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KEY GRANT                                                           EXHIBIT 10.7
CONFIDENTIAL

                    FORM OF NONQUALIFIED STOCK OPTION NOTICE
                           1989 EQUITY INCENTIVE PLAN

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                        OPTIONEE                                               GRANT DATE               SHARES GRANTED       
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<S>                                                                            <C>                      <C>                  
                                                                                                                             
                                                                                                                             
                                                                                                                             
                                                                                                                             
<CAPTION>
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                        PLAN NAME                                      PLAN NUMBER     VESTING CODE       OPTION PRICE       
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<S>                                                                    <C>             <C>                <C>                
                                                                                                                             
                                                                                                                             
<CAPTION>                                                                                                                    
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SUB. CODE        COST CENTER       SOCIAL SECURITY NUMBER                                                                    
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<S>              <C>               <C>                                                                                       

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We are pleased to inform you that you have been granted an option to purchase
Compaq common stock.  Your grant has been made under the Company's 1989 Equity
Incentive Plan (the "1989 Plan"), which, together with the terms contained in
this Notice, sets forth the terms and conditions of your grant and is
incorporated herein by reference.  A copy of the 1989 Plan is available on
Inline.  Please review it carefully; capitalized terms in this Notice have the
same meaning as the 1989 Plan.

1.       Vesting:  Subject to the conditions set forth below and in the 1989
         Plan, you may exercise this Option to purchase a number of Shares
         equal to the difference between A and B, where

         A =  the product of the number of Shares subject to your Option
              multiplied by a fraction, the numerator of which is the number of
              whole months which have elapsed since the grant date set forth
              above (not to exceed 60) and the denominator of which is 60; and

         B =  the number of Shares you previously acquired by the exercise of
              this Option.

2.       Exercise:  Your Option may be exercised to the extent vested at any
         time during the period beginning on the grant date and ending ten
         years from the date hereof;  provided that you may only exercise this
         Option with respect to whole shares.

3.       [Transferability:  Your Option may be transferred to a member of your
         immediate family or to an estate planning vehicle in accordance with
         the policies adopted by the Human Resources Committee.  No subsequent
         transfers are permitted other than by laws of descent and
         distribution.]

4.       Termination or Suspension of Employment:  The 1989 Plan sets forth the
         terms and conditions of this grant that apply in the event of your
         termination or suspension of employment.

5.       To Exercise:  You may exercise this grant by delivering to the Company
         at its principal office notice of intent to exercise and payment in
         full of the exercise price.  This option is a nonqualified option.
         Please refer to the attached Prospectus for a description of the
         federal income tax treatment of nonqualified options.

6.       Taxes and Withholding:  Upon exercise, appropriate arrangements must
         be made with the Company must be made for satisfaction of any
         applicable federal, state, or local income tax withholding
         requirements or like requirements, including the payment to the
         Company at the time of exercise of all such required amounts.

7.       Relevant Documents on Compaq Inline:  An electronic copy of the 1989
         Plan, a brochure relating to your stock options and other information
         about your options is available on Inline.  Requests for paper copies
         of such documents may be made in writing to Shareholder Services.