Document:

Exhibit 10(h)

HEWLETT-PACKARD COMPANY

1997 DIRECTOR STOCK PLAN

(AMENDED AND RESTATED,
EFFECTIVE JULY 18, 2002)

 

PART 1.  PLAN ADMINISTRATION AND
ELIGIBILITY

I.                                         Purpose

The
purpose of this amended and restated 1997 Director Stock Plan (the “Plan”) of
Hewlett-Packard Company (the “Company”) is to encourage ownership in the
Company by outside directors of the Company (each, a “Non-Employee Director,”
or collectively, the “Non-Employee Directors”) whose continued services are
considered essential to the Company’s continued progress and thus to provide
them with a further incentive to remain as directors of the Company.

II.                                     Administration

The Board of Directors (the “Board”) of the Company or any committee
(the “Committee”) of the Board that will satisfy Rule 16b-3 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any
regulations promulgated thereunder, as from time to time in effect, including
any successor rule (“Rule 16b-3”), shall supervise and administer the Plan. The
Committee shall consist solely of two or more non-employee directors of the
Company, who shall be appointed by the Board. A member of the Board shall be
deemed to be a “non-employee director” only if he satisfies such requirements
as the Securities and Exchange Commission may establish for non-employee
directors under Rule 16b-3. Members of the Board receive no additional
compensation for their services in connection with the administration of the
Plan.

The Board or the Committee may adopt such rules or guidelines as it deems
appropriate to implement the Plan. All questions of interpretation of the Plan
or of any shares issued under it shall be determined by the Board or the
Committee and such determination shall be final and binding upon all persons
having an interest in the Plan. Any or all powers and discretion vested in the
Board or the Committee under this Plan may be exercised by any subcommittee so
authorized by the Board or the Committee and satisfying the requirements of
Rule 16b-3.

III.                                 Participation
in the Plan

Each member of the Board who is not an employee of the Company or any
of its subsidiaries or affiliates and who is providing service to the Company
as a member of the Board at the beginning of the Plan Year shall be eligible to
receive an Annual Retainer (as defined in Section XII below) under the
Plan.

Any member of the Board who enters service after the beginning of the
Plan Year may be eligible to receive a prorated Annual Retainer under the Plan
as the Board or the Committee determines in its discretion.

 

 

IV.                                Stock Subject
to the Plan

The maximum number of shares of the Company’s $0.01 par value Common
Stock (“Common Stock”) which may be issued under the Plan shall be Four Million
(4,000,000). The limitation on the number of shares which may be issued under
the Plan shall be subject to adjustment as provided in Section X of the Plan.

If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares allocable to the
unexercised portion of such option shall again become available for grant
pursuant to the Plan.

PART 2.  TERMS OF THE PLAN

V.                                    Effective Date
of the Plan

The Plan shall take effect on the date of adoption by the shareholders
of the Company.  The Plan shall
terminate on February 24, 2007, unless earlier terminated by the Board of
Directors or the Committee.

VI.                                Time for
Granting Options and Issuing Shares

No options shall be granted, and no Common Stock Payments (as defined
in Section VII below) shall be made, after the date on which this Plan
terminates. The applicable terms of this Plan, and any terms and conditions
applicable to the options granted or the shares issued prior to such date,
shall survive the termination of the Plan and continue to apply to such options
and shares.

VII.                            Terms and
Conditions

A.            Compensation Alternatives.

1.             Within 25 days after the beginning
of the Plan Year (as defined in Section XII below), each Non-Employee Director
will be entitled to select one of the following alternative means of payment
for the value of his Annual Retainer:

(i)                                     A minimum of
fifty percent of the value of his Annual Retainer in the form of a Common Stock
payment (a “Common Stock Payment”) and the balance in cash (a “Cash Payment”);
or

(ii)                                  A minimum of
fifty percent of the value of his Annual Retainer in the form of an option to
purchase shares of Common Stock (an “Option Payment”) and a Cash Payment.

2.             If any Non-Employee Director fails
to notify the Secretary of the Company in writing by 25 days after the
beginning of the Plan Year  of his
desired means to receive payment of the Annual Retainer for the Plan Year, then
he shall be deemed to have elected an Option Payment for fifty percent of the
value of his Annual Retainer, with the remaining fifty percent in cash. Any
such election, or any modification or termination of such an election, shall be
filed with the Company on a form prescribed by the Board or the Committee for
this purpose.

 

 

B.            Common Stock Payment.

1.             Date of Payment. The shares
constituting any Common Stock Payment shall be issued automatically one month
after the beginning of each Plan Year (or, if such date is not a business day,
on the next succeeding business day) (the “Grant Date”), with the first payment
under this Plan commencing March 1, 1997. Each award of a Common Stock
Payment shall be evidenced by an agreement which shall reflect the terms and
conditions of the Common Stock Payment and such additional terms and conditions
as may be determined by the Board or the Committee.

2.             Number of Shares Subject to Common
Stock Payment. The total number of shares of Common Stock included in each
Common Stock Payment shall be determined by dividing the amount of the Annual
Retainer that is to be paid in stock by the Fair Market Value (as defined in
Section XII below) of a share of Common Stock on the Grant Date. It shall
be equal to the largest number of whole shares determined as follows:

50% or more, if applicable, of Annual Retainer

---------------------------------------------------------  = 
Number of Shares

     Fair Market Value on the
Grant Date

Any payment for a fractional share automatically shall be paid in cash
based upon the Fair Market Value on the Grant Date of such fractional share.

3.             Holding Period for Common Stock
Payment Shares. The shares of Common Stock included in each Common Stock
Payment shall be deposited in certificate or book entry form in escrow with the
Company’s Secretary until the six-month anniversary of the date of issuance.
The Non-Employee Director shall retain all rights in the shares while they are
held in escrow, including, but not limited to, voting rights and the right to
receive dividends; provided, however, that the Non-Employee Director shall not
have the right to pledge, sell or otherwise assign such shares until all restrictions
pertaining to such shares are terminated. Promptly after the six-month
anniversary of the issuance date, the Company’s Secretary shall release the
shares from escrow and deliver any applicable stock certificates to the
Non-Employee Director or release any applicable restrictions on the
Non-Employee Director’s book entry account.

C.            Option Payment.

Subject to Section VII.A. above, each Non-Employee Director may
specify the amount of his Annual Retainer to be received in the form of a
non-statutory option not entitled to special tax treatment under
Section 422 of the Internal Revenue Code of 1986, as amended. Each option
granted under this Plan shall be evidenced by a written agreement in such form
as the Board or Committee shall from time to time approve, which Agreements
shall comply with and be subject to the following terms and conditions and such
additional terms and conditions as may be determined by the Board or Committee:

1.             Date of Payment. The option
constituting any Option Payment shall be granted automatically on the Grant
Date.

2.             Number of Shares Subject to Option.
The number of shares to be subject to any option granted pursuant to the Plan
shall be an amount necessary to make such option equal in value, using a
modified Black-Scholes option valuation model, to that portion of the Annual
Retainer that the Non-Employee Director elected to receive in the form of an
option. The value of

 

 

the option will be
calculated by assuming that the value of an option to purchase one share of
Common Stock equals the product of (i) a fraction determined by dividing 1 by
the Multiplier, as defined below, and (ii) the Fair Market Value of a share of
Common Stock on the Grant Date.

The number of shares represented by an option granted pursuant to the
Plan shall be determined by multiplying the number of shares determined in
Section VII.B.2 above by a multiplier determined using a modified
Black-Scholes option valuation method (the “Multiplier”). The Board or the
Committee shall determine the Multiplier prior to the beginning of the Plan
Year by considering the following factors: (i) the Fair Market Value of the
Common Stock on the date the Multiplier is determined; (ii) the average length
of time that Company stock options are held by optionees prior to exercise;
(iii) the risk-free rate of return based on the term determined in (ii) above
and U.S. government securities rates; (iv) the annual dividend yield for the
Common Stock; and (v) the volatility of the Common Stock over the previous
ten-year period. For the Plan Year commencing March 1, 1997, the Board or the
Committee shall calculate the Multiplier by March 1, 1997. The number of
shares to be subject to the option shall be equal to the largest number of
whole shares determined as follows:

50% or more, if applicable, of Annual Retainer

---------------------------------------------------------  x Multiplier  =  Number of Shares

      Fair Market Value on the
Grant Date

3.             Price of Options. The exercise
price of the option will be the Fair Market Value of the Common Stock on the
date of grant.

4.             Exercise of Options. Options may be
exercised only by written notice to the Company at its head office accompanied
by payment in cash of the full consideration for the shares as to which they
are exercised.

5.             Period of Option. The option will
not be exercisable until the one-year anniversary of the grant date, at which
time it shall be vested as to all the shares represented by the option. No
option shall be exercisable after the expiration of ten (10) years from the
date upon which such option is granted.

6.             Exercise by Representative
Following Death of Director. A Non-Employee Director, by written notice to the
Company, may designate one or more persons (and from time to time change such
designation) including his legal representative, who, by reason of his death,
shall acquire the right to exercise all or a portion of the option. If the
person or persons so designated wish to exercise any portion of the option,
they must do so within the term of the option as provided in
Section VII.C.5. Any exercise by a representative shall be subject to the
provisions of this Plan.

7.             Options Nontransferable. Each
option granted under the Plan by its terms shall not be transferable by the
optionee otherwise than by will, or by the laws of descent and distribution,
and shall be exercised during the lifetime of the optionee only by him. No
option or interest therein may be transferred, assigned, pledged or
hypothecated by the optionee during his lifetime, whether by operation of law
or otherwise, or be made subject to execution, attachment or similar process.

 

 

D.            Cash Payment

Each Cash Payment shall be made in four equal installments with the
first payment commencing on the Grant Date, and subsequent payments made on
June 1, September 1 and December 1 of the Plan Year.

E.            Form of Issuance of Shares

Shares issued under the Plan shall be in either book entry form or in
certificate form pursuant to the instructions given by the Non-Employee
Director to the Company’s transfer agent.

F.            Transferability

In the event of a Non-Employee Director’s death, all of such person’s
rights to receive any accrued but unpaid Common Stock Payment or Option Payment
will transfer to the maximum extent permitted by law to such person’s
beneficiary. Each Non-Employee Director may name, from time to time, any
beneficiary or beneficiaries (which may be named contingently or successively)
as his beneficiary for purposes of this Plan. Each designation shall be on a
form prescribed by the Committee, will be effective only when delivered to the
Company and when effective will revoke all prior designations by the
Non-Employee Director. If a Non-Employee Director dies with no such beneficiary
designation in effect, such person’s beneficiary shall be his estate and such
person’s payments will be transferable by will or pursuant to laws of descent
and distribution applicable to such person.

G.            Termination

Any member of the Board who terminates service prior to the end of the
Plan Year may have his Annual Retainer prorated, including a forfeiture of
options, stock or cash payment, if any, as the Board or the Committee
determines in its discretion.

PART 3.  GENERAL PROVISIONS

VIII.                        Assignments

The rights and benefits under this Plan may not be assigned except for
the designation of a beneficiary as provided in Section VII.

IX.                                Limitation of
Rights

No Right to Continue as a Director. 
Neither the Plan, nor the issuance of shares of Common Stock nor any
other action taken pursuant to the Plan, shall constitute or be evidence of any
agreement or understanding, express or implied, that the Company will retain a
director for any period of time, or at any particular rate of compensation.

No Stockholders’ Rights for Options. An optionee shall have no rights
as a stockholder with respect to the shares covered by his options until the
date of the issuance to him of a stock certificate therefor or the making of a
book entry with the Company’s transfer agent, and no adjustment will be made
for dividends or other rights for which the record date is prior to the date
such certificate is issued.

 

 

X.                                    Changes in
Present Stock

In the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, or other change in the corporate
structure or capitalization affecting the Company’s present Common Stock, at
the time of such event the Board or the Committee shall make appropriate
adjustments to the number (including the aggregate numbers specified in
Section IV) and kind of shares to be issued under the Plan and the price
of any Stock Option or Common Stock Payment.

XI.                                Amendment of
the Plan

The Board shall have the right to amend, modify, suspend or terminate
the Plan at any time for any purpose; provided, that following the approval of
the Plan by the Company’s shareholders, the Company will seek shareholder
approval for any change to the extent required by applicable law, regulation or
rule.

XII.                            Definitions

“Annual Retainer” shall mean the amount to which a Non-Employee
Director will be entitled to receive for serving as a director in a relevant
Plan Year, but shall not include reimbursement for expenses, fees associated
with service on any committee of the Board or fees with respect to any other
services to be provided to the Company.

“Fair Market Value” shall be the mean of the highest and lowest quoted
selling prices for the Common Stock as reported on the New York Stock Exchange
Composite Tape on the date in question, or if no sales of such stock were made
on that date, the mean of the highest and lowest prices of the Common Stock on
the next preceding day on which sales were made.

“Plan Year” shall mean the year beginning the day after the Company’s
annual meeting and ending on the day of the Company’s next annual meeting, as
the case may be, for any relevant year.

XIII.                        Compliance
with Section 16 of the Exchange Act

It is the Company’s intent that the Plan comply in all respects with
Rule 16b-3. If any provision of this Plan is found not to be in compliance
with such rule and regulations, the provision shall be deemed null and void,
and the remaining provisions of the Plan shall continue in full force and
effect. All transactions under this Plan shall be executed in accordance with
the requirements of Section 16 of the Exchange Act and regulations promulgated
thereunder. The Board or the Committee may, in its sole discretion, modify the
terms and conditions of this Plan in response to and consistent with any
changes in applicable law, rule or regulation.

XIV.                       Notice

Any written notice to the Company required by any of the provisions of
this Plan shall be addressed to the Secretary of the Company and shall become
effective when it is received.

XV.                           Governing Law

This Plan and all determinations made and actions taken pursuant hereto
shall be governed by the law of the State of Delaware and construed
accordingly.Exhibit 10(z)

 

As Amended and Restated Effective July 18, 2002

As Amended Effective May 3, 2002

As Amended Effective September 4, 2001

 Adopted January 25, 2001

 

COMPAQ COMPUTER CORPORATION

2001
STOCK OPTION PLAN

SECTION 1.           Purpose.  The Compaq Computer Corporation 2001 Stock
Option Plan has been established to promote the interests of the Company and
its stockholders by (a) attracting and retaining exceptional employees of
the Company, Compaq and Affiliates, as defined below; (b) motivating such
employees and directors 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 pursuant to 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 of Directors, 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; (iii) a merger or consolidation of Compaq with any other
corporation, other than a merger or consolidation that results 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 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 adding the phrase “there is consummated” at the beginning of
clause (iii) above, 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 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.

 

“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 2001 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.

(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.

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 80 million.  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.

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.  In
order to satisfy regulatory and legal requirements, the Committee may grant
Awards to a trust or other legal entity on behalf of otherwise eligible
Employees.

(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.

(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, total and permanent
disability, or retirement, the Participant or his successor (if employment is
terminated by death) shall have the right to exercise any Nonqualified Stock
Option or Stock Appreciation Right to the extent it was exercisable at the date
of such termination of employment and shall not have been exercised, but in no
event shall such option be exercisable later than the date the Option would
have expired had it not been for the termination of such employment.  The meaning of the terms “total and
permanent disability” and “retirement” shall be determined by the Committee.

(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)                                  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 Award previously granted
based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made.

(f)                                    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.

(g)                                 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.

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, (i) 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 (ii) 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 5(c) 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.

(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.

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 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 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 26, 2001.

(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.

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