UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
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Unisys Corporation
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Unisys Corporation
801 Lakeview Drive, Suite 100
Blue Bell, PA 19422
March 17, 201729, 2019
Dear Fellow Stockholder:
It is my pleasure to invite you to the Unisys 20172019 Annual Meeting of Stockholders. This year’s meeting will be held on Wednesday, April 26, 2017,Friday, May 10, 2019, at the JW Marriott Essex House New York,Courtyard Philadelphia Downtown, which is located at 160 Central Park South21 North Juniper Street in New York, New York.Philadelphia, Pennsylvania. The meeting will begin at 8:00 a.m., local time.
Unisys entered 2016 intensely focused on executing against the strategic plan we had developed the year before.2018 with momentum, including strong Services backlog growth as ofyear-end 2017. We achieved significant progressare excited that this momentum and continued execution against our plan, and as a result delivered strong resultsstrategy has resulted in the first full year of revenue growth for the year that reflect ongoing progress incompany since 2003 and for Services since 2006. We also achieved or exceeded guidance on all metrics for the third-consecutive year. In addition to growing revenue, our strategic transition of the business. We began the year by providing financial guidance for revenue,non-GAAP operating profit margin and adjusted free cash flow for the first time in more thanEBITDA margin also both expanded, and we saw a decade. I am pleased to report that asmodest reduction of the end of the year, we met our guidance for both revenue andnon-GAAP operating profit margin, and exceeded itunfunded pension liability. We remain focused on adjusted free cash flow. We also continued to executecontinuing execution against our verticalgo-to-marketstrategy (and saw revenue growth for the year on a constant-currency basis withinof targeting industries where we have deep expertise and leverageable IP and related solutions, while also using security to differentiate our key focus industries), launched new tailored,software-led solutions, and continued to innovate and see improved sales trends with respect to Unisys Stealth®. We enhanced the efficiency of the business,offerings in both our Services and Technology delivery teams, resulting in higher gross margins, and also reduced our sales, general and administrative (SG&A) costs as a percentage of revenue. Additionally, we reduced capex needs by continuing our transition to a more asset-lite model, which also contributed to significantly improved cash flow.2019.
We are pleased to continue our practice of making proxy materials available to our stockholders over the Internet. We believe that doing so allows us to provide our stockholdersyou with the information theyyou need, while reducing our printing and mailing costs and helping to conserve natural resources. Stockholders who continue to receive paper copies of proxy materials may help us to reduce costs further by opting to receive future proxy materials by email. You may register for electronic delivery of future proxy materials by following the instructions on either the enclosed proxy/voting instruction card or the Notice of Internet Availability of Proxy Materials that you received in the mail.
Your vote is important. Whether or not you plan to attend the annual meeting, I urge you to take a moment to vote on the items in this year’s proxy statement. Voting takes only a few minutes, and it will ensure that your shares are represented at the meeting.
Sincerely,
Peter A. Altabef
President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 26, 2017May 10, 2019
Unisys Corporation will hold its 20172019 Annual Meeting of Stockholders at the JW Marriott Essex House New York, 160 Central Park South, New York, New York,Courtyard Philadelphia Downtown, 21 North Juniper Street, Philadelphia, Pennsylvania, on Wednesday, April 26, 2017,Friday, May 10, 2019, at 8:00 a.m., local time, to:
1. | approve an amendment to the Company’s Bylaws to permit the Company’s Board of Directors to extend the mandatory retirement age for directors from 72 years old to 74 years old under certain circumstances; |
2. | elect eleven directors; |
3. | ratify the selection of the Company’s independent registered public accounting firm for |
2019;
4. | hold an advisory vote to approve executive compensation; |
5. | approve the |
6. | transact any other business properly brought before the meeting. |
Only record holders of Unisys common stock at the close of business on February 27, 2017March 11, 2019 will be entitled to vote at the annual meeting.
By Order of the Board of Directors, | ||
Gerald P. Kenney | ||
Senior Vice President, General Counsel | ||
and Secretary | ||
Blue Bell, Pennsylvania | ||
March |
Important Notice Regarding the Availability of Proxy Materials for the Stockholder
Meeting to be Held on April 26, 2017:May 10, 2019:
The Company’s proxy statement and annual report are available at
www.proxyvote.com
Your vote is important. Whether or not you plan to attend the annual meeting, please promptly submit your proxy or voting instructions by Internet, telephone, or mail. For specific instructions on how to vote your shares, please refer to the instructions found on the Notice of Internet Availability of Proxy Materials you received in the mail or, if you received a paper copy of the proxy materials, the enclosed proxy/voting instruction card.
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ANNUAL MEETING OF STOCKHOLDERS
April 26, 2017May 10, 2019
The Board of Directors of Unisys Corporation (the “Board of Directors” or the “Board”) solicits your proxy for use at the 20172019 Annual Meeting of Stockholders to be held on April 26, 2017May 10, 2019 and at any adjournments or postponements thereof. At the annual meeting, stockholders will be asked to (1) approve an amendment to the Company’s Bylaws to permit the Company’s Board of Directors to extend the mandatory retirement age for directors from 72 years old to 74 years old under certain circumstances, (2) elect directors, (2)(3) ratify the selection of the Company’s independent registered public accounting firm, (3) approve an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock from 100,000,000 to 150,000,000; (4) approve, on an advisory basis, the compensation of the Company’s named executive officers, (5) vote, on an advisory basis, on the frequency with which the Company should hold an advisory vote on executiveapprove a new long-term incentive and equity compensation plan, and (6) transact any other business properly brought before the meeting.
The record date for the annual meeting is February 27, 2017.March 11, 2019. Only holders of record of Unisys common stock as of the close of business on the record date are entitled to vote at the meeting. On the record date, 50,397,10151,762,063 shares of common stock were outstanding. The presence, in person or by proxy, of a majority of those shares will constitute a quorum at the meeting.
This proxy statement, the proxy/voting instruction card and the annual report of Unisys, including the financial statements for 2016,2018, are being made available to stockholders on or about March 17, 2017.29, 2019.
Internet Availability of Proxy Materials; Multiple Sets of Proxy Materials
Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the “SEC”), the Company has elected to provide stockholders access to its proxy materials over the Internet. Accordingly, the Company sent a Notice of Internet Availability of Proxy Materials (the “Notice”) to most stockholders (other than those who previously requested electronic or paper delivery of proxy materials). The Notice includes instructions on how to access the proxy materials over the Internet, how to vote online and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.
Choosing to receive your future proxy materials by email will save the Company the cost of printing and mailing documents to you and will reduce the impact of the Company’s annual meetings on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.
If you hold shares of Unisys common stock in more than one account, you may receive more than one Notice or more than one set of proxy materials. Please be sure to vote all the shares that you own.
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Voting Procedures and Revocability of Proxies
Your vote is important. Shares may be voted at the annual meeting only if you are present in person or represented by proxy. You can vote by proxy over the Internet by following the instructions provided in the Notice, or, if you request printed copies of the proxy materials by mail, you can also vote by submitting a proxy by mail or by telephone by following the instructions provided on the proxy/voting instruction card. If you have previously elected to receive proxy materials over the Internet, you should have already received email instructions on how to vote electronically.
You may revoke your proxy at any time before it is exercised by writing to the Corporate Secretary of Unisys, by timely delivery of a properly executed later-dated proxy (including an Internet or telephone vote) or by voting in person at the meeting.
The method by which you vote will in no way limit your right to vote at the meeting if you later decide to attend in person. If you are the beneficial owner of shares held in “street name” by a bank, broker or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record if you wish to vote in person at the meeting.
If you are a stockholder of record and you properly complete, sign and return your proxy, and do not revoke it, the proxy holders will vote your shares in accordance with your instructions. If your signed and returned proxy gives no instructions, the proxy holders will vote your shares (1) FOR the proposal to amend the Company’s Bylaws to permit the Company’s Board of Directors to extend the mandatory retirement age for directors from 72 years old to 74 years old under certain circumstances, (2) FOR the election of directors, (2)(3) FOR the ratification of the selection of independent registered public accounting firm, (3) FOR the proposal to amend the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of common stock, (4) FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers, (5) forFOR the approval on an advisory basis, of an advisory vote on executive compensation EVERY YEARthe Unisys Corporation 2019 Long-Term Incentive and Equity Compensation Plan, and (6) in their discretion on any other matters that properly come before the annual meeting.
If you are a beneficial owner of shares held in street name and you do not provide specific voting instructions to the organization that holds your shares, the organization will be prohibited under the current rules of the New York Stock Exchange (the “NYSE”) from voting your shares on“non-routine” matters. This is commonly referred to as a “brokernon-vote”. The election of directors, the advisory resolution regarding the compensation of the Company’s named executive officers and the vote regardingapproval of the frequency of advisory votes on executivenew long-term incentive and equity compensation plan are considered“non-routine” matters and therefore may not be voted on by your bank or broker absent specific instructions from you. The amendment to the Company’s Bylaws to permit the Company’s Board of Directors to extend the mandatory retirement age for directors from 72 years old to 74 years old under certain circumstances and the ratification of the selection of independent registered public accounting firm and the proposal to amend the Company’s Restated Certificate of Incorporation areis considered “routine” and therefore may be voted on by your bank or broker without instructions from you. Please instruct your bank or broker so your vote can be counted.
If you are a participant in the Unisys Savings Plan, the proxy/voting instruction card will serve as voting instructions to the plan trustee for shares of Unisys common stock credited to your account as of February 27, 2017.March 11, 2019. The trustee will vote those shares in accordance with your instructions if it receives your completed proxy by April 23, 2017.May 7, 2019. If the proxy is not timely received, or if you give no instructions on a matter to be voted upon, the trustee will vote the shares credited to your account in the same proportion as it votes those shares for which it received timely instructions from other participants.
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Each share of Unisys common stock outstanding on the record date is entitled to one vote on each matter to be voted upon.
Amendment to Bylaws (Item 1). The affirmative vote of not less than 80% of the outstanding shares of common stock entitled to vote is required to approve the proposal to amend the Company’s Bylaws to permit the Company’s Board of Directors to extend the mandatory retirement age for directors from 72 years old to 74 years old under certain circumstances. Abstentions will have the same effect as a vote “Against” the proposal. There will be no broker non-votes for the proposal to approve the amendment to the Company’s Bylaws since brokers will be entitled to vote on this “routine” proposal.
Election of Directors (Item 1)2). Directors will be elected by the vote of a majority of the votes cast at the meeting. This means that a nominee will be elected if the number of votes cast “FOR” his or her election exceeds 50% of the total number of votes cast with respect to that nominee’s election. Votes cast with respect to the election of directors do not include abstentions and brokernon-votes.
Independent Registered Public Accounting Firm (Item 2)3). The proposal to ratify the selection of the Company’s independent registered public accounting firm will be approved if it receives the affirmative vote of a majority of shares present, in person or by proxy, and entitled to vote on the matter. Any shares not voted by abstention or otherwiseAbstentions will have the same effect as a vote “Against” the proposal. There will be no brokernon-votes for the proposal to ratify the selection of the Company’s independent registered public accounting firm since brokers will be entitled to vote on this “routine” proposal.
Amendment to Restated Certificate of Incorporation (Item 3). The proposal to amend the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock will require the affirmative vote of a majority of the outstanding shares of common stock entitled to vote. Any shares not voted by abstention or otherwise will have the same effect as a vote “Against” the proposal. There will be no brokernon-votes for the proposal to amend the Company’s Restated Certificate of Incorporation since brokers will be entitled to vote on this “routine” proposal.
Advisory Vote to Approve Executive Compensation (Item 4). The advisory resolution to approve executive compensation will be approved if it receives the affirmative vote of a majority of shares present, in person or by proxy, and entitled to vote on the matter. Any shares not voted by abstention or otherwiseAbstentions will have the same effect as a vote “Against” the proposal. Brokernon-votes will not be included in the vote totals and therefore will have no effect on the advisory vote on executive compensation.
Advisory Vote on Frequency of Advisory Vote on Executive Compensation (Item 5). Stockholders will have the option of selecting a frequency of every year, every two years or every three years for the advisory vote on executive compensation. The Company will consider the alternative receiving the greatest number of votes as the frequency the stockholders approve. Abstentions and brokernon-votes will therefore have no effect on the vote.
The advisory votesvote to approve executive compensation (Item 4) and on the frequency of the advisory vote on executive compensation (Item 5) areis not binding on the Company. However, the Company will review and consider the results of thesethis advisory votesvote when making future executive compensation decisionsdecisions.
2019 Long-Term Incentive and when making determinations asEquity Compensation Plan (Item 5). The proposal to whenapprove a new long-term incentive and equity compensation plan will be approved if it receives the Company will again submit the advisoryaffirmative vote of a majority of shares present, in person or by proxy, and entitled to vote on executive compensation to stockholders for approval.
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ELECTION OF DIRECTORSBYLAWS AMENDMENT TO PROVIDE FLEXIBILITY TO BOARD TO INCREASE DIRECTOR MANDATORY RETIREMENT AGE TO AGE 74 UNDER CERTAIN CIRCUMSTANCES
(Item 1)
The Board of Directors has adopted, declared advisable and is submitting for stockholder approval an amendment to the Company’s Bylaws to permit the Company’s Board of UnisysDirectors to extend the mandatory retirement age for directors from 72 years old to 74 years old under certain circumstances. The adoption of this amendment requires approval of not less than 80% of the outstanding shares of common stock entitled to vote.
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The final sentence of Article II, Section 5 of the Company’s Bylaws currently reads as follows:
“No person shall be elected a director of the Corporation (the “Boardafter having attained the age of Directors”seventy-two years.”
This Bylaw provision was adopted and approved by the Board and holders of more than 80% of the outstanding shares of the Company’s common stock entitled to vote in 2015 when the mandatory retirement age was increased from 70 years old to 72 years old with 91.4% of the Company’s outstanding shares voting in favor of the amendment. Since that time, the Board has continued to monitor trends regarding mandatory retirement ages for directors and has noted that the trend toward an older retirement age has continued in recent years. According to the 2018 Spencer Stuart U.S. Board Index, among S&P 500 boards with a mandatory retirement age, more than half set the retirement age above 73 years old, with 43.5% setting it at 75 or older, an increase from 42% in 2017 and just 11% in 2007. The Spencer Stuart Index also found that among Information Technology companies in the “Board”)S&P 500 the mean retirement age is 73 years old and the median is 75 years old.
The Board believes that there are circumstances when service by a director beyond age 72 may be in the best interests of the Company and its stockholders. In particular, the Company could lose the benefit it derives from having directors who are valuable members of the Board of Directors with deep knowledge of the Company’s history and operations or who have a unique skill set or expertise. The Board also continues to believe that a mandatory retirement age for directors is appropriate and that in many instances, the appropriate mandatory retirement age is 72 years old. In order to increase the Board’s flexibility to retain highly valued directors who have reached age 72, the Board believes that it should have the flexibility to permit directors to stand for reelection upon the request of the Nominating and Corporate Governance Committee and with the approval of at leasttwo-thirds of the directors then in office (excluding the director in question) at up to two annual stockholders meetings after having attained age 72. With this increased flexibility, the Board and Nominating and Corporate Governance Committee can assess the engagement level and value brought to the Corporation of directors who have reached age 72 or age 73 to ensure that the Board and the Corporation do not lose the benefits brought by highly engaged, highly valuable Board members with a skill set that may be difficult to replace. Even with this increased flexibility, once a director has reached age 74, that director will not be able to stand for reelection.
If the proposed amendment is approved by stockholders, the final sentence of Article II, Section 5 of the Company’s Bylaws will be amended to read as follows:
“No person shall stand for election as a director of the Corporation after having attained the age ofseventy-two years; provided that, upon the request of the Nominating and Corporate Governance Committee and with the approval of at leasttwo-thirds of the directors then in office (excluding such director) a director may stand for reelection at up to two annual stockholders meetings after having reached such age. Notwithstanding the foregoing, in no event shall a person stand for election as a director of the Corporation after having attained the age of seventy-four years.”
If approved by the stockholders, this amendment to the Company’s Bylaws will become effective immediately upon approval, and the Board of Directors will also make conforming changes to its corporate governance guidelines regarding the retirement age for directors.
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The Board of Directors recommends a vote “FOR” the proposal to amend the Company’s Bylaws to permit the Company’s Board of Directors to extend the mandatory retirement age for directors from 72 years old to 74 years old under certain circumstances.
(Item 2)
The Board currently consists of teneleven members, each of whose term expires at the annual meeting. Ms. Leslie Kenne will retire from the Board at the annual meeting. Each of the remaining nineeleven directors has been nominated for reelection for a term expiring at the 20182020 annual meeting. Each of the nominees has agreed to serve as a director if elected, and the Company believes that each nominee will be available to serve. However, the proxy holders have discretionary authority to cast votes for the election of a substitute should any nominee not be available to serve as a director.
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The following charts highlight the balance in age and the diversity in tenure, gender and ethnicity of our director nominees. Also highlighted are the variety of background and experience of the director nominees. The Board believes that this balance and mix of diversity, background and experience will help bring broad and valuable perspectives to the Board that will lead to a well-functioning board of directors.
AGE
TENURE
DIVERSITY | INDEPENDENCE | |
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BACKGROUND AND EXPERIENCE
Key | ||
Senior Leadership | Experience serving in a senior leadership role of a complex organization | |
Public Company Board | Experience as a board member of another publicly-traded company | |
CEO | Experience serving as a Chief Executive Officer of a publicly-traded company | |
Financial Expertise | Experience or expertise in finance, accounting, financial management or financial reporting | |
Technology | Experience or expertise in the information technology industry | |
Industry Sectors | Knowledge of or experience in one or more of the client industry sectors or growth segments that the | |
International | Experience with global business operations or with doing business internationally |
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Information Regarding Nominees
The names and ages of the nominees, their principal occupations and employment during the past five years, and other information regarding them are as follows.
The Board of Directors recommends a vote “FOR” all nomineesnominees.
PETER A. ALTABEF
Age:
Director Since: 2015
Unisys Chairman, President and CEO | Professional Experience:
Mr. Altabef
Attributes, Skills and Qualifications:
Mr. Altabef has more than |
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JARED L. COHON
Age:
Director Since: 2013
Compensation Committee Nominating and Corporate Governance Committee
Independent | Professional Experience:
Dr. Cohon is President Emeritus and University Professor of Civil and Environmental Engineering and Engineering and Public Policy at Carnegie Mellon University. He served as President of Carnegie Mellon from 1997 until 2013. During this period, he led the university’s global expansion while enhancing programs in information technology, diversity, international education, economic development and other areas. Prior to joining Carnegie Mellon, Dr. Cohon served as Dean of the School of Forestry and Environmental Studies at Yale University. Before that, he was an associate dean of engineering and vice provost for research at Johns Hopkins University. Dr. Cohon currently serves as a director of Ingersoll-Rand, plc. From 1999 to 2008, he served as a director of Trane, Inc. (formerly American Standard Companies, Inc.) and from 2010 to 2016, he served as director of Lexmark International, Inc.
Attributes, Skills and Qualifications:
Dr. Cohon brings to the Board both the management expertise and the unique perspective on technological matters gained from serving as the president of a global research university known for its leadership in technology programs. This, combined with his distinguished academic career, his international experience and the experience he has gained from serving as a director of multiple publicly traded companies make him a valued contributor to our Board. |
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NATHANIEL A. DAVIS
Age:
Director Since: 2011 Lead Director
Nominating and Corporate Governance Committee
Independent | Professional Experience:
Mr. Davis is the Chairman of the Board and Chief Executive Officer of K12 Inc., a provider of proprietary curricula andon-line education programs for students in kindergarten through high school. He |
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Attributes, Skills and Qualifications:
Mr. Davis brings managerial and operational expertise to our Board. This expertise, as well as his extensive experience in the communications industry, brings a valuable perspective to our Board as Unisys continues its work to strengthen its competitive and financial profile in a changing IT industry. |
MATTHEW J. DESCH Age: 61 Director Since: 2019 Independent | Professional Experience: Mr. Desch has served as Chief Executive Officer and a director of Iridium Communications Inc., a global mobile, voice and data satellite communications company, since 2009. He previously served as Chief Executive Officer of Iridium’s predecessor, Iridium Holdings LLC, beginning in 2006. Prior to joining Iridium, Mr. Desch served as Chief Executive Officer of Telcordia Technologies, Inc., a telecommunications software services provider that is now part of Ericsson. Previously, he spent 13 years at Nortel Networks Corporation, including as president of the company’s global wireless networks business, and as President of Global Carriers. Mr. Desch serves on the President’s National Security Telecommunications Advisory Committee. Attributes, Skills and Qualifications: Mr. Desch’s deep understanding of critical infrastructure from his 35 years in the telecommunications industry brings Unisys a unique and valuable perspective regarding the security challenges faced around the globe. In addition, his expertise with the Internet of Things (IoT) will help Unisys drive its Safe Cities initiative, which focuses on supporting governments around the world in protecting the security ofIOT-enabled devices. | |||
DENISE K. FLETCHER
Age:
Director Since: 2001
Audit and Finance Committee, Chair Compensation Committee
Independent | Professional Experience:
Ms. Fletcher is a former Executive Vice President, Finance of Vulcan Inc., an investment and project company, a position she held from 2005 to 2008. From 2004 to 2005, she served as Chief Financial Officer of DaVita, Inc., a provider of dialysis services in the United States. From 2000 to 2003, she was Executive Vice President and Chief Financial Officer of MasterCard International, an international payment solutions company. Before joining MasterCard, she served as Chief Financial Officer of Bowne Inc., a global document management and information services provider. Ms. Fletcher is a director of Inovalon, Inc., a publicly-traded technology company, and a member of the Group Governance Council of Mazars Group, an international organization that specializes in audit, accounting, tax, legal, and advisory services. She is also a director of Enterra Holdings, Ltd., which through its subsidiary, Golder Associates, provides global ground engineering and environmental services. During 2004 and 2005, she served as a director of Sempra Energy and of Orbitz, Inc. |
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Attributes, Skills and Qualifications:
As an experienced financial and operational leader with companies in a variety of industries, Ms. Fletcher brings a broad understanding of the strategic priorities of diverse industries, |
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coupled with knowledge of financial and tax matters and financial reporting, and experience in investments and acquisitions. In addition, Ms. Fletcher’s years at MasterCard, Bowne and |
PHILIPPE GERMOND
Age:
Director Since: 2016
Nominating and Corporate Governance Committee, Chair
Independent | Professional Experience:
Mr. Germond is the former Chairman of the Management Board (the equivalent of
Attributes, Skills and Qualifications:
As a successful leader in sales, operations and governance, Mr. Germond brings broad executive experience in a number of industries. His experience implementing transformation projects and making companies more digital and customer-oriented is helpful to Unisys as we continue our transformation and bring enhanced value to our clients. In addition, Mr. Germond’s vast global experience is particularly useful for Unisys, a company with about half of its revenue from international operations and approximately 30% of its revenue from Europe. |
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LISA A. HOOK Age: 60 Director Since: 2019 Independent | Professional Experience: Ms. Hook served as President and Chief Executive Officer of Neustar Inc., a global information services provider, from 2010 to July 2018 and as President and Chief Operating Officer from 2008 to 2010. She joined the Neustar Board in 2010 and continues to serve the company in that capacity. Ms. Hook was President and Chief Executive Officer of Sunrocket, Inc., a voice over IP service provider, from 2006 to 2007 and held several executive-level posts at America Online, Inc. from 2001 to 2004. Previously, she was a partner at Brera Capital Partners, a global private equity investment firm; was Managing Director of Alpine Capital Group, LLC., an investment banking firm; held several executive positions at Time Warner, Inc., a diversified media company; was legal advisor to the Chairman of the Federal Communications Commission; and was a senior attorney at Viacom International, Inc., a diversified media company. Ms. Hook also serves on the Board of Directors of Philip Morris International, an international tobacco company, and Worldplay Inc., a global payment processing firm. Ms. Hook was a senior independent director of RELX PLC and RELX NV, providers of information solutions, from 2006 to 2016. Previously she served as a director of Covad Communications, Time Warner Telecom, Inc. and National Geographic Ventures. Ms. Hook has served on the National Security Telecommunications Advisory Committee since 2012. Attributes, Skills and Qualifications: Ms. Hook brings to Unisys more than three decades of management experience in media, entertainment and informations businesses. In addition, her experience in leading Neustar and expertise in the field of analytics will help guide Unisys and contribute to the Company’s ongoing initiative to embed leading, real-time analytics in its solutions. |
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DEBORAH LEE JAMES Age: 60 Director Since: 2017 Compensation Committee Nominating and Corporate Governance Committee Independent | Professional Experience: Ms. James served as the U.S. Secretary of the Air Force from 2013 to January 2017. In this role, she was responsible for the affairs of the Department of the Air Force. Prior to serving as Secretary of the Air Force, from 2002 to 2013, Ms. James held a variety of increasingly senior positions as Science Applications International Corporation (SAIC), including Senior Vice President and Director of Homeland Security and President of SAIC’s Technical and Engineering Sector. Previously, she was Executive Vice President and Chief Operating Officer at Business Executives for National Security from 2000 to 2001 and Vice President of International Operations and Marketing at United Technologies from 1998 to 2000. Ms. James has also served as the Assistant Secretary of Defense for Reserve Affairs, Assistant to the Secretary for Legislative Affairs and as a professional staff member on the House Armed Services Committee. Ms. James is currently a director of Textron Inc. and serves on the Board of Trustees of Noblis, Inc. Attributes, Skills and Qualifications: Ms. James brings more than 30 years of senior homeland and national security experience in the federal government and the private sector to Unisys. Her experience leading the U.S. Air Force gives her a valuable perspective regarding cyber, logistics and border security. In addition, Ms. James’ experience in the private sector with the transformative nature of digital products and solutions is an important asset to the Board as Unisys launches its next generation of offerings. | |||
PAUL E. MARTIN
Age:
Director Since: 2017 Audit and Finance Committee
Independent | Professional Experience:
Mr. Martin is
Attributes, Skills and Qualifications:
With extensive executive management experience across the entire IT industry, Mr. Martin understands the IT challenges that Unisys customers face. In addition, the Board will greatly benefit from Mr. Martin’s international experience and his deep life sciences and healthcare expertise, a core industry area of focus for the Company. |
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REGINA PAOLILLO Age: 60 Director Since: 2018 Audit and Finance Committee Independent | Professional Experience: Ms. Paolillo has served as Executive Vice President, Chief Financial & Administrative Officer of TTEC Holdings, Inc. (formerly known as TeleTech Holdings, Inc.), a global customer experience company that designs, builds and operates omnichannel customer experiences on behalf of leading brands across the world, since 2011. Between 2009 and 2011, Ms. Paolillo was the Chief Financial Officer and Executive Vice President for Enterprise Services at TriZetto Group, Inc. While at General Atlantic from 2007 to 2008, she supported the investment teams and portfolio companies in the areas of financial, operations and human capital. Prior to General Atlantic, Ms. Paolillo served as Executive Vice President of the Revenue Cycle and Mortgage Services Division at Genpact, following its acquisition of Creditek. Prior to this acquisition, Ms. Paolillo was Creditek’s Chief Financial Officer and Chief Operating Officer before becoming the company’s Chief Executive Officer from 2003 to 2005. She has also held finance, operations and executive leadership positions at Gartner, Inc., Productivity, Inc., Citibank and Bristol-Myers Squibb. Ms. Paolillo began her career as an auditor at Price Waterhouse. Ms. Paolillo serves as director and head of the audit committee of Welltok, Inc., an enterprise software as a service company in the consumer health market. Attributes, Skills and Qualifications: As a certified public accountant and experienced financial and operational leader with a variety of technology and services companies, Ms. Paolillo brings a broad understanding of the strategic priorities of technology and services organizations, coupled with deep knowledge of financial and accounting matters and financial reporting as well as experience in investments and acquisitions. |
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LEE D. ROBERTS
Age:
Director Since: 2011
Compensation Committee,Chair Audit and Finance Committee
Independent | Professional Experience:
Mr. Roberts is Chief Executive Officer and President of BlueWater Consulting, LLC. Prior to that, he was general manager and vice president for document, content and business process management at IBM Corporation. Mr. Roberts was with FileNET Corporation from 1997 until its acquisition by IBM in 2006, serving as its Chairman and Chief Executive Officer from 2000 to 2006, its President and Chief Executive Officer from 1998 to 2000, and President and Chief Operating Officer from 1997 to 1998. Prior to FileNET, Mr. Roberts spent twenty years at IBM, where he held numerous senior management, sales and marketing roles. He is a director of Inovalon, Inc. and QAD Inc.
Attributes, Skills and Qualifications:
Mr. Roberts brings a deep understanding of the IT industry, technology trends and customer requirements to the |
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Board Meetings; Attendance at Annual Meetings
The Board of Directors held eight meetings in 2016.2018. During 2016,2018, all directors attended at least 75% of the total number of meetings of the Board of Directors and standing committees on which they served (held during the period when the director served).
It is the Company’s policy that all directors should attend the annual meeting of stockholders. All of the Company’s current directors who were directors at the time of the 20162018 annual meeting attended that meeting.
All of the Company’s directors and nominees for director other than Mr. Altabef meet the independence requirements prescribed by the NYSE and, in the case of members of the Audit and Finance Committee, also meet the audit committee independence requirements prescribed by the SEC. In assessing whether a director or nominee has a material relationship with Unisys (either directly or as a partner, stockholder or officer of an organization that has a relationship with Unisys), the Board uses the criteria outlined below in paragraph 2 of “Corporate Governance Guidelines”. Allnon-employee directors met these criteria in 2016.2018.
The Board of Directors has a standing Audit and Finance Committee, Compensation Committee and Nominating and Corporate Governance Committee. The specific functions and responsibilities of each committee are set forth in its charter, which is available on the Company’s web site at www.unisys.com/governance and is also available in print to any stockholder who requests it.
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The current composition of each standing committee is set forth below:
Director | Audit and Finance Committee | Compensation Committee | Nominating and Corporate Governance Committee | ||||||||||||||||||
Peter A. Altabef | |||||||||||||||||||||
Jared L. Cohon | X | X | |||||||||||||||||||
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Nathaniel A. Davis | X | ||||||||||||||||||||
Matthew J. Desch(1) | |||||||||||||||||||||
Denise K. Fletcher | Chair | X | |||||||||||||||||||
Philippe Germond | |||||||||||||||||||||
| |||||||||||||||||||||
Deborah Lee James | X | X | |||||||||||||||||||
Paul E. Martin | X | ||||||||||||||||||||
Regina Paolillo | X | ||||||||||||||||||||
Lee D. Roberts | X | Chair | |||||||||||||||||||
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(1) | Mr. |
AUDIT AND FINANCE COMMITTEE |
Members: Ms.
Number of Meetings: 9
Independence and Qualifications: The Board has determined that each of Ms.
Purpose: The Audit and Finance Committee assists the Board in its oversight of (1) the integrity of the Company’s financial statements and its financial reporting and disclosure practices, (2) the soundness of its systems of internal controls regarding financial reporting and accounting compliance, (3) the independence and qualifications of the Company’s independent registered public accounting firm, (4) the performance of the Company’s internal audit function and its independent registered public accounting firm, (5) the Company’s compliance with legal and regulatory requirements and the soundness of its ethical and environmental compliance programs, (6) the Company’s risk assessment and risk management policies, (7) the Company’s financial affairs, including its capital structure, financial arrangements, capital spending and acquisition and disposition plans and (8) the management and investment of funds in the pension, savings and welfare benefit plans sponsored by the Company. The Audit and Finance Committee is also responsible for preparing the report required by the SEC to be included in the Company’s annual proxy statement. |
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COMPENSATION COMMITTEE |
Members: Dr. Cohon, Ms.
Number of Meetings: 6
Independence and Qualifications: The Board has determined that each of Dr. Cohon, Ms.
Purpose: The Compensation Committee (1) oversees the compensation of the Company’s elected executive officer and other executives who report directly to the Chief Executive Officer, (2) oversees the compensation-related policies and programs involving the Company’s executive management and the level of benefits of officers and key employees and (3) reviews the senior executive succession plan and the senior executive leadership development process as presented by the Chief Executive Officer. The committee regularly reviews and approves the Company’s executive compensation strategy and principles to ensure that they are aligned with the Company’s business strategy and objectives and with stockholder interests. Under its charter, the Compensation Committee annually reviews and approves goals and objectives relevant to the compensation of the Chief Executive Officer, evaluates the performance of the Chief Executive Officer in light of those goals and objectives and makes recommendations to the independent members of the Board concerning the compensation level of the Chief Executive Officer. The committee also annually reviews and approves compensation levels of the other elected officers. In this regard, the committee solicits input from the Company’s Chief Executive Officer regarding the compensation of those executives who report directly to him. The Compensation Committee also reviews and recommends to the Board the adoption of director compensation programs. The Company’s guidelines regarding the compensation of directors are described more fully in paragraph 11 of “Corporate Governance Guidelines” below. Under its charter, the Compensation Committee also annually reviews management’s assessment of risk as it relates to the Company’s compensation arrangements. As is discussed more fully below in “Compensation Discussion and Analysis”, the Compensation Committee regularly receives reports and recommendations from management and from the committee’s outside compensation consultant to assist it in carrying out its responsibilities. In
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NOMINATING AND CORPORATE GOVERNANCE COMMITTEE |
Members: Dr. Cohon, Mr. Davis,
Number of Meetings:
Independence and Qualifications: The Board has determined that each of Dr. Cohon, Mr. Davis,
Purpose: The Nominating and Corporate Governance Committee identifies and reviews candidates and recommends to the Board of Directors nominees for membership on the Board of Directors. The director nomination process and the factors considered by the committee when reviewing candidates are described below in “Director Nomination Process.” It also oversees the Company’s corporate governance. As a part of this responsibility, the Nominating and Corporate Governance Committee oversees the evaluation of the Board of Directors, including reviewing annually with the Board the independence of outside directors and annually facilitating the Board’s self-assessment of its performance. |
As part of the nomination process, the Nominating and Corporate Governance Committee is responsible for determining the appropriate skills and characteristics required of new Board members in the context of the currentmake-up of the Board and for identifying qualified candidates for Board membership. In so doing, the Nominating and Corporate Governance Committee considers, with input from the Board, those factors it deems appropriate, such as independence, experience, expertise, strength of character, mature judgment, leadership ability, technical skills, diversity, age and the extent to which the individual would fill a present need on the Board. The aim is to assemble a Board that is strong in its collective knowledge and that consists of individuals who bring a variety of complementary attributes and who, taken together, have the appropriate skills and experience to oversee the Company’s business. In February 2017,Since the last annual meeting, the Nominating and Corporate Governance Committee recommended, and the Board elected, onetwo new director, directors—Mr. Martin.Desch in January 2019 and Ms. Hook in February 2019. As part of the selection process, the Board considered hisMr. Desch’s extensive executive management experience acrossin government and in travel and transportation and took into account Ms. Hook’s experience in leading Neustar and her expertise in the entire IT industry, his international experience and his deep life sciences and healthcare expertise.field of analytics.
As set forth above, the Nominating and Corporate Governance Committee considers diversity as one of a number of factors in identifying nominees for director. It does not, however, have a formal policy in this regard. The committee views diversity broadly to include diversity of experience, skills and viewpoint as well as traditional diversity concepts such as race and gender.
The Nominating and Corporate Governance Committee receives suggestions for new directors from a number of sources, including Board members. It also may, in its discretion, employ a third-party search firm to assist in identifying candidates for director. The committee will also consider recommendations for Board membership received from stockholders and other qualified sources. Recommendations on director candidates must be in writing and addressed to the Chair of the Nominating and Corporate Governance Committee, c/o Corporate Secretary, Unisys Corporation, 801 Lakeview Drive, Suite 100, Blue Bell, Pennsylvania 19422.
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The full Board is responsible for final approval of new director candidates, as well as the nomination of existing directors for reelection. With respect to existing directors, prior to making its recommendation to the full Board, the Nominating and Corporate Governance Committee, in consultation with the Chairman of the Board, President and Chief Executive Officer and lead director, reviews each director’s continuation on the Board as a regular part of the annual nominating process. Specific information on the qualifications of each of the Company’s directors is included above.
Stockholders and other interested parties may send communications to the Board of Directors or to thenon-employee directors as a group by writing to them c/o Corporate Secretary, Unisys Corporation, 801 Lakeview Drive, Suite 100, Blue Bell, Pennsylvania 19422. All communications directed to Board members will be delivered to them.
As set forth in paragraph 4 of “Corporate Governance Guidelines” below, theThe Board believes that it should have the flexibility to make the selection of Chairman of the Board and Chief Executive Officer in the way that it believes best to provide appropriate leadership for the Company at any given point in time. Therefore, the Board does not have a policy, one way or the other, on whether the same person should serve as both the Chief Executive OfficerCEO and Chairman of the Board or, if the roles are separate, whether the Chairman should be selected from thenon-employee directors or should be an employee. OverThe Company’s corporate governance guidelines require the last twelve years, the Company has had each of the following leadership structures, reflectingBoard to elect a lead director from its circumstances at the time: separate Chairman and Chief Executive Officer, with the Chairman being a member of the Company’s management (2005); combined Chairman and Chief Executive Officer (2008 to 2014); and separatenon-employee Chairman and Chief Executive Officer (2006 to 2008 and 2015 to present). Pursuant to the Company’s governance guidelines,independent directors whenever the Chairman is an employee of the Company,Company.
When Mr. Altabef began as the Company’s CEO in January 2015, the Board electsdetermined to separate the positions of Chairman and CEO as Mr. Altabef transitioned into the role and the Board appointed another director asnon-executive Chairman to provide the Board with independent leadership during the CEO transition and to enable Mr. Altabef, as incoming CEO, to concentrate on the Company’s business operations.
As the Chairman at the time prepared to retire from the Board last year, the Board conducted anin-depth review of its leadership structure and considered the individuals best-suited to lead the Board as the Company implements and executes its business strategy. As a part of this review, the Nominating and Corporate Governance Committee hired a third-party firm to conduct interviews of each director to assess the skill set and qualifications that each director believed was important for the Chairman to possess and to discuss with each director who would most effectively lead the Board. In making its recommendation to the Board, the Nominating and Corporate Governance Committee also reviewed recommended best practices for corporate governance.
As a result of this process, based on the recommendation of the Nominating and Corporate Governance Committee, the Board determined that combining the positions of Chairman and CEO and electing Mr. Altabef to serve as the Chairman and Mr. Davis to serve as independent lead director fromupon the former Chairman’s retirement best positions the Board and management to implement the Company’s strategy and deliver value to the Company’s stockholders going forward. The Board believes that adopting this leadership structure provides independent board leadership and oversight while benefiting the Company by having Mr. Altabef also serve as Chairman following his transition as incoming
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CEO, during which he demonstrated the strong leadership and vision necessary to drive the Company’s strategies and achieve its independent directors.objectives.
In its oversight role, the Board of Directors annually reviews the Company’s strategic and operating plans, which address, among other things, the risks and opportunities facing the Company. The Board also has overall responsibility for executive officer succession planning and reviews succession plans each year. The Board has delegated certain risk management oversight responsibility to the Board committees. As part of its responsibilities as set forth in its charter, the Audit and Finance Committee is responsible for discussing with management the Company’s major financial risk exposures and the steps management has taken to monitor and control those exposures, including the Company’s risk assessment and risk management policies. In this regard, the Company’s chief audit executive prepares annually a corporate risk assessment report and provides that report to the Board of Directors each year. This report identifies the material business risks (including strategic, operational, financial reporting and compliance risks) for the Company and identifies the controls and management initiatives that respond to and mitigate those risks. The Company’s management regularly evaluates these controls, and the chief audit executive periodically reports to the Audit and Finance Committee regarding their design and effectiveness. The Audit and Finance Committee also receives annual reports from management on the Company’s ethics program and on environmental compliance, regularly
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reviews with management the Company’s financial arrangements, capital structure and the Company’s ability to access the capital markets, and oversees the allocation policies with respect to the Company’s pension assets, as well as the performance of pension plan investments. As part of its responsibilities as set forth in its charter, the Compensation Committee annually reviews management’s assessment of risk as it relates to the Company’s compensation arrangements. The Nominating and Corporate Governance Committee annually reviews the Company’s corporate governance guidelines and their implementation. Each committee regularly reports to the full Board.
TheDuring 2018, the Company’snon-employee directors receivereceived an annual retainer of $60,000. Mr. Weaver receivesEffective January 1, 2019, the amount of this annual retainer was increased to $85,000. During 2018 and continuing in 2019, the independent lead director received an additional $100,000$50,000 annual retainer for serving as Chairman of the Board. In February 2016, the Board eliminated the meeting fee of $1,500 per meeting for attendance at certain additional Board and committee meetings, increased the annual committee chair retainers and added annual committee member retainers. Currently,retainer. During 2018, the chair of the Audit and Finance Committee receivesreceived a $26,000 annual retainer, which amount was increased to $30,000 for 2019. The annual retainers paid to the chairchairs of the Compensation Committee receives a $19,000 annual retainer and the chair of the Nominating and Corporate Governance Committee receives aduring 2018 and continuing in 2019 were $19,000 and $16,250, annual retainer. Eachrespectively. During 2018 and continuing in 2019, each other member of the Audit and Finance Committee receivesreceived a $12,000 annual retainer and each other member of the Compensation Committee and the Nominating and Corporate Governance Committee receivesreceived a $7,500 annual retainer. Prior to adopting these changes, the Board considered an assessment of ournon-employee director compensation provided by Pearl Meyer, which took into account the director compensation and practices of the peer group companies used as a frame of reference in assessing our executive compensation. The new fee amounts were aligned with the median amounts provided by our peer group companies at the time of assessment. On February 11, 2016,12, 2018, eachnon-employee director at the time of the Board meeting on that date received an annual grant of 15,00014,635 restricted stock units having a value of $150,000$150,009 based on the fair market value of Unisys common stock on that date that vested immediately. On April 28, 2016, Mr. Germond26, 2018, Ms. Paolillo received an annual grant of 18,96412,223 restricted stock units having a value of $150,005$137,509 based on the fair market value of Unisys common stock on that date that vested immediately. Directors may defer receipt of these restricted stock units until termination of service, or until a specified date, under the Company’s deferred compensation plan for directors.
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The annual retainers described above are paid in monthly installments in cash. However, directors may defer until termination of service, or until a specified date, all or a portion of their cash fees under the Company’s deferred compensation plan for directors. Under this plan, any deferred cash amounts, and earnings or losses thereon (calculated by reference to investment options available under the Unisys Savings Plan and selected by the director), are recorded in a memorandum account maintained for each director. Formerly, directors could choose, on an annual basis, to receive thesetheir fees in the form of common stock equivalent units.units under the Unisys Corporation Director Stock Unit Plan. The value of each stock unit at any point in time is equal to the value of one share of Unisys common stock. Stock units are recorded in a memorandum account maintained for each director. A director’s stock unit account is payable in Unisys common stock, either upon termination of service or on a date specified by the director, at the director’s option. Directors do not have the right to vote with respect to any stock units. Directors also may defer until termination of service, or until a specified date, all or a portion of their cash feesThis plan was terminated in 2004 and no shares (other than shares subject to outstanding awards previously received) are available for future issuance under the Company’s deferred compensation plan for directors. Under this plan, any deferred cash amounts, and earnings or losses thereon (calculated by reference to investment options available under the Unisys Savings Plan and selected by the director), are recorded in a memorandum account maintained for each director.plan. The right to receive future payments of deferred cash accounts is an unsecured claim against the Company’s general assets. Directors who are employees of the Company do not receive any cash, stock
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units, stock options or restricted stock units for their services as directors. The following table provides a summary of the 20162018 compensation of currentnon-employee directors.directors who served during 2018.
Name | Fees Earned or Paid in Cash (1) ($) | Stock Awards (2) (3) ($) | Option Awards (4) ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Non- Qualified Deferred Compensation Earnings | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
Jared L. Cohon | 67,750 | 150,000 | — | — | — | — | 217,750 | |||||||||||||||||||||
Alison Davis | 75,750 | 150,000 | — | — | — | — | 225,750 | |||||||||||||||||||||
Nathaniel A. Davis | 67,750 | 150,000 | — | — | — | — | 217,750 | |||||||||||||||||||||
Denise K. Fletcher Chair, Nominating and Corporate Governance Committee | 87,375 | 150,000 | — | — | — | — | 237,375 | |||||||||||||||||||||
Philippe Germond | 55,000 | 150,005 | — | — | — | — | 205,005 | |||||||||||||||||||||
Leslie F. Kenne | 75,500 | 150,000 | — | — | — | — | 225,500 | |||||||||||||||||||||
Lee D. Roberts Chair, Compensation Committee | 89,000 | 150,000 | — | — | — | — | 239,000 | |||||||||||||||||||||
Paul E. Weaver Chairman of the Board; Chair, Audit and Finance Committee | 186,500 | 150,000 | — | — | — | — | 336,500 |
Name | Fees Earned or Paid in Cash (1) ($) | Stock Awards (2) (3) ($) | Option Awards (4) ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Non- Qualified Deferred Compensation Earnings | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
Jared L. Cohon | 75,000 | 150,009 | — | — | — | — | 225,009 | |||||||||||||||||||||
Nathaniel A. Davis Lead Director | 104,550 | 150,009 | — | — | — | — | 254,559 | |||||||||||||||||||||
Denise K. Fletcher Chair, Audit and Finance Committee | 91,000 | 150,009 | — | — | — | — | 241,009 | |||||||||||||||||||||
Philippe Germond Chair, Nominating and Corporate Governance Committee | 73,333 | 150,009 | — | — | — | — | 223,342 | |||||||||||||||||||||
Deborah Lee James | 72,500 | 150,009 | — | — | — | — | 222,509 | |||||||||||||||||||||
Paul E. Martin | 72,000 | 150,009 | — | — | — | — | 222,009 | |||||||||||||||||||||
Regina Paolillo | 53,000 | 137,509 | — | — | — | — | 190,509 | |||||||||||||||||||||
Lee D. Roberts Chair, Compensation Committee | 91,000 | 150,009 | — | — | — | — | 241,009 |
(1) | Amounts shown are the annual board retainer and annual retainer fees for chairs of committees, committee membership and |
(2) | Amounts shown are the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. For a discussion of the assumptions made in such valuation, see note |
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units granted to directors other than |
(3) | At December 31, |
(4) | At December 31, |
Under the Company’s stock ownership guidelines, directors are expected to own Unisys stock or stock units having a value equal to five times their annual retainer within five years after the director’s date of election to the Board. Directors serving as of January 1, 2019 will have until January 1, 2024 to be compliant with the increase in the expected ownership levels resulting from the increase in the annual retainer that became effective in 2019. The number of shares owned by each director is set forth in the stock ownership table on page 28.42.
Code of Ethics and Business Conduct
The Unisys Code of Ethics and Business Conduct applies to all employees, officers (including the Chief Executive Officer, Chief Financial Officer and principal accounting officer or controller) and directors. The code is posted on the Company’s web site at www.unisys.com/ethics and is also available in print to any stockholder who requests it. The Company intends to post amendments to or waivers from the code (to the extent applicable to the Company’s Chief Executive Officer, Chief Financial Officer or principal accounting officer or controller) at this location on its web site.
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Corporate Governance Guidelines
The Board of Directors has adopted Guidelines on Significant Corporate Governance Issues. The full text of these guidelines is available on the Company’s web site at www.unisys.com/governance and is also available in print to any stockholder who requests it. Among other matters, the guidelines cover the following:
1. A majority of the Board of Directors shall qualify as independent under the listing standards of the NYSE. Members of the Audit and Finance, Compensation, and Nominating and Corporate Governance Committees must also meet the NYSE independence criteria, as well as any applicable independence criteria prescribed by the SEC.
2. The Nominating and Corporate Governance Committee reviews annually with the Board the independence of outside directors. Following this review, only those directors who meet the independence qualifications prescribed by the NYSE and who the Board affirmatively determines have no material relationship with the Company will be considered independent. The Board has determined that the following commercial or charitable relationships will not be considered to be material relationships that would impair independence: (a) if a director is an executive officer or partner of, or owns more than a ten percent equity interest in, a company that does business with Unisys, and sales to or purchases from Unisys are less than one percent of the annual revenues of that company and (b) if a director is an officer, director or trustee of a charitable organization, and Unisys contributions to that organization are less than one percent of its annual charitable receipts.
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3. The Nominating and Corporate Governance Committee is responsible for determining the appropriate skills and characteristics required of Board members in the context of its currentmake-up, and will consider factors such as independence, experience, expertise, strength of character, mature judgment, leadership ability, technical skills, diversity and age in its assessment of the needs of the Board.
4. The Board is free to make the selection of Chairman of the Board and Chief Executive Officer any way that seems best to assure the success of the Company so as to provide appropriate leadership at a given point in time. Therefore, the Board does not have a policy, one way or the other, on whether or not the role of the Chief Executive and Chairman of the Board should be separate and, if it is to be separate, whether the Chairman should be selected from thenon-employee directors or be an employee. If the Chairman of the Board is not an employee of the Company, the Chairman should qualify as independent under the listing standards of the NYSE.
5. In accordance with the Company’s Bylaws, no director shall stand forre-election at any annual stockholders’ meeting following attainment of age 72 and no person shall be elected a director (as a result of an increase in the number of directors, to fill a vacancy or otherwise) if such person has attained the age of 72. If the proposal to amend the Company’s Bylaws to provide flexibility to the Board to increase the director mandatory retirement age to age 74 under certain circumstances is approved by stockholders, a conforming change will be made to this guideline.
6. Directors should volunteer to resign from the Board upon a change in primary job responsibility. The Nominating and Corporate Governance Committee will review the appropriateness of continued Board membership under the circumstances and will recommend, and the Board will determine, whether or not to accept the director’s resignation. In addition, if the Company’s Chief Executive Officer resigns from that position, he is expected to offer his resignation from the Board at the same time.
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7.Non-employee directors are encouraged to limit the number of public company boards on which they serve to no more than four in addition to the Company’s and should advise the Chairman of the Board and the general counsel of the Company before accepting an invitation to serve on another board.
8. Thenon-employee directors will meet in executive session at all regularly scheduled Board meetings. They may also meet in executive session at any time upon request. If the Chairman of the Board is an employee of the Company, the Board will elect from the independent directors a lead director who will preside at executive sessions. If the Chairman is not an employee, the Chairman will preside at executive sessions.
9. Board members have complete access to Unisys management. Members of senior management who are not Board members regularly attend Board meetings, and the Board encourages senior management, from time to time, to bring into Board meetings other managers who can provide additional insights into the matters under discussion.
10. The Board and its committees have the right at any time to retain independent outside financial, legal or other advisors.
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11. It is appropriate for the Company’s staff to report once a year to the Compensation Committee on the status of Board compensation in relation to other large U.S. companies. Changes in Board compensation, if any, should come at the suggestion of the Compensation Committee, but with full discussion and concurrence by the Board. Particular attention will be paid to structuring Board compensation in a manner aligned with stockholder interests. In this regard, a meaningful portion of a director’s compensation should be provided and held in stock options and/or stock units. Directors should not, except in rare circumstances approved by the Board, draw any consulting, legal or other fees from the Company. In no event shall any member of the Audit and Finance Committee receive any compensation from the Company other than directors’ fees.
12. The Company will provide an orientation program for new directors. The Company will also provide directors with presentations from time to time on topics designed by the Company or third-party experts to assist directors in carrying out their responsibilities. Directors may also attend appropriate continuing education programs at the Company’s expense.
13. The Board will conduct an annual self-evaluation to determine whether it and its committees are functioning effectively. In addition, each committee will conduct an annual self-evaluation of its performance and will make a report annually to the Board.
14. Thenon-employee directors will evaluate the performance of the Chief Executive Officer annually and will meet in executive session, led by the chairperson of the Compensation Committee, to review this performance. The evaluation is based on objective criteria, including performance of the business, accomplishment of long-term strategic objectives and development of management. Based on this evaluation, the Compensation Committee will recommend, and the members of the Board who meet the independence criteria of the NYSE will determine and approve, the compensation of the Chief Executive Officer.
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15. To assist the Board in its planning for the succession to the position of Chief Executive Officer, the Chief Executive Officer is expected to provide an annual report on succession planning to the Board.
16. Members of the Board should at all times act in accordance with the Company’s confidentiality policy for directors.
17. The Company’s stockholder rights plan expired on March 17, 2006, and it has no present intention to adopt a new one. Subject to its continuing fiduciary duties, which may dictate otherwise depending on the circumstances, the Board shall submit the adoption of any future stockholder rights plan to a vote of the stockholders. Any stockholder rights plan adopted or extended without stockholder approval shall be approved by a majority of the independent members of the Board and shall be in response to specific, articulable circumstances that are deemed to warrant such action without the delay that might result from seeking prior stockholder approval. If the Board adopts or extends a rights plan without prior stockholder approval, the Board shall, within one year, either submit the plan to a vote of the stockholders or redeem the plan or cause it to expire.
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The Company is required to disclose any transactions since the beginning of 20162018 (or any currently proposed transaction) in which the Company was a participant, the amount involved exceeds $120,000 and a director or executive officer, any immediate family member of a director or executive officer or any person or group beneficially owning more than 5% of the Company’s common stock had a direct or indirect material interest. The Company does not have any such transactions to report.
Currently the Company has not adopted a policy specifically directed at the review, approval or ratification of related party transactions required to be disclosed. However, under the Unisys Code of Ethics and Business Conduct, all employees, officers and directors are required to avoid conflicts of interest. Employees (including officers) must review with, and obtain the approval of, their immediate supervisor and the Company’s Corporate Ethics Office, any situation (without regard to dollar amount) that may involve a conflict of interest. Directors should raise possible conflicts of interest with the Chief Executive Officer or the general counsel. The code of ethics defines a conflict of interest as any relationship, arrangement, investment or situation in which loyalties are divided between Unisys interests and personal interests and specifically notes involvement (either personally or through a family member) in a business that is a competitor, supplier or customer of the Company as a particularly sensitive area that requires careful review.
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Audit and Finance Committee Report
In performing its oversight responsibilities as defined in its charter, the Audit and Finance Committee has reviewed and discussed the audited financial statements and reporting process for 2016,2018, including internal controls over financial reporting, with management and with KPMG LLP, the Company’s independent registered public accounting firm. The committee has also discussed with KPMG LLP the matters required to be discussed by the Public Company Accounting Oversight Board (the “PCAOB”) Auditing Standard No. 1301, Communications with Audit Committees. In addition, the committee has received from KPMG LLP the written disclosures and the letter required by applicable requirements of the PCAOB regarding KPMG LLP’s communications with the committee concerning independence and has discussed with KPMG LLP their independence. The committee has also considered the compatibility of audit-related services, tax services and othernon-audit services with KPMG LLP’s independence.
Based on the reviews and discussions referred to above, the committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form10-K for the year ended December 31, 20162018 for filing with the SEC.
Audit and Finance Committee
Alison Davis
Denise K. Fletcher (Chair)
Paul E. Martin
Regina Paolillo
Lee D. Roberts
Paul E. Weaver (Chair)
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Independent Registered Public Accounting Firm Fees and Services
KPMG LLP was the Company’s independent registered public accounting firm for the years ended December 31, 20162018 and 2015.2017. KPMG LLP has billed the Company the following fees for professional services rendered in respect of 20162018 and 20152017 (in millions of dollars):
2016 | 2015 | 2018 | 2017 | |||||||||||||
Audit Fees | $8.8 | $9.2 | $ | 8.0 | $ | 8.9 | ||||||||||
Audit-Related Fees | 2.3 | 1.8 | 1.0 | 1.7 | ||||||||||||
Tax Fees | 0.1 | 0.2 | 0.2 | 0.2 | ||||||||||||
All Other Fees | — | — | — | — |
Audit fees consist of fees for the audit and review of the Company’s financial statements, statutory audits, comfort letters, consents, assistance with and review of documents filed with the SEC and Section 404 attestation procedures. Audit-related fees consist of fees for SSAE No. 16 engagements, employee benefit plan audits, accounting advice regarding specific transactions and various attestation engagements. Tax fees principally represent fees for tax compliance and advisory services.
The Audit and Finance Committee annually reviews andpre-approves the services that may be provided by the independent registered public accounting firm. The committee has adopted an Audit andNon-Audit ServicesPre-Approval Policy that contains a list ofpre-approved services, which the committee may revise from time to time. In addition, the Audit and Finance Committee has delegatedpre-approval authority to the chair of the committee. The chair of the committee reports any suchpre-approval decision to the Audit and Finance Committee at its next scheduled meeting.
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RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
(Item 2)3)
The Audit and Finance Committee has engaged the firm of KPMG LLP as the independent registered public accounting firm to audit the Company’s financial statements for the year ending December 31, 2017.2019. KPMG LLP has been the Company’s independent registered public accounting firm since 2008. The Company expects that representatives of KPMG LLP will be present at the annual meeting and will have the opportunity to make a statement if they desire to do so and to respond to appropriate questions asked by stockholders. The Board of Directors considers KPMG LLP to be well qualified to serve as the independent registered public accounting firm for Unisys and recommends a vote for the proposal to ratify their selection.
The Board of Directors recommends a vote “FOR” the proposal to ratify the selection of KPMG LLP as the Company’s independent registered public accounting firm for 2017.2019.
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
(Item 3)
The Company’s Board of Directors has approved, declared advisable and in the best interests of the Company and its stockholders and is submitting for stockholder approval an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock from 100,000,000 to 150,000,000.
During 2016, the Company issued $213.5 million of 5.50% Convertible Senior Notes due in 2021. In connection with this issuance, the Company reserved up to 27,415,305 shares of common stock for issuance upon the conversion of these notes. On February 28, 2017, there were 50,397,101 shares of the Company’s common stock outstanding. In addition, 7,828,639 shares of common stock were reserved for issuance in connection with the Company’s various employee benefit and compensation plans. This leaves 14,358,955 shares of common stock, or less than 15% of the number of shares of common stock currently authorized, available for future use.
The Company’s Restated Certificate of Incorporation also authorizes the issuance of 40,000,000 shares of preferred stock. Currently, there are no shares of preferred stock outstanding. The proposed amendment does not increase the number of shares of preferred stock that the Company is authorized to issue.
If stockholders approve this proposal, the Company’s Restated Certificate of Incorporation will be amended to increase the number of shares of common stock the Company is authorized to issue from 100,000,000 to 150,000,000. The par value of the common stock will remain at $.01 per share. The amendment would amend the first sentence of Article IV, Section 1 of the Company’s Restated Certificate of Incorporation to read in its entirety as follows:
Section 1. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 190,000,000 shares, divided into two classes consisting of 150,000,000 shares of Common Stock, par value $.01 per share (“Common Stock”), and 40,000,000 shares of Preferred Stock, par value $1 per share (“Preferred Stock”).
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The remaining text of Article IV, Section 1 of the Company’s Restated Certificate of Incorporation will remain unchanged.
The Board is recommending this increase in authorized shares of common stock primarily to give the Company appropriate flexibility to issue shares for future corporate needs. The shares may be issued by the Board in its discretion, subject to any further stockholder action required in the case of any particular issuance by applicable law, regulatory agency, or under the rules of the NYSE. Although there is no present agreement to issue any shares, the newly authorized shares of common stock would be issuable for any proper corporate purpose, including future acquisitions, investment opportunities, capital raising transactions of equity or convertible debt securities, stock splits, stock dividends, issuance under current or future equity compensation plans, employee stock plans and savings plans or for other corporate purposes. There are no immediate plans, arrangements, commitments or understandings with respect to issuance of any of the additional shares of common stock that would be authorized by the proposed amendment. However, the Board believes that these additional shares will provide the Company with needed ability to issue shares in the future to take advantage of market conditions or favorable opportunities without the potential expense or delay incident to obtaining stockholder approval for a particular issuance.
Rights of Additional Authorized Shares
The additional authorized shares of common stock, if and when issued, would be part of the existing class of common stock and would have the same rights and privileges as the shares of common stock currently outstanding. The Company’s stockholders do not have preemptive rights with respect to its common stock. Accordingly, should the Board of Directors elect to issue additional shares of common stock, existing stockholders would not have any preferential rights to purchase the shares.
Potential Adverse Effects of the Amendment
Future issuances of common stock or securities convertible into common stock could have a dilutive effect on the earnings per share, book value per share, voting power and percentage interest of holdings of current stockholders. In addition, the availability of additional shares of common stock for issuance could, under certain circumstances, discourage or make more difficult efforts to obtain control of the Company. The Board is not aware of any attempt, or contemplated attempt, to acquire control of the Company. This proposal is not being presented with the intent that it be used to prevent or discourage any takeover attempts, but nothing would prevent the Board from taking any appropriate actions not inconsistent with its fiduciary duties.
Effectiveness of the Amendment and Vote Required
If the proposed amendment is adopted, it will become effective upon the filing of a certificate of amendment to the Company’s Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, which the Company anticipates doing as soon as practicable following approval of this proposal. The adoption of this amendment requires the approval of a majority of the outstanding shares of common stock entitled to vote.
The Board of Directors recommends a vote “FOR” the proposal to amend the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock.
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ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
(Item 4)
In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which was added under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company is asking stockholders to approve an advisory
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resolution on compensation of its named executive officers, as described below in this proxy statement in “Executive Compensation”, “Summary Compensation Table” and the related compensation tables and narrative.
As described in detail in “Compensation Discussion and Analysis” beginning on page 29,43, the Company’s executive compensation program is designed to attract, motivate and retain the executives who lead the Company’s business, to reward them for achieving financial and strategic company goals and to align their interests with the interests of stockholders. The Company believes that the compensation of its named executive officers is reasonable, competitive and strongly focused on pay for performance principles, with a significant portion of target compensation at risk and performance based. The Company emphasizes compensation opportunities that appropriately reward executives for delivering financial results that meet or exceedpre-established goals, and executive compensation varies depending upon the achievement of those goals. Through stock ownership requirements and equity incentives, the Company also aligns the interests of its executive officers with those of stockholders and the long-term interests of the Company. The Company believes that the policies and procedures articulated in “Compensation Discussion and Analysis” are effective in achieving the Company’s goals and that the executive compensation reported in this proxy statement was appropriate and aligned with 20162018 results. Please read the “Compensation Discussion and Analysis” below, as well as the compensation tables and narrative that follow it, for additional details about the Company’s executive compensation programs and compensation of the named executive officers in 2016.2018.
For the reasons set forth above, the Company is asking stockholders to approve the following advisory resolution at the annual meeting:
RESOLVED, that the stockholders of Unisys Corporation approve, on an advisory basis, the compensation of the Company’s named executive officers set forth in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in the Proxy Statement for the Company’s 20172019 Annual Meeting of Stockholders.
This advisory resolution, commonly referred to as a“say-on-pay” resolution, isnon-binding on the Company’s Board of Directors. However, the Board and the Compensation Committee will review and consider the vote when making future executive compensation decisions.
The Board of Directors recommends a vote “FOR” the advisory resolution approving the compensation of the Company’s named executive officers as described in this proxy statement.
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ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE2019 LONG-TERM INCENTIVE AND EQUITY COMPENSATION PLAN
(Item 5)
In accordance with Section 14A of the Exchange Act, the Company is asking stockholders to vote on whether they would prefer future advisory votes on executive compensation to occur every year, every two years or every three years. After careful consideration of the frequency alternatives,General
On February 8, 2019, the Board of Directors believes that conducting an advisory voteunanimously adopted, subject to stockholders’ approval at the annual meeting, the Unisys Corporation 2019 Long-Term Incentive and Equity Compensation Plan (the “2019 Equity Plan”). The 2019 Equity Plan will become effective on executive compensation every yearthe date it is appropriate forapproved by stockholders (the “Plan Effective Date”). A copy of the Company2019 Equity Plan is attached to this proxy statement as Appendix A.
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We currently maintain the 2016 Long-Term Incentive and itsEquity Compensation Plan (the “2016 Plan”), which was approved by our stockholders at this time. The Company has conducted an advisory vote on executive compensation on an annual basis since 2011.
Youthe 2016 Annual Meeting of Stockholders. Additionally, there are awards currently outstanding under the 2003 Long-Term Incentive and Equity Compensation Plan (the “2003 Plan”) and the 2010 Long-Term Incentive and Equity Compensation Plan (the “2010 Plan”), plans under which we may cast your vote on your preferred voting frequency by choosing oneno longer grant awards (the 2003 Plan, 2010 Plan and 2016 Plan are collectively, the “Prior Plans”). To the extent that outstanding awards under the 2003 Plan or the 2010 Plan terminate, expire, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested or paid, the shares subject to those awards currently become available for issuance or transfer under the 2016 Plan. As of the following options — one year, two years, three years or abstain — onrecord date, 51,762,063 shares of our common stock were outstanding and the proxy card when you vote in response to the resolution set forth below:
RESOLVED, that the option of once every one year, two years, or three years that receives the highest number of votes cast on this resolution will be determined to be the preferred frequency with which the Company is to hold a stockholder vote to approve, on an advisory basis, the compensationshares remaining available for issuance under all of the Company’s named executive officers set forthequity plans, including the 2016 Plan that are not subject to currently outstanding awards, and shares subject to currently outstanding awards (including shares reserved for above target performance) under all such plans (some of which may become available under the 2016 Plan) were as follows (shares in thousands rounded to the Compensation Discussionnearest thousand):
2003 Plan | 2010 Plan | 2016 Plan | DSU Plan* | Total | ||||||||||||||||
Shares Available | — | — | 1,601 | — | 1,601 | |||||||||||||||
Full Value Shares Outstanding (including shares reserved for above target performance) | 86 | 14 | 3,328 | 2.4 | 3,430 | |||||||||||||||
Options/SARs outstanding | 177 | 377 | — | — | 554 | |||||||||||||||
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|
|
|
|
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|
|
|
| |||||||||||
Total | 263 | 391 | 4,929 | 2.4 | 5,585 |
* | Unisys Corporation Director Stock Unit Plan |
Total (all plans as of record date) | ||||
Weighted average exercise price of all outstanding options/SARs | $23.49 | |||
Weighted average remaining term of all outstanding options/SARs | 2.09 years |
Upon stockholder approval, the 2019 Equity Plan will replace the 2016 Plan and Analysis,no further awards will be granted under the Summary Compensation Table2016 Plan. If the 2019 Equity Plan is not approved by stockholders, then the 2019 Equity Plan will not become effective and the related compensation tables2016 Equity Plan will continue in full force and narrative ineffect.
If the Proxy Statement2019 Equity Plan is approved by stockholders, then (i) shares with respect to grants outstanding under the Prior Plans immediately prior to the Plan Effective Date that, on or after such date, terminate, expire, or are canceled, forfeited, exchanged, or surrendered without having been exercised, vested or paid under the applicable Prior Plan may be issued or transferred under the 2019 Equity Plan and (ii) shares remaining available for issuance under the Company’s 2017 Annual Meeting of Stockholders.
Stockholders2016 Plan immediately prior to the Plan Effective Date that are not votingsubject to approveoutstanding awards under any Prior Plan may also be issued or disapprovetransferred under the Board’s recommendation.
2019 Equity Plan. The Boardterms and conditions of outstanding awards under the Prior Plans will not be affected by the approval of the 2019 Equity Plan, and the Compensation CommitteePrior Plans will review and consider the vote when making future determinations asremain in effect with respect to such awards.
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In addition to the frequencyshares that remain available for issuance under the 2016 Plan, we are requesting an additional 3,500,000 shares for issuance under the 2019 Equity Plan. This number was determined based on an analysis of various factors, including historical burn rate, potential dilution, industry plan cost standards, and anticipated equity compensation needs. In 2018, the advisory“say-on-pay” vote. However, because this advisory vote2016 Plan’s average burn rate was 5.69%. We have estimated that the potential dilution to current stockholders that could result from the future issuance of shares available under the 2019 Equity Plan, in addition to shares subject to awards outstanding under the Prior Plans, would be approximately 14.93%, calculated as follows:
New Shares Requested + Shares Available + Shares Subject to Outstanding Awards
New Shares Requested + Shares Available + Shares Subject to Outstanding Awards
+ Total Common Stock Outstanding
Based on frequency isnon-binding,these factors and our current grant practices, the Companyshares requested for use under the 2019 Equity Plan are expected to meet our equity grant needs for approximately 3 to 5 years. The shares reserved may, decide that it is in itshowever, last for a greater or fewer number of years depending on currently unknown factors, such as the number of grant recipients, future grant practices, and its stockholders’ best interests to hold an advisory vote on executive compensation more or less frequently than the option selected by stockholders.our stock price.
The Board of Directors recommends a vote “FOR” the approval of the 2019 Equity Plan.
Why Stockholders Should Approve The 2019 Equity Plan
Additional shares are needed. If stockholders do not approve the 2019 Equity Plan, the Company expects that you vote for the optioncurrent equity program will have an insufficient amount of every ONE YEAR asshares to grant prior to the frequency2020 Annual Meeting in light of our compensation structure and strategy. If we cannot grant equity awards, we will be placed at a competitive disadvantage, making it difficult to attract, retain, and develop the talent of our employees, officers andnon-employee directors.
Equity awards are an important component of the advisory vote onCompany’s compensation program.The 2019 Equity Plan will enable us to attract, retain and develop the talent of employees, officers, andnon-employee directors.
Equity incentives align the interests of our executives with those of our stockholders.Our philosophy is to provide a significant portion of executive compensation in the form of equity awards that areat-risk and performance-based. Equity awards are designed to provide key leaders with a stake in the long-term success of the Company as well as align executive and stockholder interests.
The 2019 Equity Plan provides flexibility. We will be able to continue to adapt the compensation of key individuals to accommodate changes in best practices, law, accounting principles, and corporate objectives if the Company’s named executive officers.2019 Equity Plan is approved.
Approval of the 2019 Equity Plan establishes limits onnon-employee directors’ incentive and equity compensation.The Prior Plans do not place a limit on the amount of equity incentive or cash compensation that may be granted to ournon-employee directors. In order to alignnon-employee director compensation with stockholder interests, conform with emerging corporate governance best practices and establish transparent, fixed parameters within which director compensation can be set, the 2019 Equity Plan limits the aggregate value of equity awards or other
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awards granted thereunder and any other cash compensation paid to any individualnon-employee director as compensation for services as a director to $600,000 for any calendar year. The value of the historical aggregate compensation paid to ournon-employee directors is below this threshold, but this limit provides the Board of Directors with flexibility to allow for reasonable increases in annual compensation over time, provide additional compensation where additional, unanticipated services are required from directors and attract and retain outstanding director candidates who have the requisite experience and background necessary to exercise oversight of a complex global organization like the Company. |
Key Plan Features
The 2019 Equity Plan is intended to reinforce the alignment between employees’ andnon-employee directors’ interests and stockholders’ interests, and purposefully excludes features that could misalign those interests. Accordingly, the 2019 Equity Plan:
Does not permit liberal share counting in any circumstance
Prohibits the payment of dividends or dividend equivalent rights on unvested equity awards
Limits grants to any individual employee in a calendar year
Limitsnon-employee directors’ aggregate cash and equity compensation in a calendar year
Prohibits repricing of stock options and stockappreciation rights without stockholder approval, other than in connection with a capitalization event adjustment or change in control
Does not provide for automatic vesting upon a change in control
Does not have evergreen share pool provisions
Does not have a replacement option or stock appreciation right feature
Does not provide taxgross-ups to officers,non-employee directors or other plan participants
Authorizes the recoupment of awards under our recoupment policies and/or any recoupment requirements imposed under applicable laws
Plan Summary
This summary of the 2019 Equity Plan’s principal features is qualified in its entirety by reference to the 2019 Equity Plan, which is attached to this proxy statement as Appendix A.
Purpose
The purpose of the 2019 Equity Plan is to provide designated employees andnon-employee members of the Board of Directors with the opportunity to receive grants of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, other equity-based awards and incentive awards (collectively “awards”). We believe that the 2019 Equity Plan will support our ongoing efforts to attract, retain and develop exceptional talent and enable us to provide incentives directly linked to our short and long-term objectives and increases in stockholder value.
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Shares Reserved
If the 2019 Equity Plan is approved by stockholders, the maximum number of shares available to be granted under the 2019 Equity Plan will be the sum of the following: (i) 3,500,000 shares, plus (ii) shares subject to outstanding awards under the Prior Plans immediately prior to the Plan Effective Date, to the extent that such awards subsequently terminate, expire, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested or paid under the applicable Prior Plan, plus (iii) the aggregate number of shares remaining available for issuance under the 2016 Plan immediately prior to the Plan Effective Date that are not subject to outstanding awards under the Prior Plans. In no event will the aggregate number of shares of common stock issuable under the 2019 Equity Plan exceed 9,085,000 shares. The aggregate number of shares that may be issued under the 2019 Equity Plan as incentive stock options is 2,500,000 shares. The number of shares available under the 2019 Equity Plan (including for incentive stock options) is subject to adjustment in the event of certain capitalization events. The issuance of any shares under the 2019 Equity Plan will result in a reduction of the number of shares available for awards under the plan on aone-for-one basis.
Shares subject to previously granted awards under the 2019 Equity Plan will go back into the share pool and be available for future grants if the awards terminate, expire or are canceled, forfeited, exchanged or surrendered without having been exercised, or are otherwise forfeited or not paid in full in shares of common stock. Awards that are designated at grant as cash-settled awards will not be counted against the limit on the shares available under the 2019 Equity Plan.
Shares surrendered to pay the exercise price of an option or withheld to pay the taxes on any award and shares repurchased by the Company with the proceeds of an option exercise are not added to the share pool and will not be available for future grants. Additionally, the full number of shares subject to stock appreciation rights exercised and settled in shares will be counted against the limit on the shares available under the 2019 Equity Plan.
The common stock covered by the 2019 Equity Plan may be either authorized but unissued shares or reacquired shares, including shares of common stock purchased by us on the open market. On March 11, 2019, the closing price of a share of our common stock on the New York Stock Exchange was $13.10.
Award Limits
Subject to adjustment in the event of certain capitalization events, no employee is eligible to receive awards covering more than 1,000,000 shares in any calendar year. Further, no person may be granted dividend equivalents or incentive awards payable in cash measured with respect to a performance period of one year or less in excess of $5,000,000 or with respect to a performance period of more than one year in excess of $10,000,000.
Non-Employee Director Limits
Notwithstanding any provision to the contrary in the 2019 Equity Plan or in any policy of the Company regarding compensation payable to anon-employee director, the sum of the grant date fair value (determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of all awards payable in shares and the maximum amount that may become payable pursuant to all cash-
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settled awards that may be granted under the 2019 Equity Plan as compensation for services as anon-employee director, together with cash compensation paid to thenon-employee director in the form of Board of Director and committee retainer, meeting or similar fees, during any calendar year may not exceed $600,000.
Administration
The 2019 Equity Plan will be administered by a committee comprised of no fewer than two members of the Board of Directors who are appointed by the Board of Directors to administer the 2019 Equity Plan. To the extent deemed necessary by the Board of Directors, each committee member will satisfy the requirements for (i) an “independent director” under rules adopted by the New York Stock Exchange or other stock exchange on which the shares are at the time primarily traded and (ii) a “nonemployee director” for purposes of such Rule16b-3 under the United States Securities Exchange Act of 1934, as amended. The Board of Directors has delegated authority to our Compensation Committee (the “Committee”) to administer the 2019 Equity Plan. Subject to requirements of the New York Stock Exchange and applicable law, the Committee may delegate certain administrative matters under the 2019 Equity Plan to officers of the Company.
The Committee’s authority includes but is not limited to the power to: (i) construe and interpret the 2019 Equity Plan, and any agreement executed pursuant to the 2019 Equity Plan, (ii) determine who will be granted awards from the eligible population, (iii) determine the type, size and terms and conditions of the awards, (iv) determine the time when the awards will be made and the duration of any applicable exercise, vesting or restriction period, (v) determine whether the grant, vesting, exercise, issuance, retention and/or payment of an award will be subject to the attainment of one or more performance goals, (vi) amend the terms and conditions of any previously issued award, (vii) determine any restrictions on resale applicable to the shares to be issued or transferred pursuant to the award, (viii) determine whether, and to what extent, and pursuant to what circumstances an award may be settled in, or the exercise price may be paid in, cash, shares, or other awards or property, or an award may be cancelled, forfeited or surrendered, (ix) determine the number of shares or other consideration subject to awards, (x) determine whether awards will be granted singly, in combination with, in tandem with, in replacement of or as alternatives to, other awards under the 2019 Equity Plan or any other incentive or compensation plan, (xi) establish, adopt or revise any rules and regulations, including adoptingsub-plans to facilitate compliance with applicable laws, ease administration and/or take advantage oftax-favorable treatment for awards, (xii) determine whether any award will be subject to anynon-competition,non-solicitation, confidentiality, clawback or other covenants, (xiii) determine whether an incentive award or performance-based award has been earned, and (xiv) make all other determinations necessary or advisable for the administration. The Committee may accelerate the vesting of any awards at any time for any reason and may provide for complete or partial exceptions to any service or performance requirement as it deems appropriate.
Adjustments
The 2019 Equity Plan provides for equitable adjustment by the Committee to the number and kind of shares reserved under the 2019 Equity Plan, the number and kind of shares covered by, or issuable pursuant to, each outstanding award, the exercise or base price relating to an award, the individual share-based award limits under the 2019 Equity
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Plan and any other terms of affected awards in the event of certain capitalization events. Such events include a change in the number or kind of shares of common stock outstanding due to an event such as a stock dividend, spinoff, recapitalization, stock split or combination or exchange of shares, merger, reorganization, consolidation, reclassification or change in par value, or similar extraordinary or unusual event affecting the shares without the Company’s receipt of consideration, or if the value of the shares is substantially reduced due to a spinoff or the Company’s payment of an extraordinary dividend.
Eligibility
Incentive stock options may be granted only to employees of the Company and its subsidiary corporations. All other awards may be granted to employees andnon-employee directors of the Company and its subsidiaries. As of the record date, eleven executive officers and tennon-employee directors would be eligible to receive awards under the 2019 Equity Plan, if it were in effect. In 2019, awards under the 2016 Plan have been made to eleven of our executive officers, tennon-employee directors, and approximately 226non-executive officer employees of the Company and its subsidiaries.
Duration
The 2019 Equity Plan was adopted by the Board of Directors and will become effective upon its approval by the Company’s stockholders. If approved by the stockholders, the 2019 Equity Plan will continue in effect until the tenth anniversary of the Plan Effective Date, unless terminated earlier by the Board of Directors (except with respect to incentive stock options which may not be granted after the tenth anniversary of Board adoption of the 2019 Plan).
No Repricing
The 2019 Equity Plan prohibits repricing of stock options or stock appreciation rights other than in connection with an adjustment upon a capitalization event. Specifically, without prior approval of stockholders, the Committee may not lower the exercise price of an outstanding stock option or stock appreciation right, nor provide cash or any other award or security in replacement of a canceled underwater stock option or stock appreciation right other than upon a change in control.
Options
Options granted under the 2019 Equity Plan may be either incentive stock options or nonqualified stock options. The exercise period of options is determined by the Committee but, in no event, may options be exercisable more than ten years from the date they are granted, or five years for incentive stock options granted to employees who own stock possessing more than 10% of the voting power of all classes of stock of the Company or any subsidiary (“10% stockholders”). The exercise price for each option must be no less than 100% of the fair market value of a share at the time the option is granted, or 110% for incentive stock options granted to 10% stockholders. The Committee will determine when options will become exercisable and the effect of termination of service, but options may not vest prior to the first anniversary of the date of grant. The exercise price must be paid in full by the participant upon exercise of the option, by certified or bank check or other instrument permitted by the Committee, by delivering shares having a fair market value equal to the exercise price, through a broker-assisted sale or by a combination of the foregoing or such other consideration permitted by the Committee.
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Stock Appreciation Rights
The Committee may determine the terms and conditions of a stock appreciation right. However, no stock appreciation right will be exercisable after the expiration of ten years from the date of grant, the stock appreciation right may not vest prior to the one year anniversary from the date of grant and the base price for a stock appreciation right must be no less than 100% of the fair market value of a share at the time the stock appreciation right is granted. Upon exercise of a stock appreciation right, the participant receives shares and/or cash equal to the value of the stock appreciation since the grant date for the number of rights exercised.
Restricted Stock Awards
The Committee may grant shares of common stock under a restricted stock award for consideration or for no consideration and subject to such restrictions as determined by the Committee. The Committee will determine to what extent, and under what conditions, the participant will have the right to vote shares of restricted stock awards and to accrue the right to any dividends or other distributions paid on such shares during any restriction period; provided, however, that no dividends will be payable until the underlying restricted stock award vests.
Restricted Stock Units
Restricted stock units are unfunded, unsecured rights to receive shares of common stock, cash, or a combination of cash and shares upon the satisfaction of certain time-based or performance-based vesting criteria. Restricted stock units are generally granted for no consideration, however the purchase price, if any for the restricted stock units will be determined by the Committee at the time of grant. Each restricted stock unit represents one share of common stock. Participants have no rights to the shares underlying the restricted stock units unless and until the vesting criteria for the restricted stock units has been met and the award has been settled. The Committee may grant dividend equivalent rights in connection with restricted stock units, under such terms and conditions as the Committee deems appropriate, provided that no dividend equivalent rights will be payable until the underlying restricted stock units vest.
Incentive Awards
The Committee may grant incentive awards, which are performance-based awards that are expressed in U.S. currency and may be settled in cash, shares or a combination of both in accordance with the terms set by the Committee.
Performance Awards
The Committee may determine that awards granted under the 2019 Equity Plan are performance-based awards based on performance goals or other performance-based conditions as the Committee may determine.
Performance goals under the 2019 Equity Plan include levels of achievement relating to one or more of the following measures or such other measures selected by the Committee in its discretion, which may, without limitation, apply to the Company as a whole, or to any business unit, region, sector or industry group, subsidiary, product or service line, on a U.S. GAAP ornon-GAAP basis, and which may be measured on an absolute or relative basis or in
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such other manner as deemed appropriate by the Committee: basic or diluted earnings per share; total shareholder return; operating income; net income; cash flow (including but not limited to, operating cash flow, free cash flow, and cash flow return on capital); return on equity, capital, assets, or sales; revenue or revenue growth; earnings before interest, taxes, depreciation and amortization (“EBITDA”) or EBITDA growth; stock price;debt-to-capital ratio; stockholders’ equity per share; operating income as a percent of revenue; gross profit as a percent of revenue; selling, general and administrative expenses as a percent of revenue;pre-tax profit; orders; improvements in capital structure; budget and expense management; productivity ratios; economic value added or other value added measurements; operating efficiency; working capital targets; enterprise value; customer value; customer satisfaction; completion of acquisition or business expansion. The Committee may provide for such adjustments to the Performance Goals as it deems appropriate, including but not limited to adjustments designed to reflect changes during the performance period in generally accepted accounting principles or in tax rates, currency fluctuations, the effects of acquisitions or dispositions of a business or investments in whole or in part, debt reduction charges, extraordinary or nonrecurring items, the gain or loss from claims or litigation and related insurance recoveries, the effects of impairment of tangible or intangible assets, or the effects of restructuring or reductions in force or other business recharacterization activities, income or expense related to defined benefit or defined contribution pension plans, uninsured losses from natural catastrophes or political and legal developments affecting the Company’s business (including losses as a result of war, terrorism, confiscation, expropriation, seizure, new regulatory requirements, business interruption or similar events).
The 2019 Equity Plan provides for specified procedures for awards designated as performance-based awards, including that (i) within the first 25% of the applicable performance period or service period, the Committee will establish in writing the performance goals that must be met over the applicable performance period, the maximum amount payable if the goals are met and other material terms; (ii) after the performance period, the Committee will certify whether the goals were met and may adjust or eliminate the amount payable to a participant; and (iii) unless otherwise provided in an award agreement, a performance-based award may be paid only if the goals are met. Although the Committee intends to grant performance-based awards subject to the conditions and procedures outlined above, the Committee may in its discretion grant awards that do not meet such conditions and procedures.
Other Equity Awards
The Committee may grant other share-based awards subject to such terms and conditions as the Committee determines are appropriate.
Dividends and Dividend Equivalents
In no event may any award under the 2019 Equity Plan provide for the participant’s receipt of dividends or dividend equivalents in any form prior to the vesting of such award or an applicable portion of such award.
Deferrals
Subject to applicable laws, the Committee may permit or require a participant to defer receipt of the payment of cash or the delivery of shares that would otherwise be due to the participant in connection with any award.
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Foreign Awards and Rights
The Company may grant awards to such employees of the Company and its subsidiaries who reside in foreign jurisdictions, subject to such terms and conditions as the Committee determines are appropriate. The Committee may generally amend or vary the terms of the 2019 Equity Plan in order to conform such terms with the requirements of each jurisdiction where a subsidiary is located as it considers necessary or desirable to take into account or to mitigate the burden of taxation and social security contributions for participants and/or establish one or moresub-plans for these purposes.
Change in Control
Unless the Committee determines otherwise, in the event of a change in control (as defined in the 2019 Equity Plan) where the Company is not the surviving corporation, any outstanding, unexpired awards that are not exercised, vested or paid at the time of the change in control will be assumed by or replaced with comparable awards by the surviving corporation. If the surviving corporation does not assume or replace the awards, then the awards will automatically vest and become exercisable and all restrictions and conditions on any awards will lapse. Further, unless the award agreement provides otherwise, if a participant’s employment is terminated for good reason or without cause within 24 months following a change in control, all outstanding awards will vest and become exercisable and all restrictions and conditions on any awards will lapse and if such award is a performance-based award, the award will become vested at the target level of performance. Notwithstanding the foregoing, the Committee has discretion to provide for various alternative treatment with respect to awards without the consent of the participant in the event of a change in control.
Tax Withholding
The Committee may permit or require a participant to remit to the Company or any subsidiary, an amount sufficient to satisfy any U.S. federal, state, and or local taxes and any taxes imposed by a jurisdiction outside the U.S. by (i) withholding from wages or other cash compensation; (ii) withholding from the sale of shares of underlying an award either through a voluntary or mandatory sale arranged by the Company on the participant’s behalf; or (iii) if the Committee so permits, by withholding in shares otherwise deliverable under an award.
Company Policies
The Committee may determine that an award will be subject to any applicable clawback or recoupment policies, share trading policies and any other policies implemented by the Board of Directors or the Committee, as well as any clawback or recoupment requirements required under applicable laws.
Nontransferability
Generally, only the participant may exercise rights under an award during the participant’s lifetime. A participant may not transfer those rights except by will or the laws of descent and distribution. However, if permitted by the Committee, a participant may transfer an award other than an incentive stock option pursuant to a domestic relations order or as otherwise permitted by the Committee.
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Amendment and Termination
The 2019 Equity Plan may be amended or terminated by the Board of Directors; provided, however, the 2019 Equity Plan may not be amended in the absence of stockholder approval if such approval is required under applicable laws or stock exchange requirements. In addition, without the written consent of the holder, no amendment or termination of the 2019 Equity Plan may materially and adversely modify the holder’s rights under the terms and conditions of an outstanding award, except as reserved under the 2019 Equity Plan.
New Plan Benefits
The amount and timing of awards under the 2019 Equity Plan are determined in the sole discretion of the Compensation Committee, as administrator, or the Board of Directors, and cannot be determined in advance. Future awards under the 2019 Equity Plan tonon-employee directors, officers and other employees are discretionary, and therefore not determinable at this time.
U.S. Federal Income Tax Consequences
The following discussion is a brief summary of the principal United States federal income tax consequences of participation in the 2019 Equity Plan for a participant who is a U.S. tax resident under the provisions of the Internal Revenue Code of 1986 (the “Code”) as currently in effect. The Code and its regulations are subject to change. This summary is not intended to be exhaustive and does not describe, among other things, state, local or foreign income and other tax consequences. The specific tax consequences to a participant will depend upon that participant’s individual circumstances.
Options and Stock Appreciation Rights
Under existing law and regulations, the grant of nonqualified stock options and stock appreciation rights will not result in income taxable to the employee ornon-employee director. However, the exercise of a nonqualified stock option or stock appreciation right results in taxable income to the holder. At the time of the exercise of a nonqualified stock option, the participant will be taxed at ordinary income tax rates on the excess of the fair market value of the shares purchased over the option’s exercise price. At the time of the exercise of a stock appreciation right, the participant will be taxed at ordinary income tax rates on the amount of the cash, or the fair market value of the shares, received by the employee upon exercise.
The grant of an incentive stock option will not result in income taxable to the employee. The holder will not recognize income when the incentive stock option is exercised but the holder must treat the excess of the fair market value of the underlying shares on the date of exercise over the exercise price as an item of adjustment for purposes of the alternative minimum tax. If the holder disposes of the underlying shares after he or she has held the shares for at least two years after the incentive stock option was granted and one year after the incentive stock option was exercised, the amount the holder receives upon the disposition over the exercise price is treated as long-term capital gain for the holder. If the holder makes a “disqualifying disposition” of the underlying shares by disposing of the shares before they have been held for at least two years after the date the incentive stock option was granted and one year after the date the incentive stock option was exercised, the holder will recognize compensation income equal to the excess of (i) the fair market value of
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the underlying shares on the date the incentive stock option was exercised or, if less, the amount received on the disposition over (ii) the exercise price.
Restricted Stock Awards
A participant in the 2019 Equity Plan who is granted a restricted stock award will not be taxed upon the acquisition of such shares so long as the interest in such shares is subject to a “substantial risk of forfeiture” within the meaning of Code Section 83. Upon lapse or release of the restrictions, the recipient will be taxed at ordinary income tax rates on an amount equal to the then current fair market value of the shares. Any such awards that are not subject to a substantial risk of forfeiture will be taxed at the time of grant. The basis of restricted shares held after lapse or termination of restrictions will be equal to their fair market value on the date of lapse or termination of restrictions, and upon subsequent disposition any further gain or loss will be a long-term or short-term capital gain or loss, depending upon the length of time the shares are held. A recipient of a restricted stock award may elect to be taxed at ordinary income tax rates on the full fair market value of the restricted shares at the time of grant. If this election is made, the basis of the shares acquired will be equal to the fair market value at the time of grant, no tax will be payable upon the subsequent lapse or release of the restrictions, and any gain or loss upon disposition will be a capital gain or loss.
Restricted Stock Units
A participant who is granted a restricted stock unit will not be taxed upon the grant of the award. Upon receipt of payment of cash or common stock pursuant to a restricted stock unit, the participant will realize ordinary income in an amount equal to any cash received and the fair market value of any shares received.
Performance Awards and Incentive Awards
A recipient of a performance award will generally realize ordinary income at the time shares are transferred or cash is paid to the participant with respect to such award.
Dividend Equivalents
A recipient of dividend equivalents generally will realize ordinary income at the time the dividend equivalent is paid.
Deductibility
The Company is generally entitled to a deduction equal to the compensation realized by the holders of the nonqualified stock options, incentive stock options with a disqualifying disposition, stock appreciation rights, restricted stock, restricted stock units, performance awards/incentive awards and dividend equivalents. However, under the Tax Cuts and Jobs Act of 2017, the Company’s deduction will be limited by Section 162(m) of the Code for certain covered executive officers to the extent that their total compensation in any one year exceeds $1 million (less the amount of any “excess parachute payments” as defined in Section 280G of the Code), unless such compensation qualifies for certain transition relief.
Section 409A
Section 409A of the Code imposes certain requirements on nonqualified deferred compensation arrangements. These include requirements on an individual’s election to defer
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compensation and the individual’s selection of the timing and form of distribution of the deferred compensation. Section 409A also generally provides that distributions must be made on or following the occurrence of certain events (such as the individual’s separation from service, a predetermined date, or the individual’s death). Section 409A imposes restrictions on an individual’s ability to change his or her distribution timing or form after the compensation has been deferred. For certain individuals who are officers, Section 409A requires that such individual’s distribution commence no earlier than six months after such officer’s separation from service. Certain awards under the 2019 Equity Plan may be designed to be subject to the requirements of Section 409A in form and in operation. For example, restricted stock units that provide for a settlement date following the vesting date may be subject to Section 409A. If an award under the 2019 Equity Plan is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with the requirements of Section 409A, Section 409A imposes an additional 20% federal penalty tax on compensation recognized as ordinary income, as well as interest on such deferred compensation.
Registration of Shares
If this proposal is approved by our stockholders, the Board of Directors intends to cause the shares of common stock that will become available for issuance under the 2019 Equity Plan to be registered on a FormS-8 Registration Statement to be filed with the SEC at the Company’s expense prior to the issuance of any such shares.
The Board of Directors recommends a vote “FOR” the approval of the 2019 Equity Plan.
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EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 20162018 with respect to compensation plans under which Unisys common stock is authorized for issuance.
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
Equity compensation plans approved by security holders | | 2.099 million 1.454 million | (1) (2) | $ $ | 25.41 0 |
| 3.808 million | (3) | ||||
Equity compensation plans not approved by security holders(4) | 0.002 million | (5) | $ | 0 | 0 | |||||||
Total | 3.555 million | 3.808 million |
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding option, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
Equity compensation plans approved by security holders | | 1.113 million(1) 2.151 million(2) |
| $ $ | 27.90 0 |
| 2.362 million | (3) | ||||
Equity compensation plans not approved by security holders(4) | 0.002 million(5) | $ | 0 | 0 | ||||||||
Total | 3.266 million | 2.362 million |
(1) | Represents stock options. |
(2) | Represents restricted stock units. Assumes that unearned performance-based restricted stock units will vest at target. |
(3) | Shares issuable under the Unisys Corporation 2016 Long-Term Incentive and Equity Compensation Plan (the “2016 Plan”). Assumes that outstanding unearned performance-based restricted stock units will vest at the maximum amount. |
(4) | Represents the Unisys Corporation Director Stock Unit Plan (the “Stock Unit Plan”). Under the Stock Unit Plan, directors received a portion of their annual retainers and attendance fees in common stock equivalent units. The Stock Unit Plan was terminated in 2004, and stock units are now granted to directors under the 2016 Plan, which was approved by stockholders. No shares (other than shares subject to outstanding awards previously made) are available for future issuance under the Stock Unit Plan. |
(5) | Represents stock units granted under the Stock Unit Plan. |
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SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Shown below is information with respect to persons or groups that beneficially owned more than 5% of Unisys common stock as of February 28, 2017.March 11, 2019. This information is derived from Schedules 13G filed by such persons or groups.
Name and Address of Beneficial Owner | Number of Shares Of Common Stock | Percent of Class | ||||||||||||||
BlackRock, Inc. | 7,512,381(1) | 14.7 | ||||||||||||||
55 East New York, NY 10055 | ||||||||||||||||
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FMR LLC | 6,249,829(2) | 12.166 | ||||||||||||||
245 Summer Street Boston, MA 02210 | ||||||||||||||||
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The Vanguard Group | 8,329,288(3) | 16.32 | ||||||||||||||
100 Vanguard Blvd. Malvern, PA 19355 |
(1) | Sole dispositive power has been reported for all shares. Sole voting power has been reported for |
(2) |
Sole dispositive power has been reported for all shares. Sole voting power has been reported for |
Sole dispositive power has been reported for |
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Shown below are the number of shares of Unisys common stock (or stock units) beneficially owned as of February 27, 2017March 11, 2019 by all directors, each of the executive officers named on page 39,43, and all directors and current officers of Unisys as a group.
Beneficial Owner | Number of Shares of Common Stock (1)(2) | Additional Shares of Common Stock Deemed Beneficially Owned (1)(3) | Percent of Class | |||||||||
Peter A. Altabef | 106,822 | 93,334 | * | |||||||||
Jared L. Cohon | 40,016 | 0 | * | |||||||||
Alison Davis | 55,032 | 0 | * | |||||||||
Nathaniel A. Davis | 14,293 | 0 | * | |||||||||
Denise K. Fletcher | 72,338 | 0 | * | |||||||||
Philippe Germond | 24,404 | 0 | * | |||||||||
Janet B. Haugen | 44,746 | 77,137 | * | |||||||||
Eric Hutto | 11,756 | 4,046 | * | |||||||||
Leslie F. Kenne | 70,943 | 0 | * | |||||||||
Paul E. Martin | 0 | 0 | * | |||||||||
Jeffrey E. Renzi | 31,622 | 56,501 | * | |||||||||
Lee D. Roberts | 43,380 | 0 | * | |||||||||
Inder M. Singh | 0 | 0 | * | |||||||||
Andrew J. Stafford | 0 | 0 | * | |||||||||
Paul E. Weaver | 63,855 | 0 | * | |||||||||
All directors and current officers as a group | 613,523 | 293,002 | 1.4 |
Beneficial Owner | Number of Shares of Common Stock (1)(2) | Additional Shares of Common Stock Deemed Beneficially Owned (1)(3) | Percent of Class | |||||||||
Peter A. Altabef | 434,716 | 140,000 | 1.1 | |||||||||
Jared L. Cohon | 65,521 | — | * | |||||||||
Nathaniel A. Davis | 39,798 | — | * | |||||||||
Matthew J. Desch | 11,776 | — | * | |||||||||
Denise K. Fletcher | 97,843 | — | * | |||||||||
Philippe Germond | 49,909 | — | * | |||||||||
Lisa A. Hook | 10,870 | — | * | |||||||||
Eric Hutto | 82,474 | 12,135 | * | |||||||||
Deborah Lee James | 33,932 | — | * | |||||||||
Paul E. Martin | 38,005 | — | * | |||||||||
Regina Paolillo | 24,093 | — | * | |||||||||
Venkatapathi Puvvada | 55,996 | 14,270 | * | |||||||||
Jeffrey E. Renzi | 91,382 | 30,750 | * | |||||||||
Lee D. Roberts | 68,885 | — | * | |||||||||
Inder M. Singh | 52,879 | — | * | |||||||||
All directors and current officers as a group | 1,269,828 | 215,425 | 2.4 |
* | Less than 1% |
(1) | Includes shares reported by directors and officers as held directly or in the names of spouses, children or trusts as to which beneficial ownership may have been disclaimed. |
(2) | Includes: |
(a) | Shares held under the Unisys Savings Plan, a qualified plan under Sections 401(a) and 401(k) of the Internal Revenue Code, |
(b) | Stock units, as described on page |
(c) | Stock units deferred under the 2005 Deferred Compensation Plan for Directors as follows: Dr. Cohon, |
(3) | Shares shown are shares subject to options exercisable within 60 days following |
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Compensation Discussion and Analysis
Section | Page | |||
Executive Summary | ||||
What Guides Our Program | ||||
2018 Executive Compensation Program in Detail | ||||
Other Executive Compensation Practices and Policies |
This section details the objectives and elements of the Unisys executive compensation program, describes the related processes of our Compensation Committee, and discusses the compensation earned by our Named Executive Officers (“NEOs”). For 2018, our NEOs were:
NEO | Role | |
Peter A. Altabef | Chairman, Chief Executive Officer & President | |
Inder M. Singh | Senior Vice President and Chief Financial Officer | |
Eric Hutto | Senior Vice President and President, Enterprise Solutions | |
Venkatapathi Puvvada | Senior Vice President and President, Unisys Federal | |
Jeffrey E. Renzi | Senior Vice President and President, Global Sales |
Our Business2018 Overview — Where We Are Today
Unisys is a global information technology company that specializes in providing industry-focused solutions integrated with leading-edge security to clients in the midst of a strategic transition. In 2016,government, commercial and financial services markets. Our offerings include security solutions, advanced data analytics, cloud and infrastructure services, application services and application and server software.
The Company has strategically repositioned itself in the Company made substantial progress towards our objectives of improving profitabilitypast few years and free cash flow, strengthening ourgo-to-market approach,has improved profit margins and delivering on ourgrown full-year revenue guidance. To improve visibility, we provided financial guidancein 2018 for the first time since 2003. The Company also met or exceeded financial guidance in over a decade2018 for all guided metrics, marking the third-consecutive year of doing so since the process of providing guidance was reinstituted. Our executive compensation program is designed to track our progress on key financial metricsdrive long-term profitable and delivered on these commitments. In addition, we are exiting 2016 with an estimated $205 million in annualized cost savings through our cost reduction plan (compared to an initial plan of $200 million). The Company’s business contextsustainable growth, as well as leadership stability and performance are summarized below.
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Unisys is committed to enhancing peoples’ lives through digital security. We workcontinue in our progress with many of the world’s largest companies and government organizations to solve their most pressing IT and business challenges through high-value services, software and solutions. Over 90 of the Fortune 500 Global companies utilize Unisys systems to improve productivity and customer satisfaction. We offer:Company turnaround, as shown below, with a focus on achieving long-term growth.
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We operate in two business segments – Services and Technology. In our Services segment, we provide services to help clients improve their competitiveness, security, and cost efficiency. In 2016, approximately 85% of our revenue was attributable to the Services segment. In our Technology segment, we design and develop software, servers, and related products to help clients reduce costs, improve flexibility, and improve the efficiency of their data center environments. Compared to our Services segment, the Technology segment can see more variability in its results from quarter to quarter, but is also more profitable.
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The Company is undergoing a transformation to improve its capability to respond to changing client expectations:
1 2018 revenue is adjusted to exclude the benefit from the major |
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Our PerformanceIn 2018, we achieved full-year guidance on all metrics as shown below. This is the third consecutive year of either meeting or exceeding full-year guidance.
After joining the Company
Non-GAAP Adjusted Revenue 2018 Actual: $2.76B Guidance $2.7B-$2.825B Achieved Non-GAAP Operating Profit Margin 2018 Actual: 8.9% Guidance 7.75—8.75% Exceeded Adjusted EBITDA 2018 Actual: 15.3% Guidance 13.7—14.9% Exceeded
We continued our focus on January 1, 2015, our President and Chief Executive Officer, Peter A. Altabef, introduced a plan to refocus our strategy by deepening our software and integrated solutions, realigning our organization, and addressing our cost base. This work began in 2015 and continued in 2016. We established goals of increasing profitabilityoptimizing margin and cash flow while stabilizing revenue and building a foundation for revenue improvement.
Highlightsimproving revenue. We experienced traction with key elements of our 2016strategy with good performance include:
Delivered on guidance for revenue andnon-GAAP operating profit margin
Exceededin our guidance for adjusted free cash flow and were free cash flow positive for the year
Achieved total shareholder return of 35% for 2016, exceeding the median for our industry and the Russell 3000
Successfully executed against the verticalgo-to-market strategy developedfocus industries in 2015 includingbuild-out of the leadership team2018, as well as in targeted sectors and industries
Launched several new offerings aligned with ourleveraging security focus and verticalgo-to-market strategy
Increased revenue for targeted industries 2.6%as a differentiator driving success on a constant currency basis; 42% of revenue isstandalone basis and distinguishing us from focused industries
Increased Total Contract Value (TCV) by 13% compared to 2015; TCV (estimated total contractual revenue related to signed contracts including option years and without regard for cancellation) is a key leading indicator of future revenue; new business TCV (new customers or scope expansions) increased 17% compared to 2015
Executed on our cost-reduction plan with $205 million of annualized savings compared to our goal of $200 million exiting 2016
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Continued our transition to a more asset-lite business model, thereby reducing capital expenditure needs
Managed our capital structure, including through raising a convertible debt offeringUnisys stock has also performed well in 2018 and repaying early $115 million of our Senior Notes due in 2017
In order to improvehas generated shareholder value over the transparency of our financial reportingpast1- and enhance visibility on our performance, in January 2016 we provided annual financial guidance to track our progress on our strategic objectives. Our revenue guidance reflected negative impacts from currency (over half of our revenue is from sales outside the United States)3-year periods as well as lower anticipated revenue in both the Technology and Services segments. This was expected as part of our planned strategic transition, including migration from broader, more commoditized offerings to premium solutions customized for targeted industry verticals.
As summarized below, we achieved full year guidance on revenue andnon-GAAP operating profit margin and exceeded guidance on adjusted free cash flow. We achieved $205 million of annualizedrun-rate savings exiting 2016, compared to our goal of $200 million.Non-GAAP operating profit and adjusted free cash flow exclude the impact of defined benefit pension expense and cost reduction charges.shown below.
The Company’s results and the overall business environment, including the Company’s cost reduction program, were considered when determining compensation paid for 2016, as discussed below. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form10-K for a more detailed description of the Company’s financial results.
Overview of Our Compensation Programs
This section describes 2016 compensation and benefit programs for the executive officers listed in the Summary Compensation Table on page 59 and referred to as “Named Officers”.
Highlights of our compensation program include:
Strong emphasis on performance-based pay with the majority of target compensation (85% in the case of Mr. Altabef and 69% on average for the other Current Named Officers)at-risk.
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No base salary increases for most Named OfficersStockholder Outreach
No changes in short-term incentive opportunity for most Named Officers
Realized and realizable pay that aligns withComprehensive efforts were made to proactively engage our performance
Rigorous and progressively challenging performance goals
Increase in the proportion of performance-based long-term incentives
Programs designed to engage and motivate a new leadership team for execution relativetop 25 stockholders prior to the turnaround strategy
Additional detail onstockholder vote in each compensation element is provided starting on page 48.
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Base salaries and target short-term cash incentive awards for 2016 were generally at or competitive with (i.e. within 15%) the market median. In consideration of the Compensation Committee’s desire to achieve an appropriate balance between the goals of its long-term incentive program, its compensation expense and dilution to its stockholders, the grant date value of LTI awards to the Named Officers, as shown in the Summary Compensation Table on page 59, in the aggregate, was below the median compared to the market reference data. Therefore, total target compensation for 2016 is at or below median for the Named Officers.
Pay-Performance Alignment
The chart below shows 2016 target and realized compensation for Mr. Altabef. Target total direct compensation represents Mr. Altabef’s 2016 target pay opportunity. Realized compensation shows Mr. Altabef’s salary, actual EVC payout, and the value of Mr. Altabef’s Time-Based RSUs and Performance-Based RSUs which vested in 2016. Based on the Unisys common stock price at vesting, realized long-term incentives were approximately $372,200, significantly less than the fair value of Mr. Altabef’s long-term incentives at the time of grant, which was approximately $4.3 million. The chart shows that while Mr. Altabef’s target total direct compensation is approximately $6.5 million, his realized pay is approximately $2.9 million.
Below we show alignment of realizable pay and total shareholder return (TSR) for Unisys compared to the 2016 Peer Group (defined under “Market References” below). Realizable pay incorporates realized pay plus the value of unvested equity and unearned long-term performance cash attributable to awards made in the past 3 years (2014 through 2016 for Unisys, and generally 2013 through 2015 for the 2016 Peer Group given the timing of compensation disclosures) assuming target performance and stock price as of December 31. Differences in realized, realizable and Summary Compensation Table reported pay reflect
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timing of incentive payouts (long-term incentives vest over multiple years), changes in stock price since the time of grant, and the degree to which actual payouts of EVC and Performance-Based RSUs that actually vested align with the target amounts.
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For the Company, realizable pay is evaluated for 2014 through 2016 and the Chief Executive Officer comparison uses Mr. Altabef’s pay for 2015 and 2016 and the pay of our former Chief Executive Officer, J. Edward Coleman, for 2014. For the 2016 Peer Group, realizable pay is based on the last three years disclosed in the most recent proxy. TSR, which encompasses stock price appreciationto obtain important feedback and assumes dividends (where applicable) are reinvested, is calculated for January 1, 2014 through December 31, 2016.
CEO Pay for Performance
Although total shareholder return trailsdiscuss how our peers, this analysis shows realizable pay aligns withexecutive compensation program supports our total shareholder return performance over the last three years. We believe this is a comprehensive depictionstrategy. During 2018, senior executives and directors ofpay-performance alignment for the following reasons:
It takes into account stock price movement after the grant date (as opposed to grant date fair value reported in the Summary Compensation Table)
For performance-based equity such as our Performance-Based RSUs, the number of shares or units actually vesting is used for time periods where the performance period has been completed.
For multi-year cash vehicles such as our Long-Term Performance Cash, it includes target value where the performance period has not yet been completed. Only Long-Term cash earned in 2016 is shown in the Summary Compensation Table.
It excludes Other Compensation reported in the Summary Compensation Table which includes items that are not part of total direct compensation. For the Company, Other Compensation is typically a small portion (i.e.1-3%)including the Chairman of Summary Compensation Table pay for executives with the Company for the entire year. However, items related to executive turnover such as severance payments and vacation payouts to former
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The analysis is based on the 2016 Peer Group, which the Company considers most relevant.
Shareholder Feedback
The Compensation Committee, with input from its independent compensation consultant, regularly evaluates its compensation programs and considers the results of its most recent stockholder advisory vote on executive compensation(‘say-on-pay”) as well as feedback received directly from shareholders through our ongoing engagement. The Company proactively contacted many of our major shareholdersparticipated in the spring of 2016 prior to the annual meeting to discuss oursay-on-pay vote and the proposal to approve the 2016 Plan.investor meetings. During these calls,meetings, senior executives and directors of the Company provided information regarding our executive compensation programs, responded to questions and discussed investor feedback. Over 70%We were disappointed in the low level of support for our top 30 shareholders were contacted, representing over half of the shares outstanding. This process resultedsay-on-pay vote in valuable insight regarding shareholder views. Feedback received directly from shareholders, as well as from proxy advisory firms, is summarized below.
At the April 2016 annual meeting,2017 and 2018 (approximately 68% and 61.5%, respectively). In response, we receivedlook to improve oursay-on-pay support of approximately 82%. While this indicates support for our programs, oursay-on-pay approval has historically been higher (averaging approximately 94% from 2013through changes to 2015) and we are carefully considering the valuable feedback received during this process. The Company has undertaken a comprehensive approach to maintaining and improvingsay-on-pay support which includes:
Re-vamping our proxy to improve transparency and presentation
Increasing our dialogue and engagement with shareholders regarding executive compensation
Continuing plans designed to incorporateaddress shareholder feedbackconcerns, enhanced disclosure and continued dialogue with stockholders. As a result, we updated our disclosure in developingkey areas and made important changes to our executive compensation program in 2018 that addressed some of the design andgoal-setting process for 2017key concerns we heard from our stockholders.
What We Heard | ||
Goal Setting
• Some stockholders were |
• We have consistently structured our compensation plans to be tied to financial metrics we believe are key to investors. In
• For 2018, metric targets are set higher than previous year actual performance reflecting the focus on growth. 2018 Adjusted Free Cash Flow is the only incentive metric set lower than previous year’s performance due to impact in 2018 of check-processing joint venture working capital requirements. | |
Long-Term Incentives Long-Term Goals • Our long-term incentives in previous years were tied to three discrete annual goals. Stockholders have indicated that they prefer to see Unisys move towards setting3-yearpre-set goals. | Multi-year Cumulative Performance Goals • We changed the measurement period for performance-based long-term incentives to1-year,2-year cumulative, and3-year cumulative goals. We will continue to evaluate the appropriateness of moving to a three-year performance period, however, it is currently important to balance the need to retain key leaders who are successfully executing on our strategy for growth. | |
Long-term Incentive Metrics • Some stockholders have expressed a preference to include consideration of relative performance in performance assessments. | Introduced Relative Total Shareholder Return (rTSR) in 2018 • In previous years, both performance cash and performance-based restricted stock units(“PB-RSUs”) were tied toNon-GAAP Operating Profit. In 2018, the metric forPB-RSUs was changed to rTSR as compared to the Russell 2000 to improve the alignment between management rewards and stockholder value creation. |
These changes are designed to reflect stockholder feedback, drive long-term profitable growth, and foster leadership stability.
2018 Compensation DecisionsAt-A-Glance
Our executive compensation program is tailored to our strategic priorities and our current outlook, while also being designed to motivate and retain our senior management team.
Additional detail on each compensation element is provided in the “2018 Executive Compensation Program In Detail” section starting on page 54.
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Base Salary • No changes to the salaries of • Compensation Committee approved salary increases to other NEOs between 6% and 10% |
• Changes to base salary consider level of responsibility and complexity of position compared to market and other executives within the Company, individual performance, and other factors. | |
Short-Term Incentives • No change in target opportunities for any of the NEOs | • Annual cash incentives under the Executive Variable Compensation (“EVC”) Plan • Targeted award amounts set as a percentage of salary for each NEO • No award paid ifpre-setnon-GAAP Operating Profit level gate is not met • Weightings and metrics: • 40% —Non-GAAP Operating Profit • 35% — Revenue • 25% — Adjusted Free Cash Flow • No funding on a metric if performance is below threshold; payout capped at 200% of target • Goals aligned with Company’s operating plan and to financial guidance | |
Long-Term Incentives (LTI) • No changes in annual grants to Mr. Altabef and Mr. Renzi. • Compensation Committee approved increases to other NEOs between 11% and 27% to better align with the market | • Design is new in 2018 • Consists of performance-based LTI | |
value) and time-based restricted stock units |
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• No payout for performance below threshold; payouts capped at 200% • Metrics: • Performance-based RSUs: rTSR • Performance cash:Non-GAAP Operating Profit • Goals are set at the
• Time-based RSUs vesting ratably over |
Our ongoing discussions with investors also include exchange of information regarding our executive compensation programs. Going forward, we plan to continue to dialogue with our shareholders and consider their perspectives regarding compensation and governance matters.
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Good Governance Practices
The Compensation Committee continually evaluates the Company’s compensation policies and practices to ensure that they are consistent with good governance principles. The Committee receives regular updates on governance matters from its independent consultant. Below are highlights of our governance practices: