Exhibit
10(g)


 


As Amended
and Restated Effective November 21, 2002


As Amended
and Restated Effective September 12, 2002


Amended and
Restated Effective July 18, 2002


Section 8
deleted Effective May 3, 2002


Amended and
Restated Effective September 4, 2001


Section 2
“Fair Market Value” definition amended December 8, 1999


Sections
10(b) and (d) amended April 23, 1998


Approved by
Stockholders and effective April 23, 1998


Adopted January 22, 1998


 


COMPAQ COMPUTER CORPORATION


1998 STOCK OPTION PLAN


SECTION 1.           Purpose.  The Compaq Computer Corporation 1998 Stock
Option Plan has been established to promote the interests of the Company and
its stockholders by (a) attracting and retaining exceptional employees and
directors of the Company, Compaq and Affiliates, as defined below; (b)
motivating such employees by means of performance-related incentives to achieve
long-range performance goals; and (c) enabling such employees and directors 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 (a) any entity that, directly or indirectly, is controlled by the
Company or Compaq and (b) any entity in which the Company or Compaq has a
significant equity interest, in either case as determined by the Committee.


“Award”
shall mean any option or stock appreciation right granted under the Plan.


“Board”
shall mean the Board of Directors of the Company.


“Change in Control” shall be deemed to have
occurred if:  (a) Prior to May 3, 2002
(i) any “person” as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than Compaq, any trustee or other fiduciary holding
securities under any Compaq employee benefit plan, or any entity owned,
directly or indirectly, by Compaq stockholders in substantially the same
proportions as their ownership of Compaq voting securities), is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, or any
successor rule or regulation thereto as in effect from time to time), directly
or indirectly, of Compaq securities representing 30% or more of the combined
voting power of Compaq’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,
and any new director (other than a director designated by a person who has
entered into an agreement with Compaq to effect a transaction described in
clause (i), (iii), or (iv) of this paragraph) whose election by the Board or
nomination for election by Compaq’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; (iii) Compaq stockholders
approve a merger or consolidation of Compaq with any other corporation, other
than a merger or consolidation that would result in Compaq voting securities
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 voting securities of
Compaq or such surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation effected to
implement a recapitalization of Compaq (or similar transaction) in which no
person acquires more than 30% of the combined voting power of Compaq’s then
outstanding securities shall not constitute a Change in Control; or (iv) Compaq



 


1

















 


stockholders
approve a plan of complete liquidation of Compaq or an agreement for the sale
or disposition by Compaq of all or substantially all of Compaq’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.  For purposes of (1) Awards granted on or
after September 1, 2001 and (2) applying the proviso of Section 7(a)(i) to all
Options and Stock Appreciation Rights under the Plan, whenever granted, the
definition of Change in Control set forth above shall be revised by
substituting the phrase “a merger or consolidation of Compaq with any other
corporation is consummated” for the phrase the “Compaq stockholders approve a
merger or consolidation of Compaq with any other corporation” in clause (iii)
of the definition in this Section, and (b) On or after May 3, 2002, the Board
in its sole discretion determines that a change in control has occurred.


“Code”
shall mean the Internal Revenue Code of 1986, as amended from time to time.


“Committee”
shall mean a committee or committees of the Board designated by the Board to
administer the Plan and prior to May 3, 2002, the committee must be composed of
persons who (i) to the extent necessary to comply with Rule 16b-3 are
“Non-Employee Directors” within the meaning of Rule 16b-3 and (ii) to the
extent any Award granted hereunder is intended to qualify as performance-based
compensation under Section 162(m) of the Code, constitute “outside directors”
within the meaning of Section 162(m) of the Code and the regulations
thereunder.


“Compaq”
shall mean Compaq Computer Corporation, together with any successor thereto.


“Company”
shall mean any successor or parent company of Compaq.


“Eligible
Director” shall mean each director of the Compaq who is not an employee of
Compaq or any of Compaq’s subsidiaries (as defined in Section 424(f) of the
Code).


“Employee”
shall mean an employee of the Company, Compaq or of any Affiliate, but shall
exclude any individual who are classified by the Company as (a) leased from or
otherwise employed by a third party; (b) independent contractors; (c)
intermittent or temporary, even if any such classification is changed
retroactively as a result of an audit, litigation or otherwise; or (d) on or
after May 3, 2002, either a member of the Board or a covered officer as defined
in Section 162(m) of the Code at the time of grant.


“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
Compaq 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
Compaq 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.  On or after May 3, 2002 and unless otherwise
determined by the Committee or its designate, the fair market value shall mean
the average of the highest and lowest quoted sales prices for such Shares as of
such date (or if no sales were reported on such date, the average on the last
preceding day a sale was made) as quoted on the stock exchange or a national
market system, with the highest trading volume, as reported in such source as
the Committee shall determine.


“Incentive
Stock Option” shall mean a right to purchase Shares that is intended to meet
the requirements of Section 422 of the Code or any successor provision thereto.


“Non-Qualified Stock Option” shall mean a
right to purchase Shares that is granted under Section 5 of the Plan and that
is not intended to be an Incentive Stock Option.


 


2

















 


“Notice”
shall mean any written notice, contract, or other instrument or document
evidencing any Award, which may, but need not, be executed or acknowledged by a
Participant, and shall be subject to the terms and conditions of the Plan.


“Option”
shall mean, prior to May 3, 2002, a Non-Qualified Stock Option or Incentive
Stock Option and, on or after May 3, 2002, a Non-Qualified Stock Option.


“Participant”
shall mean, prior to May 3, 2002, any Employee or director selected to receive
an Award under the Plan and, on or after May 3, 2002, any Employee selected to
receive an Award under 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 1998 Stock Option Plan, as amended
from time to time.


“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 6 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
Compaq or with which the Company or Compaq combines.


SECTION 3.           Administration.


(a)                                  Authority of
Committee.  The
Committee shall administer the Plan. 
Subject to the terms of the Plan and applicable law, the Committee shall
have full power and authority to: (i) designate Employee 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 to Employees; (iv) determine the terms and conditions of any Award to
Employees; (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 Notice 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; (ix) adopt rules, procedures, and sub-plans to the
Plan relating to the operation and administration of the Plan, as the Committee
deems desirable to accommodate tax and other laws, regulations and practices in
foreign jurisdictions; (x) approve forms of Notice for use under the Plan; (xi)
authorize substitution under the Plan of any or all outstanding Non-Qualified
Stock Options or outstanding stock appreciation rights held by service
providers of an entity acquired by the Company; and (xii) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan and any Award granted hereunder.


 


3

















 


(b)                                 Committee and
Board 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 or
the Board, may be made at any time, and shall be final, conclusive, and binding
upon all Persons, including the Company, Compaq, any Affiliate, any
Participant, any holder or beneficiary of any Award, any stockholder, any
Employee, and any Director.


(c)                                  Delegation of Authority for the Day-to-Day
Administration of the Plan.  Except to the extent prohibited by applicable law or applicable rules of
a stock exchange, the Board or any of its committees as shall be administering
the Plan may delegate to one or more individuals the day-to-day administration
of the Plan and any of the functions assigned to it in this Plan. The
delegation may be revoked at any time.


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 100 million; provided,
however, if Compaq or its wholly owned subsidiary merges with Digital Equipment
Corporation the number of Shares with respect to which Awards may be granted under
the Plan shall be increased by 50 million, to a total of 150 million
shares.  If, after the effective date of
the Plan, any Shares covered by an Award granted under the Plan or to which
such Award relates, are forfeited, or if such an Award is settled for cash or
otherwise terminates or is canceled without the delivery of Shares, then the
Shares covered by such Award, or to which such 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 is exercised through the
delivery of Shares or in the event that withholding tax liabilities arising
from such Award are satisfied by the withholding of Shares, the number of
Shares available for Awards under the Plan shall be increased by the number of
Shares so surrendered or withheld.


(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 outstanding Award, or, if
deemed appropriate, make provision for a cash payment to the holder of an
outstanding Award; provided, however, that such adjustments shall be made by
the Board with respect to Awards to Eligible Directors.


(c)                                  Substitute
Awards.  Any Shares underlying
Substitute Awards shall not 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, prior to May 3, 2002, of
treasury Shares.


 


4

















 


SECTION 5.           Employee Stock Options.


(a)                                  Eligibility and
Limits on Awards.  Any
Employee shall be eligible to be designated a Participant.  Prior to May 3, 2002 any officer or
employee-director of Compaq or any Affiliate shall be eligible to be designated
as a Participant.  Prior to May 3, 2002
and subject to adjustment as provided in Section 4(b), no Executive Officer may
receive Awards under the Plan in any calendar year that relate to more than
1,500,000 Shares.  Prior to May 3, 2002,
the limits on Awards to any Executive Officer under this Plan shall be reduced
by any other Award in the same calendar year to such officer under any other
Compaq equity incentive plan.


(b)                                 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, and the conditions and limitations applicable to the exercise of the
Option. On or after May 3, 2002, no Incentive Stock Options shall be granted or
substituted under this Plan.


(c)                                  Exercise Price.  The exercise price for Options (other than
Substitute Awards) granted under the Plan shall be not less than the Fair
Market Value of the underlying Shares at the time of grant.  Neither the Board nor the Committee may
lower the exercise price of outstanding options issued under the Plan.  The Committee shall determine the appropriate
exercise prices for Substitute Awards based on the terms and conditions of the
transaction related to such Awards.


(d)                                 Exercise.  Each Employee 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 Notice or thereafter.  The Committee and the Board may impose such
conditions with respect to the exercise of options, including without
limitation, any relating to the application of any securities laws, as it may
deem necessary or advisable.


(e)                                  Payment.  No Shares shall be delivered pursuant to any
exercise of an Option until payment in full of the option cost therefor is
received by the Company.  Such payment
may be made (i) in cash, or its equivalent, (ii) 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), (iii) if and to the extent
permitted by the Company, by surrendering all or part of that Option or any
other Option, (iv) consideration received by the Company under a cashless
exercise program implemented by the Company, or (v) 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 cost.


SECTION 6.           Stock Appreciation Rights.


(a)                                  Grant.


(i)                                     Prior to May 3,
2002, the grant of Stock Appreciation Rights shall be limited to Employees in
those locations in which the law, including exchange control regulations and
taxation, unduly restricts the grant of Options.  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, and the conditions and limitations
applicable to the exercise thereof. 
Stock Appreciation Rights shall have a grant price equal to the Fair
Market Value of the related Shares on the day of the Award, and if granted to
Executive Officers, shall not be exercisable earlier than six months after
grant.


(ii)                                  On or after May
3, 2002, no Stock Appreciation Rights shall be granted under this Plan.


 


5

















 


(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.  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, 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 7.           Termination or Suspension of
Employment.  The following
provisions shall apply in the event of the Participant’s termination of
employment unless the Company shall have provided otherwise, either at the time
of the grant of the Award or thereafter.


(a)                                  Termination of
Employment.


(i)                                     For Awards
granted prior to May 3, 2002 and if a Participant’s employment with the
Company, Compaq or an Affiliate 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; provided, however, that if, within one
year following a Change in Control, the Participant’s employment is terminated
in a Qualifying Termination (as defined in subparagraph (f) below), the
Participant shall have the right to exercise any outstanding Option or Stock
Appreciation Right until the earlier of (a) the third anniversary of such
termination of employment (in the case of Options or Stock Appreciation Rights
granted prior to September 1, 2001) or the first anniversary of the effective
date of such Qualifying Termination (in the case of Options or Stock
Appreciation Rights granted on or after September 1, 2001 and prior to the
Change in Control) or (b) the date such Option or Stock Appreciation Right
would have expired had it not been for such 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)                                  For Options
granted on or after May 3, 2002 and if a Participant ceases to be an Employee
of the Company, Compaq or an Affiliate for any reason other than death,
permanent and total disability, or retirement, the Participant’s right to
exercise any vested or unvested Option shall terminate, and such Option shall
expire.


(b)                                 Death,
Disability or Retirement.


(i)                                     For Awards granted
prior to May 3, 2002 and if a Participant’s employment with the Company, Compaq
or an Affiliate 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 or Stock
Appreciation Right 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.


 


6

















 


(ii)                                  For Options
granted on or after May 3, 2002 and if a Participant’s employment with the
Company, Compaq or an Affiliate is terminated by total and permanent
disability, or retirement, all unvested Options shall immediately vest and the
Participant shall have the right to exercise any Option within three years of
the date of such disability or retirement, 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)                               For Options
granted on or after May 3, 2002 and if a Participant’s employment with the
Company, Compaq or an Affiliate is terminated by death, all unvested Options
shall immediately vest and, subject to applicable laws and subparagraph (g)
below, the Participant’s designated beneficiaries or successors shall have the
right to exercise the Option within one year of the date of the death of
Participant whether the Participant was an Employee, retired or disabled, but
in no event shall such option be exercisable later than the date the Option
would have expired had it not been for Participant’s death.


(c)                                  Acceleration
and Extension of Exercisability.  Notwithstanding the foregoing, the Committee may, in its
discretion, provide (i) that an Option granted to an Employee Participant may
terminate at a date earlier than that set forth above, (ii) that an Option granted
to an Employee Participant 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 (iii) 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.


(d)                                 Leave Without
Pay.  No Award may be exercised
during any leave of absence other than an approved personal or medical leave
with an employment guarantee upon return. An Award shall continue to vest
during any authorized leave of absence and such Award may be exercised to the
extent vested upon the Participant’s return to active employment status, in accordance
with the terms thereof, to the extent permitted by local law.


(e)                                  Definition of
Qualifying Termination.   
For purposes of subparagraph (a)(i) above, the term “Qualifying
Termination” shall have the meaning ascribed to such term in the Participant’s
individual employment or severance agreement with Compaq or its Affiliate.  If the Participant is not a party to an
individual employment or severance agreement with Compaq or its Affiliate, the
term “Qualifying Termination” shall have the meaning ascribed to the term
“Qualified Termination” in the Compaq Computer Corporation employee severance
plan, as may be amended from time to time, in which such Participant is
eligible to participate.


(f)                                    Beneficiary
Designation.


(i)                                     A Participant
may file a written designation of a beneficiary who is to receive the
Participant’s rights pursuant to Participant’s Award or the Participant may
include his or her Awards in an omnibus beneficiary designation for all
benefits under the Plan. To the extent that the Participant has completed a
designation of beneficiary while employed with the Company, Compaq or an
Affiliate such beneficiary designation shall remain in effect with respect to
any Award hereunder until changed by the Participant.


(ii)                                  Such
designation of beneficiary may be changed by the Participant at any time by
written notice. In the event of the death of an Participant and in the absence
of a beneficiary validly designated under the Plan who is living at the time of
such Participant’s death, the Company shall allow the executor or administrator
of the estate of the Participant to exercise the Award, or if no such executor
or administrator has been appointed (to the knowledge of the Company), the
Company, in its discretion, may allow the spouse or one or more dependents or
relatives of the Participant to exercise the Award.


 


7

















 


SECTION
8.           Change in Control.  


(a)                                  For Awards granted prior to
May 3, 2002 and notwithstanding any other provision of the Plan to the contrary,
(a) all Awards granted prior to September 1, 2001 shall vest and become
immediately exercisable or payable or have all restrictions lifted as may apply
to the type of Award, and no outstanding Stock Appreciation Rights may be
terminated, amended, or suspended upon or after a Change in Control and (b) all
Awards granted on or after September 1, 2001 shall vest and become immediately
exercisable or payable, or have all restrictions lifted as may apply to the
type of Award, upon a Qualifying Termination (as defined in Section 7(f))
within one year following a Change in Control.


(b)                                 For Options
granted on or after May 3, 2002 and in the event there is a Change of Control
of the Company, as determined by the Board, the Board may in its discretion
provide for (i) the assumption or substitution of, or adjustments to, each
outstanding Award; (ii) the acceleration of the vesting of Awards and
termination of any restriction on Awards; and (iii) the cancellation of Awards
for a cash payment to the Participants.


(c)                                  For Options
granted on or after May 3, 2002 and in the event of the proposed dissolution or
liquidation of the Company, the Committee shall notify each Participant as soon
as practicable prior to the effective date of such proposed transaction. The
Committee in its discretion may provide for an Award to be fully vested and
exercisable until ten (10) days prior to such transaction. In addition, the
Committee may provide that any restrictions on any Award shall lapse prior to
the transaction, provided the proposed dissolution or liquidation takes place
at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Award will terminate immediately prior to the
consummation of such proposed transaction.


SECTION 9.           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. The
Committee also 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, suspend, or terminate, any
Award, prospectively or retroactively; provided that (i) any waiver, amendment,
suspension, or termination that would adversely affect the rights of any
Participant or any holder or beneficiary of any outstanding Award shall not to
that extent be effective without the consent of the affected Participant,
holder, or beneficiary, and (ii) in accordance with Section 6(b) of this Plan
no amendment shall lower the exercise price of outstanding options issued under
the Plan.


(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,
Compaq, any Affiliate, or the financial statements of the Company, Compaq 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.


 


8

















 


(d)                                 Cancellation.  Any provision of this Plan or any Notice to
the contrary notwithstanding, the Committee may cause any Award granted
hereunder to be canceled in consideration of an alternative Award or cash
payment made to the holder of such canceled Award equal in value to the Fair
Market Value of such canceled Award as of the effective date of such
cancellation.


(e)                                  Employee Status
Change to Part-Time.  Prior to
May 3, 2002 and at such time as a full-time Employee becomes a part-time
Employee, on the next vesting date following such status change, the vesting
schedule for all Awards previously granted to such employee and not yet vested
will be automatically amended to reduce the number of shares vesting each month
by one-half during the time that such employee is working on a part-time basis;
provided, however, that any Shares that remain unvested three months prior to
the expiration of the term of such Award shall vest as of such date three
months prior to the expiration of such term.


(f)                                    Buyout
Provisions.  At any
time, the Committee may, but shall not be required to, authorize the Company to
offer to buy out for a payment in cash or Shares an Award previously granted
based on such terms and conditions as the Committee shall establish and
communicate to the Participant in connection with such offer.


SECTION 10.         General Provisions.


(a)                                  Nontransferability.  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; provided,
however, that an Award granted prior to May 3, 2002 may be transferable, to the
extent set forth in the applicable Notice and in accordance with procedures
adopted by the Committee.


(b)                                 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.


(c)                                  Share
Certificates.  All
certificates for Shares or other securities of the Company, Compaq 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 SEC, 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.


(d)                                 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, Compaq 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 other than Executive Officers.


(e)                                  Withholding.  A Participant may be required to pay to the
Company, Compaq or any Affiliate and the Company, Compaq 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 Committee to satisfy all obligations for the
payment of such taxes.  A Participant
may satisfy withholding tax obligations by electing to have the Company
withhold from the Shares to be issued upon exercise of an Award that number of
Shares having a Fair Market Value equal to the amount required to be
withheld.  The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be 


 


9

















 


withheld
is to be determined. All elections by a Participant to have Shares withheld for
this purpose shall be made in such form and under such conditions as the
Committee may deem necessary or advisable. 
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.


(f)                                    Notices.  Each Award hereunder shall be evidenced by a
Notice that shall be delivered to the Participant and shall specify the terms
and conditions of the Award and any rules applicable thereto.


(g)                                 No Limit on
Other Compensation Arrangements.  Nothing contained in the Plan shall prevent the Company, Compaq
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.


(h)                                 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, Compaq or any Affiliate.  Further, the Company, Compaq 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 Notice.


(i)                                     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.


(j)                                     Governing Law.  The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan and any Notice
shall be determined in accordance with the laws of the State of Delaware.


(k)                                  Severability.  Notwithstanding any other provision or
section of the Plan, 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 (but only to such extent necessary to
comply with such 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.


(l)                                     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 or Compaq to recover the same under Section 16(b) of the
Exchange Act, and any payment tendered to the Company or Compaq 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 or Compaq, 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.


(m)                               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, Compaq or any Affiliate
and a Participant or any other Person. 
To the extent that any Person acquires a right 


 


10

















 


to
receive payments from the Company, Compaq or any Affiliate pursuant to an
Award, such right shall be no greater than the right of any unsecured general
creditor of the Company, Compaq or any Affiliate.


(n)                                 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.


(o)                                 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 11.         Term of the Plan.


(a)                                  Effective Date.  The Plan shall be effective on April 23,
1998.


(b)                                 Expiration Date.  Unless otherwise expressly provided in the
Plan or in an applicable Notice, 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.


 


11