Document:

Exhibit 10(l)

 

Amended and restated November 21, 2002

Amended and restated September 12, 2002

Amended September 4, 2001

Amended November 23, 1994

Adjusted for Stock Splits in 1990, 1994 and 1997(2)

 

 

COMPAQ COMPUTER CORPORATION

 

1985 EXECUTIVE AND KEY EMPLOYEE STOCK OPTION PLAN

 

 

ARTICLE
I

Definitions

 

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

 

1.02                           “Code” shall mean the Internal
Revenue Code of 1986 as amended.

 

1.03                           “Committee” shall mean the body
comprised of the member or members of the Board appointed by the Board to
administer the Plan.

 

1.04                           “Common Stock” means the
Company’s $.01 par value common stock.

 

1.05                           “Company” shall mean Compaq
Computer Corporation or any successor thereto.

 

1.06                           “Fair Market Value” shall mean
the value of a share of Common Stock as determined by the Board. The Board
shall determine Fair Market Value as follows:

 

(i)                                     If the Common Stock shall not
then be listed and traded upon a recognized securities exchange or in the
NASDAQ National Market System, upon the basis of the mean between the bid and
asked quotations for such stock on the Date of Grant (as reported by a
recognized stock quotation service) or, in the event that there shall be no bid
or asked quotations on the Date of Grant, then upon the basis of the mean
between the bid an asked quotations on the date nearest preceding the Date of
Grant; or,

 

(ii)                                  If the Common Stock shall then
be listed and traded upon a recognized securities exchange or in the NASDAQ
National Market System, upon the basis of the reported closing price at which
shares of the Common Stock were traded on such recognized securities exchange
or system on the Date of Grant or, if the Common Stock was not traded on said
date, upon the basis of the reported closing price on the date nearest
preceding the Date of Grant.

 

1.07                           “Date of Grant” means the later
of (i) the date on which the Board approves the grant of an Option or (ii) the
date on which the Optionee is employed by the Company or a Subsidiary.

 

 

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1.08                           “Incentive Option” means an
option to purchase Common Stock granted pursuant to the provisions of the Plan,
including the provisions of Paragraphs 8.02, 8.03, 8.04, and 8.05 of the Plan.

 

1.09                           “Optionee” shall mean an
officer and key manager of the Company to whom an Option has been granted under
the Plan.

 

1.10                           “Plan” shall mean the Compaq
Computer Corporation1985 Executive and Key Employee Stock Option Plan, the
terms of which are set forth herein.

 

1.11                           “Incentive Stock Option Agreement”
shall mean any written notice, agreement or other instrument or document
evidencing an Incentive Option and under which the Optionee may purchase Common
Stock pursuant to the terms of the Plan.

 

1.12                           “Subsidiary” or “Subsidiaries”
shall mean any corporation which is a subsidiary corporation of the Company
pursuant to Section 425(f ) of the Code.

 

1.13                           “Successor” shall mean the
legal representative of the estate of a deceased Optionee or the person or
persons who acquire the right to exercise an Option by bequest or inheritance
or by the reason of the death of any Optionee.

 

1.14                           “Nonqualified Option” shall
mean an Option to purchase Common Stock granted pursuant to the provisions of
the Plan, but which is not subject to the provisions of Paragraphs 8.02 and
8.05 of the Plan.

 

1.15                           “Nonqualified Stock Option
Agreement” shall mean any written notice, agreement or other instrument or
document evidencing a Nonqualified Option and under which the Optionee may
purchase Common Stock pursuant to the terms of the Plan.

 

1.16                           “Option” shall refer to either
or both Incentive Options and Nonqualified Options granted pursuant to the
terms of the Plan.

 

 

ARTICLE
II

Purpose

 

The
purpose of the Plan is to advance the interests of the Company and its
stockholders by offering to officers and key managers of the Company and its
Subsidiaries the opportunity to acquire, or increase a proprietary interest in
the Company by the grant to such persons of Incentive Options entitled to the
income tax benefits described in Section 422A of the Code under the terms set
forth in the Plan and by the grant to employees of Nonqualified Options. By so
doing, the Company seeks to motivate, obtain, and attract those highly
competent individuals upon whose judgment, initiative, leadership, and
continuing efforts the success of the Company depends.

 

 

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ARTICLE
III

Effective
Date of the Plan

 

The
Plan shall become effective on the date of its adoption by a resolution of the
Board. Within one year of such adoption, this Plan shall be submitted to the
stockholders of the Company entitled to vote thereon; should a majority of the
stockholders of the Company entitled to vote thereon fail to approve the Plan
within such year, this Plan shall automatically terminate.

 

 

ARTICLE
IV

Eligibility

 

Options
may be granted only to officers and key manager (including officers and
employees who are also directors) of the Company or any of its Subsidiaries.

 

 

ARTICLE
V

Administration
of the Plan

 

The
Plan shall be administered by the Board. The Board may, in its discretion,
appoint a Committee to administer the Plan. The Committee shall consist of
three or more disinterested directors, none of whom shall be eligible (or shall
have been eligible for one year prior to appointment to the Committee) to be
granted Options under the Plan. The Committee shall serve at the pleasure of
the Board and shall exercise all powers of the Board granted herein, other than
the power to amend the Plan.

 

The
Board shall have the sole discretion and authority, subject to the provisions
of the Plan, to determine the officers and key managers to whom and the time or
times at which Options shall be granted, and the number of shares of the Common
Stock which shall be subject to each Option.

 

Subject
to the express provisions of the Plan, the Board shall also have full and final
authority to interpret the Plan, and to make all other determinations and to
take all other actions it deems necessary or advisable for the proper
administration of the Plan. All such actions and determinations shall be
conclusively binding for all purposes and upon all persons.

 

The
majority of the members of the Board shall constitute a quorum and any action
taken by a majority present at a meeting a which a quorum is present or any
action taken without a meeting evidenced by writing executed by a majority of
the Board shall constitute the action of the Board.

 

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.

 

 

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ARTICLE VI

Common Stock Subject to Options

 

Subject
to the adjustments specified below, the aggregate number of shares of Common
Stock that may be issued upon the exercise of all Options that may be granted
under the Plan shall not exceed 30,000,000 shares of the Common Stock. Any
shares subject to an Option which for any reason is surrendered, expires or is
terminated unexercised as to such shares may again be subject to an Option
under the Plan.

 

 

ARTICLE
VII

Adjustments
and Change in Control

 

7.01                           Adjustment. The total number of shares of
Common Stock available for Options under the Plan or which may be allocated to
any one employee, the number of shares of Common Stock subject to outstanding
Options and the exercise price for such Options shall be appropriately adjusted
by the Board for any increase or decrease in the number of outstanding shares
of Common Stock resulting from a stock dividend, subdivision or combination of
shares or reclassification, as may be necessary to maintain the proportionate
interest of the Option holder. In the event of a merger or consolidation of the
Company or a tender offer for shares of Common Stock, the Board may make such
adjustments with respect to Options under the Plan and take such other action
as it deems necessary or appropriate to reflect or in anticipation of such
merger, consolidation or tender offer including, without limitation, the
substitution of new Options, the termination or adjustment of outstanding
Options, and the acceleration of Options.

 

7.02                           Immediate Vesting. Notwithstanding any other
provision of the Plan to the contrary, upon a Change in Control, as defined
below, all outstanding Options shall vest and become immediately exercisable or
payable, or have all restrictions lifted as may apply to the type of Award;
provided, however, that unless otherwise determined by the Committee at the
time of award or thereafter, if it is determined that the Net After-Tax Amount
to be realized by any Optionee, taking into account the accelerated vesting
provided for by this paragraph 7.02 as well as all other payments to be
received by such Optionee in connection with such Change in Control, would be
higher if Options did not vest in accordance with the foregoing paragraph 7.02,
then and to such extent the Options shall not vest. The determination of
whether any such Option should not vest shall be made by a nationally
recognized accounting firm selected by the Company, which shall be instructed
to consider that (i) stock options shall be vested in the order in which they
were granted and within each grant in the order in which they would otherwise
have vested and (ii) unless and to the extent any other plan, arrangement or
contract of the Company pursuant to which any such payment is to be received
provides to the contrary, such other payment shall be deemed to have occurred
after any acceleration of Options.

7.03                           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 Exchange Act of 1934, (the “Exchange
Act”) (other than the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, or any company
owned, directly or indirectly, by the stockholders 

 

 

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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 January 18, 1989), individuals who at the
beginning of such period constitute the Board of Directors, and any new
director (other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause (i),
(iii), or (iv) of this paragraph whose election by the Board of Directors or
nomination for election by the Company’s stockholders was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors at the beginning of the two year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors; (iii) the stockholders
of the Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation 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.

 

7.04                           Net After-Tax Amount. “Net After-Tax Amount” shall
mean the net amount of compensation, assuming for this purpose only that all
vested Options are exercised upon such Change in Control, to be received (or
deemed to have been received) by such Optionee in connection with such Change
of Control under any option agreement and under any other plan, arrangement or
contract of the company to which such Optionee is a party, after giving effect
to all income and excise taxes applicable to such payments.

 

 

ARTICLE
VIII

Terms
and Conditions of Options

 

8.01                           Option Grant and Agreement. Each Incentive Option and
each Nonqualified Option granted prior to November 23, 1994, shall be evidenced
by a written Incentive Stock Option Agreement or a written Nonqualified Stock
Option Agreement, as applicable, dated as of the Date of Grant and executed by
the Company and the Optionee, which Agreement shall set forth the applicable
terms and conditions provided in this Article VIII and such other provisions which
the Board, in its discretion, may deem appropriate. Each Incentive Option and
each Nonqualified Option granted on or after November 23, 1994, shall be
evidenced by a Stock Option Agreement in the form of a written notice to the
Participant 

 

 

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receiving
an Option, which shall set forth the applicable terms and conditions provided
in this Article VIII and such other provisions which the Board, in its
discretion may deem appropriate.

 

8.02                           Participation Limitation. In accordance with rules and
procedures established by the Committee, the aggregate Fair Market Value
(determined as of the time of grant) of the stock subject to Incentive Stock
Options as defined by Section 422A of the Code (“Section 422A”) held by any
Optionee that become exercisable for the first time by such Optionee during any
calendar year under the Plan (and under any other benefit plans of the Company
or of any parent or subsidiary corporation of the Company) shall not exceed
$100,000 or, if different the maximum limitation in effect at the time of grant
under Section 422A, or any successor provision, and any regulations promulgated
thereunder. The terms of any Incentive Option granted hereunder shall comply in
all respects with the provisions of Section 422A, or any successor provision,
and any regulations promulgated thereunder.

 

8.03                           Option Price. The per share Option price of
the Common Stock subject to each Option shall be determined by the Board but
the per share price shall not be less than the Fair Market Value of the Common
Stock on the Date of Grant.

 

8.04                           Option. Each Option granted must be
granted within ten years from the date of the Plan’s adoption by the Board. The
period of exercise of each Option shall be set forth in the applicable Option
Agreement; provided that such period not exceed ten years from the Date of
Grant.

 

8.05                           Ten Percent Shareholder
Limitations. In any case in which an Incentive Option
is granted to an employee who, at the time the Incentive Option is granted,
owns more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company, its parent or subsidiary, the per share
Incentive Option price of the Common Stock subject to each Incentive Option
shall be determined by the Board but the per share price shall not be less than
one hundred and ten percent of the Fair Market Value of the Common Stock on the
Date of Grant; furthermore, the period for exercise, of each such Incentive
Option shall not exceed five (5) years from the Date of Grant. For the purposes
of the immediately preceding sentence, an employee shall be considered owning
the shares of Common Stock owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood), spouse, ancestors
and lineal descendants. In addition, the stock owned directly or indirectly, by
or for a corporation, partnership, estate or trust shall be considered as owned
proportionately by or for its shareholders, partners or beneficiaries.

 

8.06                           Exercise of Options. Incentive Options and
Nonqualified Options shall become exercisable in whole or in part and at such
time or times as shall be set forth in the Incentive Stock Option Agreement or
Nonqualified Stock Option Agreement, as applicable. Options shall be exercised
by notice of intent to exercise the Option with respect to a specified number
of whole shares delivered to the Company at its principal office, and payment
in 

 

 

6

 

full to
the Company in the amount of the Option price for the number of shares of the
Common Stock with respect to which the Option is then being exercised. The
payment of the Option price shall be made in cash or, with the consent of the
Board, in whole or in part in Common Stock valued at Fair Market Value which is
owned by the Optionee.

 

8.07                           Non-Transferability of Options,
Transfer upon Death of Optionee. No Option shall be transferable or
assignable by the Optionee, other than by will or the laws of descent and
distribution. Each Option shall be exercisable during the Optionee’s lifetime,
only by the Optionee.

 

8.08                           Effect of Death or Other
Termination of Employment.

 

(a)                                  If the Optionee’s employment
with the Company is terminated for any reason other than death, disability, or
retirement, the Optionee’s right to exercise any Stock Option shall terminate,
and such Option shall expire, on the earlier of (A) the first anniversary of
such termination of employment or (B) the date such Option would have expired
had it not been for the termination of employment; provided, however, that if, within one year following an
occurrence of a Change in Control, the Optionee’s employment is terminated in a
Qualifying Termination (as defined in paragraph (d) below), the Optionee shall
have the right to exercise such Option until the earlier of (1) the third
anniversary of such termination of employment or (2) the date such Option would
have expired had it not been for such termination of employment.   For purposes of applying the immediately
preceding proviso with respect to treatment of Options in the event of a
Qualifying Termination, the definition of a Change in Control set forth in
Section 7.03 of Article VII shall be revised by substituting the phrase “a
merger or consolidation of the Company with any other corporation is
consummated” for the phrase “the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation” in clause (iii) of
said Section 7.03. The Optionee shall have the right to
exercise such Option prior to such expiration to the extent it was exercisable
at the date of such termination of employment and shall not have been
exercised.

 

(b)                                 If the Optionee’s employment
with the Company is terminated by reason of death, disability, or retirement,
the Optionee’s right to exercise any Stock Option shall terminate, and such
Option shall expire, on the earlier of (A) the third anniversary of such
termination of employment or (B) the date such Option would have expired had it
not been for the termination of employment. The Optionee (or his successor if
his employment is terminated by death) shall have the right to exercise such
Option prior to such expiration to the extent it was exercisable at the date of
such termination of employment and shall not have been exercised.

 

 

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(c)                                  Notwithstanding the foregoing,
the Board may in its discretion provide in an Option Agreement that such Option
shall terminate at a date earlier or later than the date set forth above, provided
such date shall not be beyond the earlier of (i) three years from the last day
of Optionee’s employment or (ii) the date such Option would have expired had it
not been for the termination of the Optionee’s employment.

 

(d)                                 The term “disability” as used
in this paragraph means total and permanent disability. The terms “disability”
and “retirement” shall be determined in accordance with applicable Company
personnel policies as interpreted in the exercise of the Board’s discretion.  For purposes of subparagraph (a) above, the term “Qualifying Termination”
shall have the meaning ascribed to such term in the Optionee’s individual
employment or severance agreement with the Company or its Subsidiaries.  If the Optionee is not a party to an
individual employment or severance agreement with the Company or its
Subsidiaries, the term “Qualifying Termination” shall have the meaning ascribed
to the term “Qualified Termination” in the Compaq Computer Corporation employee
severance plan in which such Optionee is eligible to participate.

 

(e)                                  No transfer of an Option by an
Optionee by will or by the laws of descent and distribution shall be effective
to bind the Company unless the Company shall have been furnished with written
notice of the same and an authenticated copy of the will and/or such other
evidence as the Board may deem necessary to establish the validity of the
transfer and the acceptance of the transferee or transferees of the terms and
conditions of such Option.

 

(f)                                    In the event an Optionee holds
an Incentive Stock Option, such Option to the extent not exercised during the
90 days after termination of employment, automatically will be deemed a
Nonqualified Stock Option and such Option will be exercisable during the
remainder of the time set forth above; provided that in the event that
employment is terminated because of death or the Optionee dies in such 90-day
period, the Option will continue to be an Incentive Stock Option to the extent
provided by Section 421 or Section 422A of the Code, or any successor
provision, and any regulations promulgated thereunder.

 

8.09                           Leave Without Pay. Any time spent by a
Participant in the status of “leave without pay” shall be disregarded for
purposes of determining the extent to which an Option or any portion thereof
has vested. The meaning of the term “leave without pay” shall be determined by
the Committee and shall include but not be limited to periods during which the
Participant is receiving payments under the Company’s Long-Term Disability
Plan.

 

 

8

 

8.10                           Rights of Stockholder. Optionee or his successor
shall have no rights as a stockholder with respect to any share subject to an
Option until the certificates evidencing the share purchased are properly
delivered to such Optionee or his Successor.

 

8.11                           Buyout Provision.  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 Option previously granted based on such terms and conditions as the
Committee shall establish and communicate to the Optionee in connection with
such offer.

 

 

ARTICLE
IX

Restrictions
on Issuing Shares

 

The
exercise of each Option shall be subject to the condition that if at any time
the Board shall determine in its discretion that the listing, registration or
qualification of any shares otherwise deliverable upon such exercise upon any
securities exchange or under any state or federal law, or that the consent or
approval of any regulatory body is necessary or desirable as a condition of or
in connection with such exercise of delivery or purchase of shares pursuant to
the Plan, then in any such event, such exercise shall not be effective unless
such withholding, listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board.

 

In
addition, the exercise of each Option shall be subject to the condition that,
if required by the Board, Optionee shall give satisfactory assurance in
writing, signed by Optionee, his successor or legal representative, as the case
may be, that such shares are being purchased for investment and not with a view
to the distribution thereof; provided that such assurance shall be deemed
inapplicable to (i) any sale of such shares by such Optionee made in accordance
with the terms of a registration statement covering such sale, which has
heretofore been (or may hereafter be) filed and become effective under the
Securities Ac of 1933, as amended, and with respect to which no stop order
suspending the effectiveness thereof has been issued, and (ii) any other sale
of such shares with respect to which, in the opinion of counsel for the
Company, such assurance is not required to be given in order to comply with the
provisions of the Securities Act of 1933 as amended.

 

 

ARTICLE
X

Amendment,
Suspension and Termination of the Plan

 

The
Board shall have the right to amend, suspend or terminate the Plan at any time;
provided, however, that no such action shall affect any Option granted without
the consent of the Optionee or his Successor of the Option. In addition, unless
duly approved by a majority of the holders of Common Stock entitled to vote
thereon at a meeting (which may be the annual meeting), or the equivalent of
said meeting, duly called and held for such purpose, no amendment or change
shall be made in the Plan (a) increasing the total number of shares which may
be issued under the Plan (except for adjustments for recapitalization, stock
dividends and other changes in the corporate structure and except as
contemplated in Article VII), (b) changing the minimum purchase price
hereinbefore specified for the Common Stock subject to the Options, (c)
changing the maximum period during which the Options may be exercised, (d)
increasing the maximum number of shares for which Incentive Options may be
granted to any one employee, or (e) 

 

 

9

 

extending the period during
which Options may be granted under the Plan. It is contemplated that the Incentive
Options issued pursuant to the Plan qualify as “Incentive Stock Options” within
the meaning of Section 422A of the Code. Accordingly, the Board shall
administer the Plan and make such amendments as to accomplish this purpose.

 

 

ARTICLE
XI

Miscellaneous

 

11.01                     Employment. Nothing in the Plan, any
Option granted pursuant to the Plan, or in any Incentive Stock Option Agreement
or Nonqualified Stock Option Agreement shall confer upon any employee the right
to continue in the employ of the Company or any Subsidiary.

 

11.02                     Other Compensation Plans. The adoption of the Plan
shall not affect any other stock option, incentive or other compensation plans
in effect for the Company or any Subsidiary or preclude the Company from
establishing any other forms of incentive or other compensation for employees
of the Company or any Subsidiary.

 

11.03                     Plan Binding on Successors. The Plan shall be binding on
the successors and assigns of the Company.

11.04                     Use of Proceeds. The proceeds from the sale of
Common Stock, pursuant to Options granted under the Plan, shall constitute
general funds of the Company.

 

 

10Exhibit 10(m)

 

Amended and restated November 21, 2002

Amended and restated September 12, 2002

Amended September 4, 2001

Amended November 23, 1994

Adjusted for Stock Splits in 1990, 1994 and 1997(2)

 

 

 

 

COMPAQ COMPUTER CORPORATION

 

1985 NONQUALIFIED STOCK OPTION PLAN

 

 

1.             Purpose
of the Plan. The purpose of the COMPAQ COMPUTER CORPORATION 1985
Nonqualified Stock Option Plan (“Plan”) is to provide compensation in the form
of ownership of the common stock, $.01 par value (“Common Stock”), of Compaq
Computer Corporation, a Delaware corporation, or any successor thereto
(“Company”), to certain selected employees of the Company and its subsidiaries.

2.             Administration
of the Plan. The Board of Directors of the Company (“Board”) shall have
full power and authority, subject to the provisions of the Plan, to designate
participants and to interpret the provisions and supervise the administration
of the Plan. All such decisions, selections and other actions shall be
conclusively binding for all purposes and upon all persons. All decisions and
selections made by the Board pursuant to the provisions of the Plan shall be
made by a majority of its members. Any decision reduced to writing and signed
by a majority of the members shall be fully effective as if it had been made by
a majority at a meeting duly held. The Board may, in its discretion, appoint a
Compensation Committee (“Committee”) to administer the Plan. If appointed, the
Committee shall consist of at least three directors, none of whom is eligible
to participate in the Plan or has been eligible to participate in the Plan for
at least one year prior to his appointment. The Committee shall serve at the
pleasure of the Board, and shall exercise all powers of the Board granted
herein, other than the power to amend the Plan.

3.             Stock
Reserved for the Plan. The shares subject to the Plan shall consist of
45,000,000 unissued shares of Common Stock or previously issued shares
reacquired and held by the Company, and such amount of shares shall be and is
hereby reserved for issuance pursuant to this Plan. Any of such shares which
may remain unsold and which are not subject to outstanding options at the
termination of the Plan shall cease to be reserved for the purpose of the Plan,
but until termination of the Plan the Company shall at all times reserve a
sufficient number of shares to meet the requirements of the Plan. Should any
option expire or be canceled prior to its exercise in full, the shares
theretofore subject to such option may again be made subject to an option under
the Plan.

4.             (a)           Grant
of Options. The Board shall, from time to time, determine and designate
those persons who are to receive options under the Plan, the number of shares
to be covered by such options and the terms thereof. For options granted prior
to November 23, 1994, the Board shall thereupon grant options in accordance
with such determinations as evidenced by a written option agreement.

 

 

1

 

Each Nonqualified Option
granted on or after November 23, 1994, shall be evidenced by a Nonqualified
Stock Option Agreement in the form of a written notice to the Participant
receiving an option, which notice shall set forth the applicable terms and
conditions provided in this Plan and such other provisions which the Board, in
its discretion may deem appropriate. The capitalized term “Nonqualified Stock
Option Agreement” as used herein shall mean any written notice, agreement, or
other instrument or document evidencing a Nonqualified Option and under which
the Optionee may purchase Common Stock pursuant to the terms of the Plan.

 

(b)           Eligibility.  Options may be granted only to officers and
employees  (including  officers and employees who are also
directors) of the Company or any of its Subsidiaries.

 

5.             Terms and Conditions. Each
option granted under the Plan shall be evidenced by an agreement, in a form
approved by the Board, pursuant to Section 4(a), which shall be subject to the
following express terms and conditions and to such other terms and conditions
as the Board may deem appropriate.

 

(a)           Option Period. Each option
agreement shall specify the period  for
which the option thereunder is granted (which in no event shall exceed  ten years and one day from the date of
grant) and shall provide that the 
option shall expire at the end of such period.

 

(b)           Option Price. The purchase
price of each share of Common Stock subject to each option granted pursuant to
the Plan shall be determined by the Board at the time the option is granted. In
the case of any option granted to an individual subject to Section 16 of the
Securities Exchange Act of 1934, such purchase price shall be not less than 50%
of the fair market value of such shares on such date. The term “fair market
value” as used in this paragraph shall mean the value of a share of Common
Stock as determined by the Board. The Board shall value as follows:

 

(i)            If the
Common Stock shall not then be listed and traded upon a recognized securities
exchange or in the NASDAQ National Market System, upon the basis of the mean
between the bid and asked quotations for such stock on the date of grant (as
reported by a recognized stock quotation service) or, in the event that there
shall be no bid or asked quotations on the date of grant, then upon the basis
of the mean between the bid an asked quotations on the date nearest preceding
the date of grant;

(ii)           If the
Common Stock shall then be listed an traded upon a recognized securities
exchange or in the NASDAQ National Market System, upon the basis of the
reported closing price at which shares of the Common Stock were traded on such
recognized securities exchange or system on the date of grant or, if the Common
Stock was not traded on said date, upon the basis of the reported closing price
on the date nearest preceding the date of grant.

(c)           Exercise Period. The Board may
provide in any option agreement that an option may be exercised in whole
immediately or is to be exercisable  in
increments.

 

(d)           Procedure for Exercise.
Options shall be exercised by notice of intent to exercise the options
delivered to the Company at its principal office setting forth the number of
whole shares with respect to which the option is to be exercised. Such notice
shall be accompanied by cash or certified check, bank draft, postal or express
money order payable to the order of the Company, or, with the consent of the
Board, in whole or in part in Common Stock valued at Fair Market Value which is
owned by optionee, for an amount equal to the option price of such shares, and
specifying the address to which the certificates for such shares are to be
mailed. As promptly as practicable after receipt of such written 

 

 

2

 

notification
and payment, the Company shall deliver to the Optionee certificates for the number
of shares with respect to which such option has been so exercised, issued in
the Optionee’s name; provided, however, that such delivery shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited such certificates in the United States mail, addressed to the
Optionee, at the address specified pursuant to this paragraph 5(d).

 

(e)           Effect of Termination and Leave
Without Pay.

 

(i)          If the Optionee’s employment with the
Company is terminated for any reason other than death, disability, or
retirement, the Optionee’s right to exercise any Stock Option shall terminate,
and such Option shall expire, on the earlier of (A) the first anniversary of
such termination of employment or (B) the date such Option would have expired
had it not been for the termination of employment; provided, however that if, within one year following an
occurrence of a Change in Control, the Optionee’s employment is terminated in a
Qualifying Termination (as defined in subparagraph (v) below), the Optionee
shall have the right to exercise all outstanding Options until the earlier of
(1) the third anniversary of such termination of employment or (2) the date
such Options would have expired had it not been for such termination of
employment.  For purposes of applying
the immediately preceding proviso with respect to treatment of Options in the
event of a Qualifying Termination, the definition of a Change in Control set
forth in Section 9.(c) shall be revised by substituting the phrase “a merger or
consolidation of the Company with any other corporation is consummated” for the
phrase “the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation” in clause (iii) of said Section 9. (c). The Optionee shall have the
right to exercise such Option 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)         If the Optionee’s employment with the
Company is terminated by reason of disability or retirement, the Optionee’s
right to exercise any Stock Option shall terminate and such Option shall
expire, on the earlier of (A) the third anniversary of such termination of
employment or (B) the date such Option would have expired had it not been for
the termination of employment. The Optionee shall have the right to exercise
such option prior to such expiration to the extent it was exercisable at the
date of such termination of employment and shall not have been exercised.

 

(iii)        Notwithstanding the foregoing, the Board
may in its discretion provide in any option agreement that such option shall
terminate at a date earlier or later than that set forth above, provided such
date shall not be beyond the earlier of (i) three years from the last day of
Optionee’s employment or (ii) the date such option would have expired had it
not been for the termination of the Optionee’s employment.

 

(iv)        In the event of the death of an Optionee
under the Plan prior to termination of his employment, the options previously
granted to him may be exercised (to the extent he would have been entitled to
do so at the date of his death) at any time and from time to time prior to
their expiration by the executor or administrator of his estate or by the
person or persons to whom his rights under the option shall pass by will or the
laws of descent and distribution, but in no event may the option be exercised
after its expiration.

 

(v)         The term “disability” as used in this
paragraph means total and permanent disability. The term “disability” and
“retirement” shall be determined in accordance with applicable Company
personnel policies as interpreted in the Board’s direction.  For
purposes of subparagraph (i) above, the term “Qualifying Termination” shall
have the meaning ascribed to such term in the Optionee’s individual employment
or severance agreement with the Company or its Subsidiaries.  If the Optionee is not a party to an
individual employment or severance agreement with the Company or its
Subsidiaries, the term “Qualifying Termination” shall have the meaning ascribed
to the term “Qualified 

 

 

3

 

Termination” in the Compaq Computer
Corporation employee severance plan in which such Optionee is eligible to
participate.

 

(vi)          No transfer of an option by an
Optionee by will or by the laws of descent and distribution shall be effective
to bind the Company unless the Company shall have been furnished with written
notice of the same and an authenticated copy of the will and/or such other
evidence as the Board may deem necessary to establish the validity of the
transfer and the acceptance of the transferee or transferees of the terms and
conditions of such option.

 

(vii)         Leave Without Pay. Any time
spent by a Participant in the status of “leave without pay” shall be
disregarded for purposes of determining the extent to which an Option or any
portion thereof has vested. The meaning of the term “leave without pay” shall
be determined by the Committee and shall include but not be limited to periods
during which the Participant is receiving payments under the Company’s
Long-Term Disability Plan.

 

(f)            Assignability. An option
shall not be assignable or otherwise transferable except by will or by the laws
of descent and distribution. Each option shall be exercisable during the
Optionee’s lifetime only by the Optionee.

 

(g)           No Rights as Stockholder. No
Optionee shall have any rights as a stockholder with respect to shares covered
by an option until the date of issuance of a stock certificate for such shares;
except as provided in paragraph 9, no adjustment for dividends, or otherwise,
shall be made if the record date therefor is prior to the date of issuance of
such certificate.

 

(h)           Investment Representation.
Each option agreement shall contain an agreement that, upon demand by the Board
for such a representation, the Optionee (or any person acting under paragraph
5(e) shall deliver to the Board at the time of any exercise of an option a
written representation that the shares to be acquired upon such exercise are to
be acquired for investment and not for resale or with a view to the
distribution thereof. Upon such demand, delivery of such representation prior
to the delivery of any shares issued upon exercise of an option and prior to
the expiration of the option period shall be a condition precedent to the right
of the Optionee or such other person to purchase any shares.

 

(i)            Buyout Provisions.  At any time, the Committee may, but shall not be required
to, offer to buy out for a payment in cash or shares an option previously
granted based on such terms and conditions as the Committee shall establish and
communicate to the Optionee at the time that such offer is made.

 

6.             Amendments or Termination.  The Board may amend, alter or discontinue the
Plan, but no amendment or alteration shall be made which would impair the
rights of any participant under any option theretofore granted without his
consent.

 

7.             Compliance with Other Laws and
Regulations. The Plan, the grant and exercise of options thereunder, and
the obligation of the Company to sell and deliver shares under such options,
shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any governmental or regulatory agency or
national securities exchange as may be required. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock prior
to the completion of any registration or qualification of such shares under any
federal or state law, or any ruling or regulation of any government body or
national securities exchange which the Company shall, in its sole discretion,
determine to be necessary.

 

 

4

 

8.             Effectiveness and Expiration of
Plan. The Plan shall be effective on the date the Board adopts the Plan.
The Plan shall expire ten years and one day after the effective date of the
Plan and thereafter no option shall be granted pursuant the Plan.

 

9.             Adjustments and Change in
Control.

 

(a)           Adjustment.
The total number of shares of Common Stock available for options under the Plan
or which may be allocated to any one employee, the number of shares of Common
Stock subject to outstanding options and the exercise price for such options
shall be appropriately adjusted by the Board for an increase or decrease in the
number of outstanding shares of Common Stock resulting from a stock dividend,
subdivision or combination of shares or reclassification, as may be necessary
to maintain the proportionate interest of the option holder. In the event of a
merger or consolidation of the Company or a tender offer for shares of Common
Stock, the Board may make such adjustments with respect to options under the
Plan and take such other action as it deems necessary or appropriate to reflect
or in anticipation of such merger, consolidation or tender offer including,
without limitation, the substitution of new options, the termination or
adjustment of outstanding options, and the acceleration of options.

(b)           Immediate
Vesting. Notwithstanding any other provision of the Plan to the contrary,
upon a Change in Control, as defined below, all outstanding options shall vest
and become immediately exercisable or payable, or have all restrictions lifted
as may apply to the type of Award; provided, however, that unless otherwise
determined by the Committee at the time of award or thereafter, if it is
determined that the Net After-Tax Amount to be realized by any optionee, taking
into account the accelerated vesting provided for by this paragraph 9.(c) as
well as all other payments to be received by such optionee in connection with
such Change in Control, would be higher if options did not vest in accordance
with the foregoing paragraph 9.(c), then and to such extent the options shall
not vest. The determination of whether any such option should not vest shall be
made by a nationally recognized accounting firm selected by the Company, which
shall be instructed to consider that (i) stock options shall be vested in the
order in which they were granted and within each grant in the order in which
they would otherwise have vested and (ii) unless and to the extent any other
plan, arrangement or contract of the Company pursuant to which any such payment
is to be received provides to the contrary, such other payment shall be deemed
to have occurred after any acceleration of options.

(c)           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 Exchange Act of 1934,
(the “Exchange Act”) (other than the Company, an 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 January 18, 1989), individuals who at the
beginning of such period constitute the Board of Directors, and any new
director (other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause (i) ,
(iii) , or (iv) of this paragraph whose election by the Board of Directors or
nomination for election by the Company’s stockholders was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors at the beginning of the two year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors; (iii) the
stockholders of the Company approve 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 

 

 

5

 

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.

(d)           Net
After-Tax Amount. “Net After-Tax Amount” shall mean the net amount of
compensation, assuming for this purpose only that all vested options are
exercised upon such Change in Control, to be received (or deemed to have been
received) by such optionee in connection with such Change of Control under any
option agreement and under any other plan, arrangement or contract of the
company to which such optionee is a party, after giving effect to all income
and excise taxes applicable to such payments.

 

10.           Miscellaneous.

 

(a)           Employment. Nothing in the
Plan, any Option granted pursuant to the Plan, or in any Incentive Stock Option
Agreement or Nonqualified Stock Option Agreement shall confer upon any employee
the right to continue in the employ of the Company or any Subsidiary.

 

(b)           Other Compensation Plans. The
adoption of the Plan shall not affect any other stock option, incentive or
other compensation plans in effect for the Company or any Subsidiary or
preclude the Company from establishing any other forms of incentive or other
compensation for employees of the Company or any Subsidiary.

 

(c)           Plan Binding on Successors.
The Plan shall be binding on the successors and assigns of the Company.

 

(d)           Use of Proceeds. The proceeds
from the sale of Common Stock, pursuant to Options granted under the Plan,
shall constitute general funds of the Company.

 

 

6

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