for that
performance period.

•Compaq will use linear interpolation to determine the number of shares in which
you will vest should Compaq's EPS growth over a performance period fall between
1 and 1.1 times the average EPS growth of the Index Companies for that
performance period.

•If Compaq's EPS growth for any performance period does not equal or exceed the
average EPS growth of the Index Companies for that performance period, you will
not vest in any shares for that performance period.

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        However, should any of the 83,333 shares available for vesting in the
first performance period remain unvested after the conclusion of that
performance period, you will have the opportunity to vest in any such remaining
shares based on cumulative EPS growth over the first and second performance
periods as follows:

•If Compaq's cumulative EPS growth is equal to the cumulative average EPS growth
for the Index Companies, you will vest in 60% of any such remaining shares.

•If Compaq's cumulative EPS growth is equal to or greater than 1.1 times the
cumulative average EPS growth for the Index Companies, you will vest in 100% of
any such remaining shares.

•If Compaq's cumulative EPS growth is between 1 and 1.1 times the cumulative
average EPS growth of the Index Companies, linear interpolation will be used to
determine the number of remaining shares in which you will vest.

        The same approach will be used should any of the 83,333 shares from the
first performance period remain unvested at the conclusion of the second
performance period, based on cumulative EPS growth over all three performance
periods. Again, you will vest in 60-100% of those shares, depending on relative
cumulative EPS growth, in accordance with the schedule described above.

        Similarly, should any of the 83,333 shares from the second performance
period remain unvested at the conclusion of the second performance period, you
will vest in 60-100% of those remaining shares based on cumulative EPS for the
second and third performance periods, using the schedule described above to
determine the precise number of those remaining shares in which you will then
vest.

        Any shares which remain unvested at the conclusion of the third
performance period will be forfeited.

        1999 GRANT: The 200,000 shares of restricted stock granted pursuant to
Article 5.4 of the 1999 Agreement (the "1999 Restricted Stock") shall continue
to be governed by the terms and conditions of the 1989 Equity Incentive Plan.
Vesting of the 1999 Restricted Stock shall be in accordance with its original
terms, which, restated, are as follows:

        As a special performance incentive, the 1999 Restricted Stock shall vest
in the quantities listed below the first time after July 22, 1999 and during
your employment with Compaq that the closing price of Compaq's stock on the New
York Stock Exchange (or other nationally recognized stock exchange on which it
is listed at the time) equals or exceeds each performance target listed below
for thirty consecutive trading days:

QUANTITY

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  PERFORMANCE TARGET

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50,000   $35 per share 50,000   $40 per share 100,0000   $50 per share

        Except to the extent that the 1999 Restricted Stock vests in accordance
with the above schedule or you separate from employment prior to July 22, 2004
(in which event, your rights as to the 1999 Restricted Stock, if any, will be
governed by the termination provisions set forth below), the 1999 Restricted
Stock shall become fully vested on July 22, 2004.

        Compaq shall adjust the quantities and performance targets for the 1999
Restricted Stock and the 2000 Restricted Stock, as set forth above, to reflect
any stock dividend, subdivision, or combination of shares or reclassification
that occurs in the manner contemplated by the 1989 Equity Incentive Plan or any
successor to such Plan. Dividends on all unvested shares shall inure to the
benefit of Compaq.

        PRIOR LOAN TO PURCHASE SHARES: Under the 1999 Agreement, you received a
loan to purchase additional shares of Compaq stock (the "1999 Loan"). Provided
that you remain in the

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continuous employ of Compaq, Compaq will forgive 1/3 of the then-outstanding
balance of the 1999 Loan on November 1, 2001, 1/2 of the then-outstanding
balance of that loan on November 1, 2002, and the remaining balance on
November 1, 2003. Compaq is releasing its security interest in the shares of
Compaq stock currently securing the 1999 Loan.

        TAX ASSISTANCE: Compaq will loan you $2,500,000 on a full recourse basis
to assist you in defraying taxes associated with certain aspects of this
Agreement (the "Tax Assistance Loan"). The Tax Assistance Loan will be secured
by 125,000 shares of Compaq common stock currently owned by you. The proceeds of
any sale of those shares prior to repayment of the Tax Assistance Loan shall be
used to retire any outstanding balance on the Tax Assistance Loan. The Tax
Assistance Loan will bear interest at a fixed rate which will be the minimum
rate required under Section 7872 of the Internal Revenue Code of 1986, as
amended, in order that the loan is not considered a below market interest loan.
Principal and interest on the loan will be due and payable on the earlier of the
fifth anniversary of this Agreement or, if you separate from employment under
circumstances that do not constitute a Qualifying Termination, as defined below,
120 days after the termination of your employment with Compaq.

        BENEFITS AND PERQUISITES: You will continue to be eligible to
participate in such benefit plans, and for such perquisites, as Compaq offers
other executive officers of the Company, including but not limited to insurance
for directors and officers liability, subject to the terms of the governing
plans and programs.

        SEPARATION FROM EMPLOYMENT: Your employment with Compaq is at-will.
Under certain circumstances, however, you will be entitled to severance benefits
should you separate from employment during the term of this Agreement. The
following provisions govern your compensation and benefits should you separate
from employment during the term of this Agreement:

QUALIFYING TERMINATION:

        Should you incur a Qualifying Termination (as defined below) you will be
eligible for the following payments and benefits, provided that you remain in
compliance with your obligations under the terms of this Agreement, including,
but not limited to the provisions regarding non-competition, non-solicitation,
and non-disparagement, and the Release (as defined below). Should you fail to
comply with your obligations under this Agreement or the Release, Compaq may, in
addition to any other available remedies, cease making any payment or benefit
provided for herein.

        SEPARATION PAYMENT: A separation payment equivalent, before applicable
deductions, to three times the sum of your base salary and your target annual
bonus, both as in effect at the time of your separation from employment (the
"Separation Payment"). The Separation Payment shall be paid as follows: 25% of
the Separation Payment shall be paid to you within ten business days of your
execution of the Release, with the remaining 75% to be paid in equal
installments, without interest, commencing on Compaq's second regularly
scheduled payroll following your execution of the Release and ending with
Compaq's regularly scheduled payroll twenty-four months later (the "Separation
Pay Period"). In the event of a change in payroll practice during the Separation
Pay Period, Compaq may adjust the amounts of such installments as necessary to
ensure that the total amount paid is equal to the Separation Payment, as defined
above.

        PRORATED ANNUAL INCENTIVE: A prorated annual incentive calculated by
multiplying the target annual bonus for which you are otherwise eligible times a
fraction, the numerator of which is the number of full calendar months during
which you were employed in the applicable measurement period and the denominator
of which is the total number of full calendar months in the applicable
measurement period (the "Prorated Annual Incentive"). The Prorated Annual
Incentive shall be subject to applicable deductions and will be paid at the same
time such payments are made to other participants in Compaq's annual incentive
program.

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        STOCK OPTIONS: You will continue to vest in any unvested stock options
as if you had remained employed by Compaq for the duration of the Separation Pay
Period. You will have until the earlier of (a) the expiration of the term of the
option or (b) the twelve-month anniversary of the payment of the final
Separation Payment installment to exercise any options that are or become
vested.

        1999 RESTRICTED STOCK: Upon the expiration of a 180-day period following
your separation date, you will vest in a prorated number of the original shares
of the 1999 Restricted Stock grant based on the following formula:
(N/60 × 200,000) - Y, where N equals the number of whole calendar months from
July 22, 1999 to the end of the year in which you separate from employment (to a
maximum of 60) and Y equals the number of shares of the 1999 Restricted Stock
that have vested as a result of achievement of the performance targets set forth
above in connection with the 1999 Restricted Stock. The 200,000 in the formula
shall be adjusted to the same extent that the original number of shares of 1999
Restricted Stock is adjusted under the 1989 Equity Incentive Plan, or any
successor to such Plan, due to a stock dividend, subdivision, or combination of
shares or a reclassification.

        2000 RESTRICTED STOCK: On the date the Release becomes effective and
irrevocable, you will vest in any outstanding shares of the 470,000 shares of
the 2000 Restricted Stock granted pursuant to this agreement that were scheduled
to vest over time. You will not be entitled to continue to vest in any portion
of the 2000 Restricted Stock which was scheduled to vest only upon achievement
of the performance factors set forth above. Notwithstanding the immediately
preceding sentence, (1) if you have a Qualifying Termination as a result of
receipt of a Notice of Non-Renewal during the initial three-year term, you will
be treated as having been employed through September 30, 2003 for purposes of
vesting in the performance-based 2000 Restricted Stock and (2) if you have a
Qualifying Termination as a result of receipt of a Notice of Non-Renewal after
the initial three-year term, you will be treated as having been employed through
November 1 immediately following the end of the then-current term for purposes
of vesting in the performance-based 2000 Restricted Stock.

        1999 LOAN: Compaq will forgive in full any outstanding balance of the
1999 Loan upon a Qualifying Termination.

        TAX ASSISTANCE LOAN: Repayment of the Tax Assistance Loan provided for
under this Agreement will not be accelerated in the event of a Qualifying
Termination.

        SUPPLEMENTAL PAYMENT: A special one-time lump sum payment to you of
$100,000 (the "Supplemental Payment"), payable on the ninety day anniversary of
Compaq's receipt of the executed Release. The Supplemental Payment shall be
subject to applicable deductions and shall be in lieu of any payment by Compaq
to you for tax preparation services, security system monitoring, accounting or
legal fees necessitated by the termination of your employment, secretarial
services, outplacement services, or any other similar purposes.

        HEALTH BENEFIT CONTINUATION: Continuation of certain health benefits
under COBRA for you and your eligible dependents following your separation from
employment. Compaq will make any necessary payments or adjustments so that you
will have the opportunity to continue those COBRA-covered benefits at the
employee premium rate for six months following your separation. Thereafter, you
will have the opportunity, as determined by the provisions of COBRA, to continue
such coverage at the COBRA premium rate.

        DEFINITION OF A QUALIFYING TERMINATION: For purposes of this Agreement,
a Qualifying Termination shall mean any of the following:

(1)Involuntary termination of your employment without Cause. For purposes of
this Agreement, Cause shall mean a good faith determination by the Board of
Directors, after consultation with outside legal counsel, that you have
committed an act or omission that is materially contrary to the best interests
of Compaq or that you have materially breached any of the terms and conditions
of this Agreement. You will not, however, be deemed to have been

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involuntarily terminated for Cause unless and until you are presented with a
resolution of the Board of Directors, approved by at least 3/4 of the entire
membership of the Board after providing you with reasonable notice and
opportunity to be heard, with counsel, before the Board, finding that you have
engaged in conduct which would constitute Cause under this Agreement.

(2)Resignation within 90 days of the occurrence of a Good Reason, which, for
purposes of this Agreement, shall mean: (a) involuntary removal from the
position of Chief Executive Officer, (b) involuntary removal from, or failure to
be elected, Chairman of the Board, (c) assignment, by the Board, of duties
inconsistent with the position of Chief Executive Officer, (d) receipt of a
Notice of Non-Renewal, or (e) the Board's approval of a material reduction in
target compensation opportunities that is not part of an across-the-board
reduction for all executive officers of the Company. Notwithstanding the
foregoing, you will not be eligible for a Separation Payment unless you provide
the Board of Directors with 60 days written notice of your intent to resign for
Good Reason, containing details regarding the grounds for your resignation, and
allow the Board of Directors to take action to remove or correct the Good Reason
within 30 days. If the Board of Directors fails to take action to remove or
correct the Good Reason within 30 days of receiving notice of same, your
resignation for Good Reason shall become effective.

(3)Involuntary termination of your employment by the Company for any reason
within 180 days of a Change in Control, as defined in Exhibit A.

        You will not be deemed to have incurred a Qualifying Termination unless
you execute, within 30 days of your separation, a release of claims
substantially similar to the form attached as Exhibit B hereto (the "Release").
Under no circumstances shall your resignation or termination from employment as
a result of Disability (as defined below) or death constitute a Qualifying
Termination.

        SEPARATION DUE TO DEATH OR DISABILITY: In the event of separation from
employment as a result of Disability or death and contingent upon your, or, in
the event of your death, your estate's, execution of a Release, you, or in the
event of your death, your estate, will receive (1) a one-time lump sum Special
Separation Payment equivalent, before applicable deductions, to 1.5 times the
sum of your base salary and your target annual bonus, both as determined as of
the date of your separation from employment, and (2) a Prorated Annual
Incentive, as defined above, payable at the same time annual incentives are paid
to other participants. Both the Special Separation Payment and the Prorated
Annual Incentive shall be subject to applicable deductions. Compaq will also
forgive any remaining balance on the 1999 Loan, and repayment of the Tax
Assistance Loan will not be accelerated. All other compensation and benefits
shall be determined by the terms of the governing plan or program. For purposes
of the Agreement, Disability shall mean your inability to perform the essential
functions of your position as Chief Executive Officer, or to perform your duties
as Chairman of the Board, as a result of illness or injury for a period of six
consecutive months.

        INVOLUNTARY TERMINATION FOR CAUSE/RESIGNATION WITHOUT GOOD REASON: If
you are involuntarily terminated for Cause or resign your employment for any
reason other than a Good Reason, you will not be entitled to any severance
payment under this Agreement. Compaq will have no other obligations under this
Agreement, and all compensation and benefits will be determined by the terms of
the governing plan or program.

        EXCISE TAX GROSS-UP: In the event of a Change in Control, Compaq, at its
sole expense, shall cause its independent auditors promptly to review all
payments, distributions and benefits that have been made to or provided to, and
are to be made to or provided to, you under this Agreement, and any other
agreement and plan benefiting you, to determine the applicability of
Section 4999 of the United States Internal Revenue Code of 1986, as amended (the
"Code"). If Compaq's independent auditors determine that any such payments,
distributions or benefits are subject to excise taxes as

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provided under Section 4999 of the Code (the "Excise Tax"), then such payment,
distributions, or benefits (the "Original Payment(s)") shall be increased by an
amount (the "Gross-up Amount") such that, after the Company withholds all taxes
due, including any excise and employment taxes imposed on the Gross-up Amount,
you will retain a net amount equal to the Original Payment(s) less income and
employment taxes, if any, imposed on the Original Payment(s). To facilitate the
calculation of the applicable excise tax, you agree to provide Compaq's auditors
with copies of your Forms W-2 for the tax years they deem necessary for their
use in determining the application of Section 4999 and calculating any amounts
payable under this provision. Compaq's auditors will perform the calculations in
conformance with the foregoing provisions and provide you with a copy of their
calculation. The intent of the parties is that Compaq shall be solely
responsible for, and shall pay, any Excise Tax on the Original Payment(s) and
Gross-up Amount and any income and employment taxes (including, without
limitation, penalties and interest) imposed on any Gross-up Amount. If no
determination by Compaq's auditors is made prior to the time you are required to
file a tax return reflecting any portion of the Original Payment(s), you will be
entitled to receive a Gross-up Amount calculated on the basis of the Original
Payment(s) you report in such tax return, within 30 days of the filing of such
tax return. You agree that, for the purposes of the foregoing sentence, you are
not required to file a tax return until you have obtained the maximum number and
length of filing extensions available. If any tax authority finally determines
that a greater Excise Tax should be imposed upon the Original Payment(s) than is
determined by Compaq's independent auditors or reflected in your tax returns,
you shall be entitled to receive the full Gross-up Amount calculated on the
basis of the additional amount of Excise Tax determined to be payable by such
tax authority (including related penalties and interest) from Compaq within
30 days of such determination as long as you have taken all reasonable actions
to minimize any such amounts. If any tax authority finally determines the Excise
Tax to be less than the amount taken into account hereunder in calculating the
Gross-up Amount, you shall repay to Compaq, within 30 days of your receipt of a
refund resulting from that determination, the portion of the Gross-up Amount
attributable to such reduction (plus the refunded portion of Gross-up Amount
attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-up Amount being repaid, less any
additional income tax resulting from such refund).

        COVENANTS: In your role with Compaq (which, for purposes of these
Covenants includes Compaq Computer Corporation, its subsidiaries, affiliates,
related entities, and successors), you will have access to confidential and
proprietary information, and your access to such information is intrinsic to,
and essential to the success of, your employment by the Company. In
consideration of your access to such information, your continuing employment
with the Company, and the payments and benefits provided for under this
Agreement, you agree to the following Covenants, which you agree are reasonable
and necessary for the protection of Compaq's legitimate business interests,
including, but not limited to, good will and information which is confidential
and proprietary to Compaq.

        CONFIDENTIAL INFORMATION/INTELLECTUAL PROPERTY: You agree that you will
not, at any time during or after your employment by Compaq, make any
unauthorized use or disclosure of Confidential Information (as defined below) or
Intellectual Property (as defined below), including confidential information or
intellectual property of third parties to which you had access as a result of
your employment. Nothing in this Agreement shall prohibit you from complying
with a court order to produce information, but you agree to provide Compaq
notice, immediately upon becoming aware of such requirement, of any subpoena,
order, or other mandate to produce information which may be Confidential
Information and to cooperate fully with Compaq in obtaining such protection as
Compaq deems appropriate.

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        During your employment by Compaq, you agree to promptly disclose in
writing to Compaq any Intellectual Property, whether originated, conceived,
created, made, developed or invented in whole or in part by you, and maintain
adequate and current records thereof. You assign, transfer, and convey to
Compaq, or its designees or successors, your entire right, title and interest in
any Intellectual Property that you originate, conceive, create, make, develop or
invent, whether as sole inventor, creator, developer or originator or as a joint
inventor, creator, developer or originator with others, whether made within or
without the usual working hours or upon the premises of Compaq or elsewhere,
during your employment.

        If, subsequent to separation from Compaq, you perform an act at Compaq's
request or direction, or provide assistance to Compaq, as described in this
paragraph, then Compaq shall compensate you for your time at a rate of one
thousand dollars per day. Either during or subsequent to your employment, upon
the request and at the expense of Compaq, but for no consideration in addition
to that due to you pursuant to your employment with Compaq and this Agreement,
you shall execute, acknowledge, and deliver to Compaq or its designee any
instruments that in the judgment of Compaq may be necessary or desirable to
secure or maintain for the benefit of Compaq or its designee adequate patent,
copyright, and other property rights with respect to Intellectual Property
within the scope of this Agreement, including, but not limited to: (a) domestic
and foreign patent and copyright applications, (b) any other applications for
securing, protecting, or registering property rights, and (c) powers of
attorney, assignments, oaths, affirmations, supplemental oaths and sworn
statements. You shall also assist Compaq or its designee, as required, to draft
such instruments, to obtain such rights, and to enforce such rights, provided
that such assistance will not unreasonably interfere with your other endeavors.

        For purposes of this Agreement, "Confidential Information" means any
confidential or private information, not generally known to the public, related
to the business or operations (past, present or future) of Compaq. You agree
that Confidential Information encompasses a broad scope of information that
includes, without limitation: business plans and strategies; information
regarding the identities, skills, qualities, competencies, characteristics,
expertise, or experience of the directors, officers, or employees of Compaq;
information regarding the compensation practices of, or payments made to or by,
Compaq; the contents of communications, oral or written, with, by or between
directors, officers, employees, or agents of Compaq; statements of fact or
opinion or mixed statements of fact and opinion if such statements are based on
information or events to which you had access as a result of your employment by
Compaq; and similar information related to third parties to whom Compaq owes a
duty of confidentiality or privacy.

        Intellectual Property includes, without limitation, any and all
information, ideas, concepts, improvements, discoveries, designs, inventions,
trade secrets, know-how, manufacturing processes, product formulae, design
specifications, writings and other works of authorship, computer programs, and
business methods, whether patentable or not, which are originated by, conceived
by, created by, made by, developed by, invented by, learned by, or disclosed to
you, individually or in conjunction with others, during your employment by
Compaq (whether during business hours or otherwise and whether on Compaq's
premises or otherwise) which relate to Compaq's business, products, or services
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing and trading terms,
evaluations, opinions, interpretations, acquisition prospects, the identity of
customers or their requirements, the identity of key contacts with in the
customer's organizations or within the organization of acquisition prospects, or
marketing and merchandising techniques, prospective names, and marks). The term
"Intellectual Property" also includes all rights provided by the law of any
jurisdiction throughout the world with respect to such information, ideas,
concepts, improvements, discoveries, designs, inventions, trade secrets,
know-how, manufacturing processes, product formulae, design specifications,
writings and other works of authorship, computer programs, and business methods,
including, without limitation, the right to

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maintain the same as confidential information, the right to first publication,
the right to obtain patents and industrial rights thereon, all rights of
copyright, all trademark rights, and the right to protect the same against acts
of unfair competition.

        NON-COMPETITION AND NO SOLICITATION: During your employment with Compaq
and, should your employment terminate for any reason (whether voluntary or
involuntary), for the greater of (a) a period of 24 months following your
separation or (b) any Separation Pay Period, you agree that you will not,
directly or indirectly, on your own behalf or on the behalf of others, in any
geographic area or market where Compaq is conducting, or has, during the
previous twelve months conducted, any business:

(1)Engage in any business competitive with the business conducted by Compaq at
the time of your separation or set forth in any then-existing business plan that
you have approved and with respect to which significant steps toward
implementation have been taken at the time of your separation;

(2)Render advice or services to, or otherwise assist, any other person,
association, or entity who is engaged, directly or indirectly, in any business
competitive with the business conducted by Compaq at the time of your separation
or set forth in any then-existing business plan that you have approved and with
respect to which significant steps toward implementation have been taken at the
time of your separation; or

(3)Solicit, influence, or induce, or attempt to solicit, influence, or induce,
any employee of Compaq to terminate his or her employment with Compaq, or
recruit, hire or assist in the recruitment or hiring of any such employee by any
person, association, or entity not affiliated with Compaq.

        You understand that these restrictions may limit your ability to engage
in certain businesses anywhere in the world during the period provided for
above, but you also acknowledge and agree that you will receive sufficiently
high remuneration and other benefits under this Agreement to justify such
restriction.

        NON-DISPARAGEMENT: During your employment with Compaq and, should your
employment terminate for any reason (whether voluntary or involuntary), for the
greater of (a) a period of 24 months following your separation or (b) any
Separation Pay Period, you agree that you will not make any comment or take any
action which disparages, defames, or places in a negative light Compaq or its
past and present officers, directors, and employees. Compaq agrees that during
this same period, its officers and directors shall refrain from making any
comment or taking any action to disparage, defame, or place you in a negative
public light.

        REMEDIES: You acknowledge that money damages would not be sufficient
remedy for any breach of the foregoing Covenants and that Compaq shall be
entitled to specific performance and injunctive relief to enforce these
Covenants or to remedy a breach or threatened breach of these Covenants. Such
remedies shall not be deemed the exclusive remedies for a breach of these
Covenants, but shall be in addition to all remedies available at law or in
equity to Compaq, including, without limitation, the recovery of damages from
you and any agent acting on your behalf in connection with such breach.

        ARBITRATION: Except for claims by Compaq arising out of your alleged
breach of obligations under the Covenants section of this Agreement, all
disputes arising out of or relating to this Agreement or to your employment or
the termination thereof, will be resolved by final and binding arbitration in
Houston, Texas, under the Federal Arbitration Act in accordance with the
Employment Dispute Resolution Rules then in effect with the American Arbitration
Association. This paragraph shall apply both during and after termination of the
employment relationship. Either party shall have the right to enforce this
agreement to arbitrate in either federal or state court.

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        All proceedings and documents prepared in connection with any
arbitration under this Agreement shall be Confidential Information and, unless
otherwise required by law, the contents or subject matter thereof shall not be
disclosed to any person other than the parties to the proceedings, their
counsel, witnesses and experts, the arbitrator, and, if court enforcement of an
arbitration award is sought, the court and court staff hearing such matter.

        Should a dispute under this Agreement be submitted to arbitration and
you prevail in that arbitration, you will be entitled to recover your reasonable
expenses you incurred in connection with that arbitration, including but not
limited to attorneys' fees and arbitrators' fees, from Compaq. Should Compaq
prevail, each party shall pay its own costs.

        CONTROLLING LAW: Except where otherwise provided for herein, this
Agreement shall be governed in all respects by the laws of the State of Texas,
excluding any conflict-of-law rule or principle that might refer the
construction of the Agreement to the laws of another State or country.

        NOTICES: Any notices under this agreement that are required to be given
to the Company shall be addressed to Corporate Secretary, Compaq Computer
Corporation, 20555 SH 249, Houston, Texas 77070-2698, and any notices required
to be given to you shall be sent to your address as shown in the Company's
records.

        SEPARABILITY AND CONSTRUCTION: If any provision of this Agreement is
determined to be invalid, unenforceable, or unlawful by an arbitrator or a court
of competent jurisdiction, the other provisions of this Agreement shall remain
in full force and effect, and the provisions that are determined to be invalid,
unenforceable, or unlawful will either be limited so that they will remain in
effect to the extent permissible by law or such arbitrator or court will
substitute, to the extent enforceable, provisions similar thereto or other
provision so as to provide, to the fullest extent allowed by law, the benefits
intended by this Agreement.

        WAIVER OF BREACH: No failure by any party to give notice of any breach
of, or to require compliance with, any condition or provision of this Agreement
shall be deemed a waiver or relinquishment or that party's rights, and no waiver
or relinquishment of rights by any party at any one or more times will be deemed
to be a waiver or relinquishment of such right or power at any other time or
times.

        ENTIRE AGREEMENT: Except as provided in written Compaq policies dealing
with issues such as securities trading, business ethics, governmental affairs
and political contributions, delegation of authority, compliance with law,
conflicts of interest, and the like, this Agreement, together with the plan
documents, option grant notice, restricted stock award and loan instruments
described herein, as amended from time to time, shall constitute the entire
understanding relating to the services to be performed for Compaq, and, except
as to any agreements as to indemnification, including the August 3, 1998
Indemnity Agreement, any previous employment or other agreements, whether
written or oral, between you and Compaq shall be deemed to be revoked and
canceled for all purposes as of the date of this Agreement.

        MODIFICATION IN WRITING: No addition to, or modification of, this
Agreement shall be effective, unless it is in writing and signed by both you and
an authorized representative of Compaq.

        ASSUMPTION OF OBLIGATIONS: Compaq agrees that it shall not enter into
any merger, reorganization, sale of substantially all its assets or other
similar agreement or transaction without specifically providing that any
successor entity shall assume the Compaq's obligations under this Agreement. You
agree that Compaq may assign its rights under this Agreement to a successor
entity provided that such assignment shall not offset, reduce, or diminish any
rights that shall accrue to you as a result of any Change in Control that may
thereby occur. Except as set forth in this paragraph, neither Compaq nor you
shall assign their rights under this Agreement without the written consent of
the other party.

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        Michael, I hope that this Agreement, as is intended, provides you with
the level of security and incentive that will allow you to continue to lead
Compaq to the best of your abilities. Please sign below and return an executed
original to indicate your acceptance of these terms. Again, congratulations on
being named Chairman.

        Effective October 1, 2000, amended and restated December 13, 2000.

Sincerely,

/s/  LAWRENCE T. BABBIO, JR.      

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Lawrence T. Babbio, Jr.
Chairman – Human Resources Committee of
the Board of Directors    
cc:
Judith Craven
Kenneth Lay
Yvonne Jackson
 
 
/s/  MICHAEL D. CAPELLAS      

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Michael D. Capellas
 
 
December 13, 2000

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Date

 
 

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EXHIBIT A TO EMPLOYMENT AGREEMENT BETWEEN MICHAEL CAPELLAS
AND COMPAQ COMPUTER CORPORATION

DEFINITION OF CHANGE IN CONTROL

        A "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 Securities and
Exchange Act of 1934, as amended (the "Exchange Act") other than Compaq Computer
Corporation ("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
October 20, 2000), individuals who at the beginning of such period constitute
the Board of Directors of the Company, 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
definition) 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 which 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.

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EXHIBIT B TO EMPLOYMENT AGREEMENT BETWEEN
MICHAEL CAPELLAS AND COMPAQ

RELEASE OF CLAIMS

        I acknowledge that I have had twenty-one days to decide whether to
execute this Release of Claims ("Release") and that I have been advised in
writing to consult an attorney before executing this Release. I acknowledge that
I have seven days from the date I execute this Release to revoke my signature. I
understand that if I choose to revoke this Release I must deliver my written
revocation to Compaq before the end of the seven-day period.

        Excepts as to rights provided me in the Employment Agreement, I, FOR
MYSELF, MY HEIRS, SUCCESSORS, AND ASSIGNS DO HEREBY SETTLE, WAIVE, AND RELEASE
COMPAQ COMPUTER CORPORATION ("COMPAQ") AND ANY OF ITS PAST AND PRESENT OFFICERS,
OWNERS, STOCKHOLDERS, PARTNERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS,
PREDECESSORS, ASSIGNS, REPRESENTATIVES, ATTORNEYS, DIVISIONS, SUBSIDIARIES, OR
AFFILIATES FROM ANY AND ALL CLAIMS, CHARGES, COMPLAINTS, RIGHTS, DEMANDS,
ACTIONS, AND CAUSES OF ACTION OF ANY KIND OR CHARACTER, IN CONTRACT, TORT, OR
OTHERWISE, BASED ON ACTIONS OR OMISSIONS OCCURRING IN THE PAST AND/OR PRESENT,
AND REGARDLESS OF WHETHER KNOWN OR UNKNOWN TO ME AT THIS TIME, INCLUDING THOSE
NOT SPECIFICALLY MENTIONED IN THIS RELEASE. AMONG THE RIGHTS, CLAIMS, AND CAUSES
OF ACTION WHICH I GIVE UP UNDER THIS RELEASE ARE THOSE ARISING IN CONNECTION
WITH MY EMPLOYMENT AND THE TERMINATION OF MY EMPLOYMENT, INCLUDING RIGHTS OR
CLAIMS UNDER FEDERAL, STATE AND LOCAL FAIR EMPLOYMENT PRACTICE OR DISCRIMINATION
LAWS (INCLUDING THE VARIOUS CIVIL RIGHTS ACTS, THE AGE DISCRIMINATION IN
EMPLOYMENT ACT, THE EQUAL PAY ACT, AND THE TEXAS COMMISSION ON HUMAN RIGHTS
ACT), LAWS PERTAINING TO BREACH OF EMPLOYMENT CONTRACT, WRONGFUL TERMINATION OR
OTHER WRONGFUL TREATMENT, AND ANY OTHER LAWS OR RIGHTS RELATING TO MY EMPLOYMENT
WITH COMPAQ AND THE TERMINATION OF THAT EMPLOYMENT. I ACKNOWLEDGE THAT I AM
AWARE OF MY RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT, AND THAT I AM
KNOWINGLY AND VOLUNTARILY WAIVING AND RELEASING ANY CLAIM OF AGE DISCRIMINATION
WHICH I MAY HAVE UNDER THAT STATUTE AS PART OF THIS RELEASE. THIS AGREEMENT DOES
NOT WAIVE OR RELEASE ANY RIGHTS, CLAIMS, OR CAUSES OF ACTION THAT MAY ARISE FROM
ACTS OR OMISSIONS OCCURRING AFTER THE DATE I EXECUTE THIS RELEASE. I AGREE NOT
TO BRING OR JOIN ANY LAWSUIT OR FILE ANY CLAIM AGAINST COMPAQ IN ANY COURT
RELATING TO MY EMPLOYMENT OR THE TERMINATION OF MY EMPLOYMENT.

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  Date:

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Michael D. Capellas
     

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QuickLinks

EXHIBIT 10(pp)

EXHIBIT A TO EMPLOYMENT AGREEMENT BETWEEN MICHAEL CAPELLAS AND COMPAQ COMPUTER
CORPORATION
DEFINITION OF CHANGE IN CONTROL
EXHIBIT B TO EMPLOYMENT AGREEMENT BETWEEN MICHAEL CAPELLAS AND COMPAQ
RELEASE OF CLAIMS