Filed by Hewlett-Packard Company Pursuant to Rule 425
Under the Securities Act of 1933
And Deemed Filed Pursuant to Rule 14a-6
Under the Securities Exchange Act of 1934
Subject Company: Compaq Computer Corporation
Commission File No.: 333-73454
This filing relates to a planned merger (the "Merger") between Hewlett-Packard
Company ("HP") and Compaq Computer Corporation ("Compaq") pursuant to the terms
of an Agreement and Plan of Reorganization, dated as of September 4, 2001 (the
"Merger Agreement"), by and among HP, Heloise Merger Corporation and Compaq. The
Merger Agreement is on file with the Securities and Exchange Commission as an
exhibit to the Current Report on Form 8-K, as amended, filed by Hewlett-Packard
Company on September 4, 2001, and is incorporated by reference into this filing.
[LETTERHEAD OF]
[WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION]
March 6, 2002
VIA FACSIMILE AND U.S. MAIL
Stephen C. Neal
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306-2155
RE: YOUR LETTER DATED MARCH 3, 2002
Dear Steve:
Let's set the record straight:
WALTER HEWLETT'S DISCLOSURE REGARDING EXECUTIVE COMPENSATION FAILED TO
INCLUDE KEY FACTS.
We agree that it is important that all material information be given to the
shareowners. Mr. Hewlett chose not to disclose key facts behind the
compensation discussions, as summarized below.
Walter Hewlett knows that the Compensation Committee and the Board have the
final word on all executive compensation matters. As a member of that
Committee he knew at the time he disclosed outdated Board materials that
the Committee had already rejected the executive employment terms
previously discussed and determined that they would not serve as benchmarks
for any future employment arrangements.
AS A MEMBER OF THE HP COMPENSATION COMMITTEE MR. HEWLETT KNOWS THE
FOLLOWING FACTS TO BE TRUE:
1. NO EXECUTIVE COMPENSATION AGREEMENTS.
Contrary to Mr. Hewlett's statements, HP is NOT and NEVER HAS BEEN
under any obligation to enter into employment agreements with any of
the HP or Compaq executives. The Merger Agreement (Section 8.5) is
clear that HP is not obligated to consider, negotiate, offer or agree
to any compensation or employment terms. THERE IS NOT AND NEVER WAS
ANY
Stephen C. Neal
March 6, 2002
Page 2
AGREEMENT with any HP or Compaq executive regarding post-merger
compensation or employment, other than the pre-existing
employment, retention and severance agreements as already
disclosed in HP's proxy statement.
2. PRIOR DISCUSSIONS SPECIFICALLY REJECTED BY UNANIMOUS VOTE; NOT
BENCHMARKS.
Prior compensation discussions and terms were rejected and are
not benchmarks. As noted in the HP proxy statement, the HP
Compensation Committee (INCLUDING MR. HEWLETT) voted unanimously
to specifically REJECT ALL PREVIOUSLY DISCUSSED EXECUTIVE
COMPENSATION TERMS (including those referred to in my letter sent
to Compaq's counsel five months ago and those discussed in the
Compensation Committee's September meetings), and further
unanimously agreed that the previously discussed terms (including
those in the letter and those discussed in their September
meetings), WOULD NOT CONSTITUTE BENCHMARK OR MINIMUM TERMS FOR
FUTURE DISCUSSIONS.
Even with respect to matters discussed at the September
Compensation Committee meetings, it was determined that all
components of the compensation arrangements would be reconsidered
at future meetings. When reconsidered, the Compensation Committee
(INCLUDING MR. HEWLETT) specifically rejected all terms
previously discussed.
3. NEW MARKET DATA TO BE CONSIDERED.
Future employment contract terms, if any, would be the
responsibility of the Board of Directors following the Merger.
The Compensation Committee (INCLUDING MR. HEWLETT) voted
unanimously that it would be best for the Board of the combined
company to determine employment agreements, if any, BASED ON NEW
MARKET DATA AND INPUT FROM INDEPENDENT COMPENSATION CONSULTANTS.
Stephen C. Neal
March 6, 2002
Page 3
4. OUTDATED MATERIALS THAT WERE ALREADY REJECTED.
The letter sent to Compaq's counsel five months ago did not
obligate HP in any manner. That letter simply summarized
discussions at the time the Merger Agreement was signed. The
matters discussed in the letter had been SPECIFICALLY REJECTED by
HP's Compensation Committee (INCLUDING MR. HEWLETT) by the time
HP mailed its proxy statement to shareowners, and were not even
taken to the Compaq's Board Human Resources Committee for
consideration.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ LARRY W. SONSINI
Larry W. Sonsini
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements that involve risks,
uncertainties and assumptions. If any of these risks or uncertainties
materializes or any of these assumptions proves incorrect, the results of HP and
its consolidated subsidiaries could differ materially from those expressed or
implied by such forward-looking statements.
All statements other than statements of historical fact are statements that
could be deemed forward-looking statements, including any projections of
earnings, revenues, synergies, accretion or other financial items; any
statements of the plans, strategies, and objectives of management for future
operations, including the execution of integration and restructuring plans and
the anticipated timing of filings, approvals and closings relating to the Merger
or other planned acquisitions; any statements concerning proposed new products,
services, developments or industry rankings; any statements regarding future
economic conditions or performance; any statements of belief and any statements
of assumptions underlying any of the foregoing.
The risks, uncertainties and assumptions referred to above include the ability
of HP to retain and motivate key employees; the timely development, production
and acceptance of products and services and their feature sets; the challenge of
managing asset levels, including inventory; the flow of products into
third-party distribution channels; the difficulty of keeping expense growth at
modest levels while increasing revenues; the challenges of integration and
restructuring associated with the Merger or other planned acquisitions and the
challenges of achieving anticipated synergies; the possibility that the Merger
or other planned acquisitions may not close or that HP, Compaq or other parties
to planned acquisitions may be required to modify some aspects of the
acquisition transactions in order to obtain regulatory approvals; the assumption
of maintaining revenues on a combined company basis following the close of the
Merger or other planned acquisitions; and other risks that are described from
time to time in HP's Securities and Exchange Commission reports, including but
not limited to HP's annual report on Form 10-K, as amended on January 30, 2002,
for the fiscal year ended October 31, 2001 and HP's registration statement on
Form S-4 filed on February 5, 2002.
HP assumes no obligation and does not intend to update these forward-looking
statements.
ADDITIONAL INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT
On February 5, 2002, HP filed a registration statement with the SEC containing a
definitive joint proxy statement/prospectus regarding the Merger. Investors and
security holders of HP and Compaq are urged to read the definitive joint proxy
statement/prospectus filed with the SEC on February 5, 2002 and any other
relevant materials filed by HP or Compaq with the SEC because they contain, or
will contain, important information about HP, Compaq and the Merger. The
definitive joint proxy statement/prospectus and other relevant materials (when
they become available), and any other documents filed by HP or Compaq with the
SEC, may be obtained free of charge at the SEC's web site at www.sec.gov. In
addition, investors and security holders may obtain free copies of the documents
filed with the SEC by HP by contacting HP Investor Relations, 3000 Hanover
Street, Palo Alto, California 94304, 650-857-1501. Investors and security
holders may obtain free copies of the documents filed with the SEC by Compaq by
contacting Compaq Investor Relations, P.O. Box 692000, Houston, Texas
77269-2000, 800-433-2391. Investors and security holders are urged to read the
definitive joint proxy statement/prospectus and the other relevant materials
(when they become available) before making any voting or investment decision
with respect to the Merger.