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The cost of poor performance: $9.81-million, with options

Published Sep. 29, 2005

Compaq Computer Corp.'s ousted chief executive Eckhard Pfeiffer received $9.81-million in severance pay plus options after being forced to resign in April because of poor performance at the No. 1 personal computer maker.

Pfeiffer was granted the package outlined in his employment agreement, according to a separation accord filed with the U.S. Securities and Exchange Commission. All 13.5-million options he had received while at the Houston company are fully vested with an estimated value of $410-million. The exercise period was extended to four years from his termination.

Pfeiffer, 57, was ousted by chairman Ben Rosen because the board was unhappy with Pfeiffer's moves to make Compaq more competitive with nimbler rivals such as Dell Computer Corp. and because of problems with the company's $9-billion purchase of Digital Equipment Corp. Compaq since has promoted Michael Capellas to CEO and unveiled plans to restructure, including cutting 12 percent of its work force.

Capellas, who had been acting chief operating officer before being named chief executive last month, will get an annual base salary of $850,000. He also was given a $5-million loan to purchase Compaq shares as well as 200,000 shares of restricted stock. The restricted stock begins vesting when Compaq shares trade above $35. Capellas' employment contract lasts until 2002.

Compaq's stock has lost more than half its value since trading as high as $49.25 in January. The stock rose 31\ cents Friday to $23.06\.

Last month, the company reported its first loss from operations since 1991 as it struggles to cope with plummeting PC prices, bloated costs and slack growth in several of the businesses it acquired with Digital.

According to the filing, Pfeiffer also was given $5,000 for financial advising fees and was allowed to keep any Compaq computers he has. Pfeiffer received a compensation package valued at $6.1-million in 1998.

To receive the severance package, Pfeiffer had to sign non-compete and non-solicitation agreements. He cannot work for a rival company, and he cannot woo Compaq employees away from their jobs.