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Exhibit 10.5
AMENDED AND RESTATED AS OF JANUARY 20, 1998
TO REFLECT 2-FOR-1 STOCK SPLIT EFFECTED JANUARY 20, 1998
COMPAQ COMPUTER CORPORATION
NONQUALIFIED STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
SECTION 1. AMENDMENT AND RESTATEMENT. The Compaq Computer Corporation
Nonqualified Stock Option Plan for Non-Employee Directors (the "Plan") amends
and restates in its entirety the Compaq Computer Corporation 1987 Nonqualified
Stock Option Plan for Non-Employee Directors.
SECTION 2. PURPOSE. The purposes of the Plan are to attract and retain the
services of experienced and knowledgeable non-employee directors, to encourage
eligible directors of Compaq Computer Corporation (the "Company") to acquire a
proprietary and vested interest in the growth and performance of the Company,
and to generate an increased incentive for directors to contribute to the
Company's future success and prosperity, thus enhancing the value of the Company
for the benefit of its stockholders.
SECTION 3. DEFINITIONS. As used in the Plan, the following terms shall have
the meanings set forth below:
(a) "Amendment Date" shall mean December 12, 1996, the effective date of
the amendment and restatement of the Plan.
(b) "Annual Retainer" shall mean the amount that an Eligible Director
would be entitled to receive for serving as a director in the year following an
Election Date, but shall not include fees associated with service on any
committee of the Board, any meeting fees, or any fees associated with other
services to be provided to the Company.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Company" shall mean Compaq Computer Corporation.
(f) "Election Date" shall mean with respect to an Option hereunder the
date of the appointment, election, or re-election of the director that prompted
the grant of such Option.
(g) "Eligible Director" shall mean each director of the Company who is not
an employee of the Company or any of the Company's subsidiaries (as defined in
Section 425(f) of the Code).
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" shall mean with respect to the Common Stock (i)
the last sale price of the Common Stock on the date on which such value is
determined, as reported on the consolidated tape of New York Stock Exchange
issues or, if there shall be no trades on such date, on the date nearest
preceding such date; (ii) if the Common Stock is not then listed for trading on
the New York Stock Exchange, the last sale price of the Common Stock on the date
on which such value is determined, as reported on another recognized securities
exchange or on the NASDAQ National Market System if the Common Stock shall then
be listed and traded upon such exchange or system or, if there shall be no
trades on such date, on the date nearest preceding such date; or (iii) the mean
between the bid and asked quotations for such stock on such date (as reported by
a recognized stock quotation service) or, in the event that there shall be no
bid or asked quotations on such date, then upon the basis of the mean between
the bid and asked quotations on the date nearest preceding such date.
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(j) "Grant Notice" shall mean a written notice evidencing an Option
granted hereunder.
(k) "Option" shall mean any right granted to a Participant allowing such
Participant to purchase Shares at such price or prices and during such period or
periods as set forth under the Plan. All Options shall be nonqualified options
not entitled to special tax treatment under Section 422A of Code.
(l) "Participant" shall mean an Eligible Director who receives an Option
under the Plan.
(m) "Price Percentage" shall mean 50 percent unless adjusted in accordance
with Section 8(e).
(n) "Release Date" shall mean the fifth business day occurring after the
Company's earnings release for the preceding fiscal period. In calculating the
Release Date, the day of an earnings release shall be counted if the earnings
release is made before the opening of trading on the New York Stock Exchange and
shall not be counted if such release is made after the opening of trading.
(o) "Share Percentage" shall be 50 percent unless adjusted in accordance
with Section 8(e).
(p) "Shares" shall mean shares of the common stock, $.01 par value, of the
Company.
(q) "Window" shall mean a period of time beginning on a Release Date and
ending at the end of the second month of the fiscal quarter in which such
Release Date occurs.
SECTION 4. ADMINISTRATION. The Plan shall be administered by the Board.
Subject to the terms of the Plan, the Board shall have the power to interpret
the provisions and supervise the administration of the Plan.
SECTION 5. SHARES SUBJECT TO THE PLAN.
(a) Total Number. Subject to adjustment as provided in this Section, the
total number of Shares as to which Options may be granted under the Plan shall
be 7,500,000 Shares. Any Shares issued pursuant to Options hereunder may
consist, in whole or in part, of authorized and unissued shares or treasury
shares.
(b) Reduction of Shares Available.
(i) The grant of an Option will reduce the Shares as to which Options
may be granted by the number of Shares subject to such Option.
(ii) Any Shares issued by the Company through the assumption or
substitution of outstanding grants from an acquired company shall not reduce the
Shares available for grants under the Plan.
(c) Increase of Shares Available. The lapse, cancellation, or other
termination of an Option that has not been fully exercised shall increase the
available Shares by the number of Shares that have not been issued upon exercise
of such Option.
(d) Other Adjustments. The total number and kind of shares available for
Options under the Plan or which may be allocated to any one Participant, the
number and kind 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 resulting from
a stock dividend, subdivision, combination of Shares, reclassification, or other
change in corporate structure affecting the Shares or for any conversion of the
Shares into or exchange of the Shares for other shares as a result of any merger
or consolidation (including a sale of assets) or other recapitalization as may
be necessary to maintain the proportionate interest of the Option holder.
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SECTION 6. INITIAL OPTIONS. Initial Options shall be granted to Eligible
Directors as follows:
(a) Initial Grants. Each Eligible Director who is first elected or
appointed to the Board on or after April 25, 1996, shall be granted one Option
to acquire 31,250 Shares. In the event that the Election Date occurs during the
Window, such Option shall be granted on the Election Date with respect to such
Option. In the event that such Eligible Director's election or appointment does
not occur during the Window, then such Option shall be granted on the next
Release Date. Any Eligible Director who is elected or appointed to the Board as
the result of a merger of a subsidiary of the Company with Tandem Computers
Incorporated ("Tandem") will not be eligible for an initial grant as provided in
this Section 6(a). Any options to purchase common stock of Tandem held by such
Eligible Director at the time of the merger will be converted into options to
purchase Compaq Common Stock upon consummation of the merger. Such converted
options shall be assumed under this Plan and shall be exercisable on the first
anniversary date of the grant date of such options. This conversion to Options
under this Plan shall not be considered an initial grant as provided in this
Section 6(a).
(b) Terms and Conditions. Any Option granted under this Section 6 shall be
subject to the following terms and conditions:
(i) Option Price. The purchase price per Share purchasable under an
Option granted under Section 6 shall be 100% of the Fair Market Value of a Share
on the date of the grant of the Option.
(ii) Exercisability. An Option granted under Section 6(a) shall be
exercisable on the first anniversary of the Election Date.
SECTION 7. ANNUAL OPTIONS. Annual Options shall be granted to Eligible
Directors as follows:
(a) Reelected Directors. Each Eligible Director who is reelected to the
Board at an annual meeting of the Company's stockholders on or after the
Amendment Date and who has not received a grant under Section 6 during the
period since the most recent previous annual meeting of the Company's
stockholders shall be granted an Option to acquire 25,000 Shares on each
Election Date on which he is reelected.
(b) Chairman of the Board. Each Eligible Director who is elected or
re-elected Chairman of the Board by the Board at its meeting following an annual
meeting of the Company's stockholders on or after the Amendment Date and who has
not received a grant under Section 6 during the period since the most recent
annual meeting of the Company's stockholders shall be granted on each Election
Date on which he is elected or reelected Chairman of the Board an Option to
acquire 6,250 Shares in addition to any applicable Option granted under Section
7(a).
(c) Terms and Conditions. Any Option granted under this Section 7 shall be
subject to the following terms and conditions:
(i) Option Price. The purchase price per Share purchasable under an
Option shall be 100% of the Fair Market Value of a Share on the date of the
grant of the Option.
(ii) Exercisability. An Option granted under this Section 7 shall be
exercisable (A) with respect to 50% of the Shares thereunder on the first
anniversary of the Election Date related to such Option and (B) with respect to
the remaining 50% of the Shares thereunder on the second anniversary of such
Election Date.
SECTION 8. OPTIONS IN LIEU OF CASH COMPENSATION. Options shall be granted
to Eligible Directors in lieu of cash compensation as follows:
(a) Election to Receive Option. An option shall be granted automatically
to any Eligible Director who prior to an Election Date on which such director is
re-elected to the Board by the Company's stockholders, files with the Secretary
of the Company an irrevocable election to receive an Option in lieu of all or a
portion of his or her Annual Retainer. On the following Election Date, each
Eligible Director making such a filing under this Section 8(a) shall be granted
an Option for the number of Shares determined under Section 8(b) below.
(b) Option Formula. The number of Option shares granted on an Election
Date to any Eligible Director under this Section 8 shall be equal to the nearest
number of whole shares determined in accordance with the following formula:
(Elected Portion) (Annual Retainer) = Number of
(Share Percentage) (Fair Market Value) Shares
where Elected Portion refers to the portion of Annual Retainers elected under
Section 8(a) and Fair Market Value refers to the Fair Market Value of a Share on
the date of grant.
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(c) Option Price. The purchase price per Share covered by each Option
granted under this Section 8 shall be the Fair Market Value of a Share on the
date of grant multiplied by the Price Percentage.
(d) Exercisability. An Option granted under this Section 8 shall be
exercisable one year from the date of grant.
(e) Adjustment. In the event that any law, ruling, or regulation shall be
proposed, promulgated, or adopted after the Amendment Date that provides that a
higher Option price shall be required so that Options granted under Section 8 of
the Plan will be treated as options for tax purposes, the Share Percentage and
Price Percentage of Options granted hereafter under this Section 8 shall be
automatically adjusted to comply therewith; provided, however, the sum of the
Share Percentage and the Price Percentage shall remain 100 percent.
SECTION 9. GENERAL TERMS. The following provisions shall apply to any
Option granted under the Plan.
(a) Option Period. Each Option shall expire ten years from its date of
grant. Each Option shall be subject to termination before its date of expiration
as hereinafter provided.
(b) Termination of Service as Director. If a Participant's service as a
director is terminated for any reason other than death, disability or retirement
due to a mandatory age retirement policy the Participant or his beneficiary
shall have the right to exercise any Option to the extent it was exercisable at
the date of such termination of service and shall not have been exercised. The
right to exercise such Option to the extent set forth herein shall continue
until the expiration of the Option.
(c) Death or Disability. If the Participant's service as a director is
terminated by death or disability, the Participant shall have the right to
exercise a prorated number of the Shares under any Option that is not fully
exercisable prior to such event, such number to be determined by multiplying (i)
the total number of Shares subject to such Option by (ii) a fraction equal to
(A) the total of number of completed months of service since the Election Date
related to such Option divided by (B) the total number of completed months of
service from the Election Date related to such Option until such Option would
have become fully exercisable. The right to exercise such Option to the extent
set forth herein shall continue until the expiration of the Option.
(d) Mandatory Age Retirement. If the Participant's service as a Director
is terminated as a result of any mandatory age retirement policy of the Board,
Options granted under the Plan shall become immediately exercisable with respect
to 100% of the Shares on the date of such mandatory retirement. The right to
exercise each such Option to the extent set forth herein shall continue until
the expiration of such Option.
(e) Method of Exercise. Any Option may be exercised by the Participant in
whole or in part at such time or times and by such methods as the Board may
specify. The applicable Option Agreement may provide that the Participant may
make payment of the Option price in cash, Shares, or such other consideration as
the Board may specify, or any combination thereof, having a Fair Market Value on
the exercise date equal to the total option price.
SECTION 10. CHANGE IN CONTROL.
(a) 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.
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(b) 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 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 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, 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 Section
10(b)) whose election by the Board 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; (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.
SECTION 11. AMENDMENTS AND TERMINATION.
(a) Board Authority. The Board may amend, alter, or discontinue the Plan,
but no amendment, alteration, or discontinuation shall be made (i) that would
impair the rights of a Participant under an Option theretofore granted, without
the Participant's consent, or (ii) without the approval of the stockholders if
such approval is necessary to comply with any tax or regulatory requirement,
including for these purposes any approval requirement which is a prerequisite
for exemptive relief from Section 16(b) of the Exchange Act, or (iii) to Section
6, Section 7 or Section 8 more often than once every six months.
(b) Prior Stockholder and Participant Approval. Anything herein to the
contrary notwithstanding, in the event that amendments to the Plan are required
in order that the Plan or any other stock-based compensation plan of the Company
comply with the requirements of Rule 16b-3 issued under the Exchange Act as
amended from time to time or any successor rules promulgated by the Securities
and Exchange Commission related to the treatment of benefit and compensation
plans under Section 16 of the Exchange Act, the Board is authorized to make such
amendments without the consent of Participants or the stockholders of the
Company.
SECTION 12. GENERAL PROVISIONS.
(a) Nontransferability. No Option 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
Option may be transferable, to the extent set forth in the applicable Grant
Notice or agreement and in accordance with procedures adopted by the Board, if
such provisions do not disqualify such Option for exemption under Rule 16b-3.
(b) Compliance Requirements. All certificates for Shares delivered under
the Plan pursuant to any Option shall be subject to such stock-transfer orders
and other restrictions as the Board may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Shares are then listed, and any applicable
federal or state securities law, and the Board may cause a legend or legends to
be put on any such certificates to make appropriate reference to such
restrictions. The Company shall not be required to issue or deliver any Shares
under the Plan prior to the completion of any registration or qualification of
such Shares under any federal or state law, or under any ruling or regulation of
any governmental body or national securities exchange that the Board in its sole
discretion shall deem to be necessary or appropriate.
(c) Other Plans. Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required by applicable law or the rules
of any stock exchange on which the Common Stock is then listed; and such
arrangements may be either generally applicable or applicable only in specific
cases.
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(d) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Delaware and applicable federal law.
(e) Conformity With Law. If any provision of this Plan is or becomes or is
deemed invalid, illegal, or unenforceable in any jurisdiction, or would
disqualify the Plan or any Option under any law deemed applicable by the Board,
such provision shall be construed or deemed amended in such jurisdiction to
conform to applicable laws or if it cannot be construed or deemed amended
without, in the determination of the Board, materially altering the intent of
the Plan, it shall be stricken and the remainder of the Plan shall remain in
full force and effect.
SECTION 13. EXPIRATION. The Plan will expire when no Shares are available
for issuance.