The document discusses compensation recommendations for Compaq Brazil in 1999. It recommends keeping the salary structures the same with only inflation adjustments. A 5% merit budget is proposed to align with market practices. Variable pay components are discussed including profit sharing averages. Guidelines for promotions, ratings distributions and market trends are also summarized.

1. COMPENSATION REVIEW - 1999 BRAZIL - DEMAND FULFILLMENT

3. Compaq’s overall compensation philosophy is to pay performance relative to the market, focusing on total compensation. PURPOSES Attract Outstanding External Candidates Not Retain Low Performing Employees Motivate Employees To Perform At Their Highest Level Focus Each Employee On Specific Contributions They Make To The Overall Success Of Compaq Put Compensation Decision-making In The Hands Of Managers Foster Empowerment Environment 1 2 3 4 5 6 COMPENSATION PHILOSOPHY

4. BASE COMPENSATION SYSTEM DESIGN PROCESS OBJECTIVE: REVIEW PAY PHILOSOPHY STEPS PARTICIPATE IN EXTERNAL SALARY SURVEYS VERIFY BENCHMARK JOB MATCHES IN SURVEYS COLLECT & EVALUATE SURVEY DATA DEVELOP SALARY STRUCTURES EVALUETE COST & DEVELOP MERIT GRIDS DISTRIBUTE COMMUNICATION PACKET MANAGEMENT PREPARES AND SUBMITSPERFORMANCE REVIEWS AS APPROPRIATE (MANAGEMENT TO CONTACT HUMAN RESOURCES WITH ANY QUESTIONS) 1 2 3 4 5 6 7

5. TOTAL COMPENSATION COMPONENTS

9. December 1998 Expected Year End 1999 Exempt 75 81 Non-Exempt 45 45 Direct Labor 152 170 Contractors Temporary 72 23 Total 344 319 HEADCOUNT

10. 1997 TURNOVER

11. 1998 TURNOVER

12. Annual Payroll= ~ R$ 8,08m EXECUTIVE SUMMARY

17. 1999 Exempt Salary Structure

18. Market data used to determine appropriate salary structure midpoints - Exempt

19. Exempt Average Salary

20. Exempt Total Compensation

22. 1999 Non-Exempt Salary Structure

23. Market data used to determine appropriate salary structure midpoints - Non-Exempt

24. Non-Exempt Average Salary

25. Non-Exempt Total Compensation

27. 1999 Direct Labor Salary Structure

28. Market data used to determine appropriate salary structure midpoints - Direct Labor

29. DL - Average Salary

30. Dl- Total Compensation

32. 1999 INFLATION / MERIT APPROACH

33. 1999 INFLATION /Salary Evolution

35. 1999 Merit Grid Recommendation

46. Exempt Last Performance Rating Distribution

47. Non-Exempt Last Performance Rating Distribution

48. Market data used in the analysis as of Towers Perrin August-1998 NOVELL ORACLE PROGRESS SOFTWARE QAD QUALCOMM RAYCHEM SAP SIEMENS SILICOM GRAPHICS SUN MICROSYSTEMS TEKTRONIX UNISYS VARIAN XEROX HEWLETT-PACKARD IBM INFORMIX INTEL JOHNSON & JOHNSON JD EDWARDS KODAK LOTUS LUCENT TECHNOLOGIES MICROSOFT NCR NEC NEWBRIDGE NORTHERN TELECOM 3COM ALCATEL ANIXTER AT&T BAAN BAY NETWORKS BCP TELECOMUNICAÇÕES CISCO SYSTEMS COMSAT DIGITAL DUPONT EMC GESSY LEVER GLOBAL ONE Survey Data Benchmark Companies

54. Telecommunication sector will continue to grow over the next 2 years. Increasing search for top-notch individuals. Market Trends Led by forward thinking domestic and global companies, larger employers in South America region are eager to adopt human resources and compensation methods from North America and elsewhere. Employers are looking for ways to vary the compensation mix. Variable pay will become more common for broader groups of employees. Large employers will increasingly seek to improve company performance through enhanced performance measurement and management systems, including competency-based human resources applications. The focus in this region will continue to be on controlling total compensation costs, as is demonstrated by the introduction of company wide profit-sharing plans and interest in the cost/value of total remuneration in general, human resources programs are expected to become more sophisticated rapidly.

55. Market Trends