OMB APPROVAL | ||
OMB Number: | 3235-0059 | |
Expires: | January 31, 2008 | |
Estimated average burden | ||
hours per response | 14 |
UNITED STATES
SCHEDULE 14A INFORMATIONSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
the Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrantx
Filed by a Party other than the Registrant¨
Check the appropriate box:
¨ | Preliminary Proxy Statement |
¨ | Confidential, for Use of the Commission Only |
x | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material Pursuant to | §240.14a-12 |
NCR CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x | No fee required. |
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which the transaction applies: |
(2) | Aggregate number of securities to which the transaction applies: |
(3) | Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of the transaction: |
(5) | Total fee paid: |
¨ | Fee paid previously with preliminary materials. |
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: |
NOTICE OF 20072008 ANNUAL MEETING
AND PROXY STATEMENT
March 1, 200711, 2008
Dear Fellow NCR Stockholder:
I am pleased to invite you to attend NCR’s 20072008 Annual Meeting of Stockholders on April 25, 2007.23, 2008. The meeting will begin promptly at 9:00 a.m. local time in the Auditorium of NCR’s World Headquarters Building, located at 1700 South Patterson Boulevard in Dayton, Ohio.
This booklet includes the formalThe accompanying notice of the annual meeting and the proxy statement. The proxy statement tellstell you more about the agenda and procedures for the meeting. ItThey also describesdescribe how the Board operates and givesprovide information about our director candidates, executive officer and generaldirector compensation and corporate governance matters. A form of proxy for voting at the meeting and our annual report to stockholders for the year ended December 31, 2006 are included with this booklet.
Bill Nuti, NCR’s Chief Executive Officer, and I look forward to sharing more information with you about NCR at the annual meeting. If you plan
This year we are pleased to attend, please complete and returnbe able to NCRoffer to our stockholders the meeting reservation request form printedoption to receive NCR’s proxy materials on the backInternet. We believe this option will be preferred by many of this booklet.our stockholders, as it allows NCR to provide our stockholders the information they need in an environmentally-conscious form and at a reduced cost.
Your vote is important. Whether or not you plan to attend the annual meeting, I urge you to authorize your proxy as soon as possible so thatpossible. You may vote by proxy on the Internet or by telephone, or, if you received the proxy materials by mail, you may also vote by mail. Your vote will ensure your stock may be representedrepresentation at the meeting.annual meeting regardless of whether you attend in person.
Sincerely,
James M. Ringler
William R. Nuti
Chairman of the Board,
Chief Executive Officer and President
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF NCR CORPORATION
Time:
9:00 a.m. local time
Date:
Wednesday, April 25, 200723, 2008
Place:
Auditorium at NCR’s World Headquarters Building
1700 South Patterson Blvd.
Dayton, Ohio 45479
Purpose:
Elect threetwo Class BC directors to hold office for three-year terms, and one Class A director to hold office for a period of time concurrent with the term of the remaining Class A directors, each until his or her respective successor is duly elected and qualifies;
Consider and vote upon the ratification of the appointment of the Company’s independent registered public accounting firm for 2007;2008; and
Transact such other business as may properly come before the meeting and any adjournment or postponement of the meeting.
Other Important Information:
Registered stockholders of NCR common stock at the close of business on February 12, 2007,11, 2008, may vote at the meeting.
Your shares cannot be voted unless they are represented by proxy or in person by the record holder at the meeting.Even if you plan to attend the meeting, please authorize your proxy.
By order of the Board of Directors,
Peter M. Lieb
Senior Vice President,
General Counsel and Secretary
March 1, 200711, 2008
NCR Corporation
1700 South Patterson Blvd.
Dayton, Ohio 45479
PROXY STATEMENT
GENERAL INFORMATION
We are deliveringmaking these proxy materials available to you on the Internet beginning on March 11, 2008. If you prefer a printed copy of the proxy materials, you must request one, and we will mail you a printed copy of the proxy materials, at no cost to you. These materials are intended to solicit proxies on behalf of the Board of Directors of NCR Corporation, a Maryland corporation (which we refer to as “NCR,” the “Company,” “we,” or “us”), for the 20072008 Annual Meeting of Stockholders, including any adjournment or postponement thereof. The meeting will be heldconvened at 9:00 a.m. local time,, Eastern Time, on April 25, 2007,23, 2008, at the Company’s World Headquarters Building at the address above.
Starting March 19, 2007, weDelivery of Proxy Materials
We are mailingproviding access to our proxy materials (including this proxy statement, together with a notice of meeting form of proxy and voting instruction card (“proxy card”) and the Company’s annual report forreport) on the year ended December 31, 2006,Internet pursuant to new rules adopted by the Securities and Exchange Commission (“SEC”). Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to stockholders entitled to vote at the meeting. You may also request a printed copy of the proxy materials by mail. If you do so, these materials will also include the proxy card for the Annual Meeting. To request a printed copy of the proxy materials, please contact us via the Internet (www.investorEconnect.com), telephone (1-800-579-1639) or by email (sendmaterial@investorEconnect.com) on or before April 3, 2008. If requesting material by email, please send a blank email with the 12-digit Control# (located on the Notice)in the subject line. Requests, instructions and other inquiries will NOT be forwarded to your investment advisor.
All stockholders will have the ability to access the proxy materials on a website referred to in the Notice or request to receive a printed copy of the proxy materials at no charge. If you request a printed copy of the proxy materials, we will mail them to you within three business days of your request. The Notice includes instructions on how to access the electronic proxy materials, as well as instructions for requesting a printed copy. In addition, stockholders may permanently elect to receive future proxy materials in either electronic form by email or printed form by mail. If you make such an election, we will continue to send you the materials pursuant to your election, until you notify us otherwise.
We are taking advantage of the householding rules adopted by the SEC that permit us to deliver only one Notice to stockholders who share an address, unless otherwise requested. This allows us to reduce the expense of delivering duplicate Notices to our stockholders who may have more than one stock account or who share an address with another NCR stockholder. If you have multiple NCR common stock record accounts and/or share an address with a family member who is an NCR stockholder and have received only one Notice, you may write or call us at 1700 S. Patterson Boulevard, Attn: Investor Relations, Dayton, Ohio 45479 (phone: 937-445-5905), to request separate copies of the proxy materials at no cost to you. If you do not wish to participate in the householding program, please call 1-800-542-1061 to “opt-out” or revoke your consent.
Stockholders Entitled to Vote at the Meeting
If you are a registered stockholder at the close of business on the record date for the meeting, February 12, 2007,11, 2008, you are entitled to vote at the meeting. There were 179,312,878173,252,852 shares of common stock outstanding on the record date. You will have one vote on each matter properly brought before the meeting for each share of NCR common stock you own.
Delivery of Voting Materials1
As we did last year, we are taking advantage of the householding rules adopted by the U.S. Securities and Exchange Commission (“SEC”) that permit us to deliver only one set of disclosure materials (such as a proxy statement and annual report) to stockholders who share an address, unless otherwise requested. This allows us to reduce the expense of delivering duplicate disclosure materials and notice to our stockholders who may have more than one stock account or who share an address with another NCR stockholder. We will continue to send a separate proxy card for each stockholder residing at a shared address. If you are a registered stockholder (owning your stock directly and not through a nominee suchas a bank or broker) who receives multiple copies of NCR’s annual report and proxy statement,you areencouraged to indicate your consent to the householding of future investor communications by answering “yes” to the Householding Election question on your proxy card.
If you own NCR common stock beneficially through a nominee (such as a bank or broker), information regarding householding of disclosure materials should be forwarded to you by your nominee.
Electronic Access to Proxy Materials and Annual Report
ThisThe Notice includes instructions regarding how to:
view your proxy statement and NCR’s 2006 annual report to stockholders are availablematerials for the Annual Meeting on the following Internet sites:http://investor.ncr.com/downloads/2007proxy.pdf (proxy statement)Internet; andhttp://investor.ncr.com/downloads/NCR2006AR.pdf (annual report). Most stockholders can elect
instruct us to viewsend you all future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail.materials by email.
If you are a registered stockholder, you can choose to accessreceive future proxy materials by email, next year you will receive an email with a link to the proxy materials and proxy voting site. Your election to receive future proxy materials by email will remain in effect until you terminate your disclosureelection. Choosing to receive your future proxy materials electronically andby email will save the Company the cost of producing and mailing these documents by followingand reduce the instructions provided athttp://www.icsdelivery.com/ncr or by following the prompt if you choose to authorize your proxy over the Internet. If you hold your NCR stock in a nominee name (such as through a bank or broker), please review the information provided by your nominee for instructionsimpact of our Annual Meeting on how to elect to view future proxy statements and annual reports over the Internet.our environment.
How to Obtain a Separate Set of Voting Materials
If you have multiple NCR common stock record accounts and/or share an address with a family member who is an NCR stockholder and have received only one annual report and proxy statement, you may write or call us at 1700 S. Patterson Boulevard, Attn: Investor Relations, Dayton, Ohio 45479 (phone: 937-445-5905), to request separate copies of these materials at no cost to you.
1
How to Vote Your Shares
Your vote is important. Your shares can be voted at the annual meeting only if you are present in person or represented by proxy. Even if you plan to attend the meeting, we urge you to authorize your proxy in advance. We encourage you to authorize your proxy electronically by going to thehttp://www.proxyvote.com website or by calling the toll-free number (for residents of the United States and Canada) listed on your proxy card. Please have your proxy card in hand when going online or calling.If you authorize your proxy electronically, you do not need to return your proxy card.If you received proxy materials by mail and choose to authorize your proxy by mail, simply mark your proxy card, and then date, sign and return it in the postage-paid envelope provided.
If you hold your shares beneficially in street name, i.e., through a nominee (such as a bank or broker), you may be able to authorize your proxy by telephone or the Internet as well as by mail. You should follow the instructions you receive from your broker or other nominee to vote these shares.
How to Revoke Your Proxy
You may revoke your proxy at any time before it is voted at the meeting by:
voting again on the Internet or telephone (only the latest Internet or telephone proxy will be counted);
properly executing and delivering a later-dated proxy (including a telephone or Internet proxy authorization);card;
voting by ballot at the meeting; or
sending a written notice of revocation to the inspectors of election in care of the Corporate Secretary of the Company at the address listed above.
Voting at the Annual Meeting
The method by which you vote and authorize your proxy will in no way limit your right to vote at the meeting if you later decide to vote in person at the meeting. If you hold your shares in street name, you must obtain a proxy executed in your favor from your nominee (such as a bank or broker) to be able to vote at the meeting.
Your shares will be voted at the meeting as directed by your electronic proxy, the instructions on your proxy card or voting instructions or electronic proxy if: (1) you are entitled to vote, (2) your proxy was properlyexecutedproperly executed or properly authorized electronically, (3) we received your proxy prior to the annual meeting, and (4) you did not revoke your proxy prior to or at the meeting.
The Board’s Recommendations
If you authorize your proxy electronically or send a properly executed proxy or authorized your proxy electronically without specific voting instructions, your shares represented by that proxy will be voted as recommended by the Board of Directors:
FOR the election of each of the threetwo Class BC director nominees and the single Class A director nominee (see pages 6-7)page 6); and
FOR ratification of the appointment of the Company’s independent registered public accounting firm for 20072008 (see page 55)69).
2
Voting Shares Held in the NCR Savings Plan
If you are a participant in the NCR Savings Plan, your proxy includes any NCR common stock allocated to your plan account. The trustee of this plan will vote the number of shares allocated to your account according to your instructions. If you do not vote your shares in the NCR Savings Plan as instructed above, the trustee will vote unallocated shares, and any allocated shares for which voting instructions are not timely received, in the same proportion of “For” and “Against” votes as the shares for which voting instructions were timely received.
Voting Shares Held Under the NCR Direct Stock Purchase and Sale Plan
If you are a participant in the direct stock purchase and sale plan (the “DSPP”) administered by our transfer agent, Mellon Investor Services (“Mellon”), for NCR, your proxy includes the NCR common stock held in your DSPP account. Mellon, as the DSPP administrator, is the stockholder of record of that plan and will not vote those shares unless you provide it with instructions, which you may do over the Internet, by telephone, or by mail using your proxy card.
Quorum for Meeting: Votes Required to Approve Each Item
The presence at the meeting (in person or by proxy) of the holders of at leaststockholders entitled to cast a majority of all the shares outstanding onvotes entitled to be cast at the meeting as of the record date, the close of
2
business on February 12, 2007, is necessary to have11, 2008, constitutes a quorum allowing us to conduct business at the meeting. A majority of all the votes cast (in person or by proxy) is required to elect directors and to ratify the appointment of our independent registered public accounting firm. Broker “non-votes” and abstentions are not votes cast under Maryland law and, therefore, will have no effect on the outcome of the vote for any item. Broker “non-votes” occur when a broker returns a properly executed proxy but does not vote on a particular item because the broker does not have the authority to vote on a proposal because it has not received voting instructions from the beneficial owner. We do not expect that brokers will lack authority to vote on either of the proposals that will be considered at the meeting.
Annual Meeting Admission
You may attend the meeting if you are a registered stockholder, a proxy for a registered stockholder, or a beneficial owner of NCR common stock with evidence of ownership.If you plan to attend the meeting in person, please complete and return to NCR’s Corporate Secretary, by mail, the meeting reservation request form printedprovided on the Internet, or, if you received the proxy materials by mail, the form provided on the back ofthis the booklet. If you are not a record stockholder, please include evidence of your ownership of NCRstock with the form (such as an account statement showing you own NCR stock as of the record date).If you do not have a reservation for the meeting, you may still attend if we can verify your stock ownership at the meeting.
Annual Meeting Voting Results
We will include the results of the votes taken at the meeting in NCR’s next quarterly report filed with the SEC. You may also find information on how to obtain a full transcript of the meeting in that quarterly report or by writing to NCR’s Corporate Secretary at NCR Corporation, 1700 South Patterson Blvd., Dayton, Ohio 45479.
2-for-1 Stock SplitTeradata Spin-Off
On January 21, 2005,In September 2007, the Company completed a 2-for-1 stock splittransaction in which it strategically separated one of its business units, referred to as the Teradata Division (“Teradata”), into a separate publicly-held corporation, Teradata Corporation. The spin-off of Teradata required the Company to take a number of actions, including making adjustments necessary to account for changes in the operating business of the Company’s common stock in the form of a 100% stock dividend for stockholders of record on December 31, 2004 (the “Stock Split”). All references to numbers of shares and per share amounts in this proxy statement reflect the Stock Split.Company.
Uncertificated Shares
On January 25, 2006, the Board of Directors approved an amendment and restatement of the Company’s Bylaws which, among other things, allows the Company to issue uncertificated shares of stock. As a result of a resolution adopted by the Board of Directors, the Company will no longer issue stock certificates. However, stockholders whose shares are uncertificated will have all of the same rights as stockholders who were previously issued stock certificates and whose shares continue to be represented by certificates.
3
STOCK OWNERSHIP
Ownership by Officers and Directors
This table shows the NCR common stock beneficially owned as of January 31, 20072008 by each executive officer named in the Summary Compensation Table found below on page 30,35, and each non-employee director and nominee and the current directors and current executive officers as a group. As of that date, the then currentthen-current directors and executive officers as a group beneficially owned 1.2%1.3% of NCR stock. In addition to the shares shown in this table, the directors and executive officers hold the restricted stock units whichthat have not yet vested, as listed in footnote 67 to the following the table.
Name | Total Shares Beneficially Owned(1)(2) | Shares Covered by Options(3) | ||
Current Non-Employee Directors | ||||
Edward P. Boykin, Director | 47,541 | 20,000 | ||
Gary Daichendt, Director | 3,168 | 0 | ||
Mark Frissora, Director(4) | 37,593 | 16,000 | ||
Linda Fayne Levinson, Director | 104,938 | 78,946 | ||
Victor L. Lund, Director | 39,628 | 24,000 | ||
C.K. Prahalad, Director | 110,746 | 78,946 | ||
James M. Ringler, Director | 94,463 | 64,610 | ||
William Stavropoulos, Director | 101,080 | 62,000 | ||
Current Named Executive Officers | ||||
William R. Nuti, Director and Officer | 245,701 | 103,913 | ||
Peter Bocian, Officer(5) | 91,656 | 52,122 | ||
Malcolm Collins, Officer | 49,407 | 17,717 | ||
Michael Koehler, Officer | 114,200 | 28,710 | ||
Christine Wallace, Officer | 131,351 | 91,159 | ||
Current Directors and Executive Officers as a Group (19 persons) | 2,215,694 | 768,923 |
Name | Total Shares Beneficially Owned(1)(2) | Shares Covered by Options(3) | ||
Non-Employee Directors | ||||
Edward (Pete) Boykin, Director | 72,035 | 39,724 | ||
Gary Daichendt, Director | 10,479 | 3,724 | ||
Mark Frissora, Director(4) | 42,588 | 19,724 | ||
Linda Fayne Levinson, Independent Lead Director | 111,477 | 77,770 | ||
C.K. Prahalad, Director | 123,336 | 77,770 | ||
Named Executive Officers | ||||
William Nuti, Director and Officer | 1,057,254 | 892,308 | ||
Malcolm Collins, Officer | 65,471 | 38,432 | ||
Peter Lieb, Officer | 43,830 | 25,716 | ||
Christine Wallace, Officer | 273,138 | 208,726 | ||
Peter Bocian, Former Officer(5) | 10 | 0 | ||
Robert Fishman, Former Officer | 16,759 | 12,438 | ||
Michael Koehler, Former Officer(6) | 31,674 | 0 | ||
Current Directors and Executive Officers as a Group (17 persons) | 2,214,427 | 1,701,970 |
(1) Some of NCR’s executive officers and directors own fractional shares of NCR stock. For purposes of this table, all fractional shares have been rounded to the nearest whole number. This column also includes 24,311 shares granted to Mr. Boykin that were deferred pursuant to his election until the time of his departure from the Board.
(2) This column includes shares held by NCR’s executive officers and directors who have entered into a standard brokerage account form with Fidelity which includes a provision for the pledge of NCR shares owned by such executive officer or director. The pledge applies to all shares listed for each individual in the table above which are held in such individual’s Fidelity brokerage account.
(3) This column shows those shares the officers and directors or their family members have the right to acquire through stock option exercises within 60 days after January 31, 2008. These shares are also included in the Total Shares Beneficially Owned column. For officers who are eligible for a “retirement” under the Company’s benefit plans, this includes the following options that would accelerate upon such retirement: Ms. Wallace, 10,983 shares, and an officer who is not an executive officer named in the Summary Compensation Table, 4,362 shares.
(4) Includes an aggregate of 280 shares held by Mr. Frissora’s sons.
(5) Includes 10 shares of common stock held by Mr. Bocian’s wife.
(6) Includes an aggregate of 21,503 shares of common stock held by Mr. Koehler and his wife.
(7) In addition to the shares listed in the table, directors hold the following number of restricted stock units that have not vested as of the filing date of this proxy statement: Mr. Boykin, 327 (the receipt of which Mr. Boykin has elected to defer); and Messrs. Daichendt, Frissora and Prahalad and Ms. Levinson, 327. The executive officers also hold the following number of restricted stock units that have not vested as of the filing date of this proxy statement, in addition to the shares listed in the table: Mr. Nuti, 222,658; Mr. Collins, 68,560; Mr. Fishman, 14,246; Mr. Lieb, 47,801; Ms. Wallace, 31,654; and other executive officers who are not named in the Summary Compensation Table, 86,997.
4
Other Beneficial Owners of NCR Stock
To the Company’s knowledge, the following stockholders beneficially own more than 5% of the Company’s outstanding stock.
Name and Address of Beneficial Owner | Total Number of Shares | Percent of Class | ||||
FMR Corp 82 Devonshire Street Boston, Massachusetts 02109 | 22,077,310 | (1) | 12.39 | % | ||
Dodge & Cox 555 California Street, 40th Floor San Francisco, California 94104 | 13,695,990 | (2) | 7.7 | % |
Name and Address of Beneficial Owner | Total Number of Shares | Percent of Class | ||||
FMR LLC 82 Devonshire Street Boston, Massachusetts 02109 | 27,150,000 | (1) | 15.3 | % | ||
Cramer Rosenthal McGlynn, LLC 520 Madison Avenue New York, New York 10022 | 11,943,816 | (2) | 6.7 | % | ||
OZ Management LP 9 West 57th Street, 39th Floor New York, New York 10019 | 9,783,709 | (3) | 5.5 | % | ||
Glenview Capital Management, LLC 767 Fifth Avenue, 44th Floor New York, New York 10153 | 9,231,987 | (4) | 5.2 | % |
(1) | Information is based upon a Schedule 13G/A filed by FMR |
Fidelity is the beneficial owner of |
(2) | Information is based upon |
(3) | Information is based upon a Schedule 13G filed by OZ Management LP (“OZ”), Och-Ziff Holding Corporation (“OZHC”), Och-Ziff Capital Management Group LLC (“OZM”) and Daniel S. Och with the SEC on February 11, 2008. According to this filing, OZ has sole voting power and sole dispositive power over 9,327,872 shares, OZHC has sole voting power and sole dispositive power over 9,327,872 shares, OZM has sole voting power and sole dispositive power over 9,783,709 shares and Daniel S. Och has sole voting power and sole dispositive power over 9,783,709 shares. |
(4) | Information is based upon a Schedule 13G/A filed by Glenview Capital Management, LLC and Lawrence M. Robbins with the SEC on February 14, 2008. According to the filing, Glenview Capital Management, LLC and Lawrence M. Robbins have shared voting power and shared dispositive power over all the shares. |
5
ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
The Board of Directors of NCR (the “Board”) is currently divided into three classes. Directors hold office for staggered terms of three years (or less if they are filling a vacancy) and until their successors are elected and qualify. One of the three classes is elected each year to succeed the directors whose terms are expiring. As of the 2007 annual meeting, theThe terms for the directors in Classes A, B and C of the Board of Directors expire at the annual meetings of stockholders in 2009, 2007,2010, and 2008, respectively.
Messrs. BoykinFrissora and Lund and Ms. LevinsonPrahalad are Class BC Directors whose current terms are expiring at the 20072008 annual meeting. Messrs. BoykinFrissora and Lund and Ms. LevinsonPrahalad have been nominated for reelection throughto serve until the 20102011 annual meeting of stockholders and until their successors are elected and qualify. Mr. Daichendt is a Class A Director who was elected by the Board of Directors following the 2006 annual meeting of stockholders. NCR’s Chief Executive Officer identified and recommended Mr. Daichendt to the Committee on Directors and Governance as a candidate for such position and that committee subsequently recommended to the Board of Directors that he be elected a director of the Company to serve as a Class A director until the 2007 annual meeting. Mr. Daichendt has been nominated for reelection through the 2009 annual meeting of stockholders and until his successor is elected and qualifies.
Proxies solicited by the Board will be voted for the election of each of the nominees, unless you withhold your vote on your proxy. The Board has no reason to believe that any of these nominees will be unable to serve. However, if one of them should become unavailable, the Board may reduce the size of the Board or designate a substitute nominee. If the Board designates a substitute, shares represented by proxies will be voted for the substitute nominee.
The Board recommends that you vote FOR each of the following nominees for election as a director.
Class B—C—Current Terms Expiring in 20072008 and New Terms Expiring in 2010:2011:
Edward P. “Pete” BoykinMark Frissora, 68, served52, became Chief Executive Officer of The Hertz Corporation, a car and equipment rental company, on July 19, 2006, and became Chairman of the Board of The Hertz Corporation on January 1, 2007. Prior to becoming Chief Executive Officer of The Hertz Corporation, Mr. Frissora was Chairman and Chief Executive Officer of Tenneco Inc. (“Tenneco”), a manufacturer of automotive emission control and ride control products and systems, from March 2000, after serving as theits President and Chief OperatingExecutive Officer ofComputer Sciences Corporation (“CSC”), an information technology services company he joined in 1966, from July 2001 to June 2003. From 1998 to 2001, he held a number of senior management positions at CSC, including group president of its Financial Services Group fromNovember 1999 to 2001 and vice president of its Technology Management Group from 1998 to 1999. From 1996 to 1998,until March 2000. Mr. Boykin was President of The Pinnacle Alliance, a CSC-managed organization providing information technology outsourcing and other services to J.P. Morgan. Mr. BoykinFrissora became a director of NCR on June 5, 2002.
Linda Fayne LevinsonC.K. Prahalad, 65,66, is Chairthe Paul and Ruth McCracken Distinguished University Professor at The Ross School of Business, University of Michigan. Mr. Prahalad is a nationally recognized specialist in corporate strategy and the Boardrole of Directorstop management in large, diversified, multi-national corporations. From 2000 to 2002, he was Chairman of Vendare Media Corporation, an online media and marketing company providing solutions for brand marketers, direct marketers and web publishers, a position she has held since July 2006. She is also Chair of the Board of Directors of X1 Technologies,PRAJA, Inc., an Idealaba software company providing secure enterprise desktop search solutions, a position she has held since November 2006. From February 2006 through July 2006, Ms. Levinson was Interim Chief Executive Officer of Vendare Media. Ms. Levinson was a partner at GRP Partners, a private equity investment fund investinglocated in start-up and early-stage retail and electronic commerce companies, from 1997 to December 2004. From 1994 to 1999, she was President of Fayne Levinson Associates, an independent consulting firm. Ms. Levinson has also served as an executive with Creative Artists Agency Inc., as a partner in the merchant banking operations of Alfred Checchi Associates, Inc., as a Senior Vice President of American Express and as a Partner at McKinsey & Co. SheSan Diego, California. He is also a director of DemandTec, Inc.Teradata Corporation, Hindustan Lever Limited, India, and World Resources Institute, Washington, D.C., Jacobs Engineering Group Inc., Ingram Micro Inc., and The Western Union Company. Ms. Levinsona non-governmental organization. Mr. Prahalad became a director of NCR on January 1, 1997.
Victor L. Lund, 59, has served as non-executive Chairman of the Board of DemandTec, Inc., a SAS demand forecasting company, since December 2006. Prior to this
6
position, Mr. Lund served as the non-executive Chairman of the Board of Mariner Health Care, Inc., a long-term health care services company, from May 2002 to December 2004. He served as Vice Chairman of Albertson’s, Inc., a food and drug retailer, from June 1999 until June 2002. Mr. Lund served as Chairman of the Board of American Stores Company from 1995 until its acquisition by Albertson’s in June 1999, and as Chief Executive Officer of American Stores Company from 1992 until 1999. He was President of American Stores Company from 1992 until 1995. Prior to joining American Stores Company in 1977, Mr. Lund was a practicing certified public accountant. He also serves on the boards of Borders Group, Inc., Del Monte Foods Company, and Service Corporation International. Mr. Lund became a director of NCR on April 23, 2003.
Class A—Current Term Expiring in 2007 and New Term Expiring in 2009:
Gary Daichendt, 55, is the lead investor in Howie’s Game Shack LLC, a gaming center company, and the commercial real estate firm, TheoryR Properties LLC. He served as President and Chief Operating Officer of Nortel Networks, a global supplier of communication equipment, from March 2005 to June 2005. Prior to that and until his retirement in December 2000, Mr. Daichendt served as Executive Vice President, Worldwide Operations for Cisco Systems, a manufacturer of communications and information technology networking products. Mr. Daichendt joined Cisco in 1994 as Vice President, Intercontinental Operations, and soon became Senior Vice president, Sales. In 1998 he became Executive Vice President, Worldwide Operations. He became a director of NCR on April 26, 2006.
Directors Whose Terms of Office Continue
Class A—Current Terms Expiring in 2009:
William R. Nuti, 43,44, is our President andNCR’s Chairman of the Board, Chief Executive Officer.Officer and President. Mr. Nuti became Chairman of the Board on October 1, 2007. Before joining NCR in August 2005, Mr. Nuti served as President and Chief Executive Officer of Symbol Technologies, Inc., an information technology company (“Symbol Technologies”). Prior tothat, he was Chief Operating Officer of Symbol Technologies. Mr. Nuti joined Symbol Technologies in 2002 following 10 years at Cisco Systems where he held positions of increasing responsibility, advancing to the dual role of senior vice president of the company’s Worldwide Service Provider Operations and U.S. Theater Operations. Prior to his Cisco experience, Mr. Nuti held sales and management positions at IBM, Netrix Corporation and Network Equipment Technologies. Mr. Nuti became a director of NCR on August 7, 2005.
James M. RinglerGary Daichendt, 61,56, has been principally occupied as a private investor since June 2005 and has been a managing member of Theory R Properties LLC, a commercial real estate firm, since October 2002. He served as President and Chief Operating Officer of Nortel Networks Corporation, a global supplier of
6
communication equipment, from March 2005 to June 2005. Prior to that and until his retirement in December 2000, Mr. Daichendt served as Executive Vice President, Worldwide Operations for Cisco Systems, a manufacturer of communications and information technology networking products. Mr. Daichendt is Chairmanalso a director of ShoreTel Inc. Mr. Daichendt became a director of NCR on April 26, 2006.
Class B—Current Terms Expiring in 2010:
Edward “Pete” Boykin, 69, is Chair of the Board of NCR,Directors of Capital TEN Acquisition Corp., a special purpose acquisition company, a position he has held since July 25, 2005. From March 30, 2005 to August 7, 2005, Mr. Ringler served as NCR’s President and Interim Chief Executive Officer.October 2007. He served as Vice Chairman of Illinois Tool Works Inc., a multi-billion dollar diversified manufacturer of highly engineered components and industrial systems, from 1999 until 2004. Prior to joining Illinois Tool Works, from 1997 to 1999, Mr. Ringler was Chairman of Premark International, Inc. (“Premark”), a large, diversified manufacturing company serving the food equipment, builder products and consumer durable markets. He also served as Premark’s Chief Executive Officer from 1995 to 1999, and prior to that as its President and Chief Operating Officer.Officer of Computer Sciences Corporation, an information technology services company he joined in 1966, from July 2001 to June 2003. Mr. Ringler wasBoykin is also a director of Premark from 1990 until it merged with Illinois Tool Works in 1999. Mr. Ringler serves as a director of Autoliv Inc., The Dow Chemical Company, FMC Technologies, Inc., and Corn Products International, Inc. He joined NCR’s Board of Directors on November 1, 2003.
Class C—Terms Expiring in 2008:
Mark P. Frissora, 51, became Chief Executive Officer of The HertzTeradata Corporation, a cardata warehousing and equipment rental company, on July 19, 2006, and became Chairman of the Board of The Hertz Corporation on January 1, 2007. Prior to becoming Chief Executive officer of The Hertz Corporation,analytic technologies company. Mr. Frissora was Chairman and Chief Executive Officer of Tenneco Inc. (“Tenneco”), a manufacturer of automotive emission control and ride control products and systems, from March 2000, after serving as its President and Chief Executive Officer from November 1999 until March 2000. From March
7
to November 1999, he was President, Worldwide Operations, at Tenneco’s automotive subsidiary, and also served as that company’s Senior Vice President and General Manager, Worldwide Original Equipment, from 1998 until March 1999. Mr. FrissoraBoykin became a director of NCR on June 5, 2002.
C.K. PrahaladLinda Fayne Levinson, 65,66, is Chair of the PaulBoard of Directors of Connexus Corporation (formerly VendareNetblue), an online marketing company, a position she has held since July 2006. From February 2006 through July 2006, Ms. Levinson was Interim Chief Executive Officer and Ruth McCracken Distinguished University Professor at The Ross SchoolChair of Business, UniversityVendare Media (subsequently merged with Netblue and known as VendareNetblue). From November 2006 through June 2007, she was also Chair of Michigan. Mr. Prahalad is a nationally recognized specialist in corporate strategy and the roleBoard of top management in large, diversified, multi-national corporations. From 2000 to 2002, he was ChairmanDirectors of PRAJA,X1 Technologies, Inc., an Idealab company providing secure enterprise desktop search solutions. Ms. Levinson was a software company locatedpartner at GRP Partners, a private equity investment fund investing in San Diego, California. Hestart-up and early-stage retail and electronic commerce companies, from 1997 to December 2004. She is also a director of Hindustan Lever Limited, India,DemandTec, Inc., Jacobs Engineering Group Inc., Ingram Micro Inc., and World Resources Institute, Washington, D.C., a non-governmental organization. Mr. PrahaladThe Western Union Company. Ms. Levinson became a director of NCR on January 1, 1997.1997 and was appointed the Independent Lead Director of the NCR Board of Directors on October 1, 2007.
William S. Stavropoulos, 67, retired as director and Chairman of the Board of Directors of The Dow Chemical Co. (“Dow Chemical”), a chemical and plastics producer, on April 1, 2006. He had served in such capacity since November 2000. Mr. Stavropoulos was the President and Chief Executive Officer of Dow Chemical from 1995 to 2000 and was reappointed to that position in December 2002. In November 2003, Mr. Stavropoulos relinquished the position as President and in November 2004 relinquished the position as Chief Executive Officer. In addition, he is a director of BellSouth Corporation, Chemical Financial Corporation, and Maersk Inc., and is a trustee of the Fidelity Group of Funds. Mr. Stavropoulos became a director of NCR on January 1, 1997.
87
ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board of Directors oversees the overall performance of the Company on your behalf. Members of the Board stay informed of the Company’s business by participating in Board and committee meetings (including regular executive sessions of the Board), by reviewing materials provided to them prior to meetings and otherwise, and through discussions with the Chief Executive Officer and other members of management and staff, by reviewing materials provided to them, and by participating in regularly scheduled Board and committee meetings.staff.
Corporate Governance
NCR’s Board of Directors is elected by the stockholders to governoversee the performance of the business and affairs of the Company. The Board selects the senior management team, which is charged with conducting the Company’s business. Having selected the senior management team, the Board acts as an advisor to senior management and monitors its performance. The Board reviews the Company’s strategies, financial objectives and operating plans. It also plans for management succession of the Chief Executive Officer, as well as other senior management positions, and oversees the Company’s compliance efforts.
To help discharge its responsibilities, the Board of Directors has adopted Corporate Governance Guidelines on significant corporate governance issues. These guidelines address, among other things, such matters as director independence, committee membership and structure, meetings and executive sessions, and director selection, retirement, and training. The Board’s Corporate Governance Guidelines, as well as the Board’s committee charters, are found on NCR’s corporate governance website athttp://www.ncr.com/corpgovernance/guidelines.htm. You may obtain a written copy of these guidelines, or any of the Board’s committee charters, by writing to NCR’s Corporate Secretary at the address listed on page 312 of this proxy statement. The Board’s independent directors meet regularly in executive session and, as provided in the Corporate Governance Guidelines,session. Effective October 1, 2007, the Board of Directors has selectedappointed Linda Fayne Levinson as the ChairmanBoard’s Independent Lead Director. As the Independent Lead Director, Ms. Levinson will preside at the executive sessions of the Board to preside at its executive sessionsof Directors during 2007.2008.
In connection with its Corporate Governance Guidelines, the Board of Directors has established independence standards. In general, the Board shall determineannually determines whether aeach director is considered independent, taking into account the independenceguidelinesindependence guidelines of the New York Stock Exchange and the factors listed immediately following this paragraph, which are included as Exhibit B, Definition of Director Independence, to the Board’s Corporate Governance Guidelines referenced above, in addition to those other factors it may deem relevant. No director may qualify as independent unless the Board affirmatively determines (i) under the New York Stock Exchange (“NYSE”) listing standards, that he or she has no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with NCR); and (ii) under the Company’s independence standards, that the director or director candidate:
has not been an employee of the Company or any of its affiliates, or affiliated with the Company, within the past five years;
has not been affiliated with or an employee of the Company’s present or former independent auditors or its affiliates withinfor at least five years after the end of such affiliation or auditing relationship;
has not for the past five years;
cannot haveyears been in the past five years a paid advisor, service provider or consultant to the Company or any of its affiliates or to an executive officer of the Company or an employee or owner of a firm that is such a paid advisor, service provider or consultant;
hasdoes not, directly or indirectly, hadhave a material relationship (such as being an executive officer, director, partner, or significant stockholder) with a significant customer or supplier of the Company, and in no case may the director be an executive officer or employee of another company thatincluding payments in the previous three years made payments to or received payments from the Company to another company in a fiscal year exceeding the greater of $1 million or 2% of the other company’s consolidated gross revenues;
is not an executive officer or director of a foundation, university or other non-profit entity receiving significant contributions from the Company, including contributions in the previous three years that, in any single fiscal year, exceeded the greater of $1 million or 2% of such charitable organization’s consolidated gross revenues;
98
any single fiscal year, exceeded the greater of $1 million or 2% of such charitable organization’s consolidated gross revenues; |
has not been employed as an executive officer by another corporation that has (or had during the past five years)had) an executive officer of the Company on its board of directors;directors during the past five years;
has not for the past five years received any compensation, consulting, advisory or other fees from the Company, other than director compensation and expense reimbursement or compensation for prior service that is not contingent on continued service;service for the past five years; and
is not and has not been for the past five years, a member of the immediate family of (i) an officer of the Company, (ii) an individual who receives more than $100,000 per year in direct compensation from the Company, other than compensation for prior service that is not contingent on continued service, (iii) an individual affiliated with or an employee of the Company’s present or former independent auditors or its affiliates, (iv) an individual who is an executive officer of another companycorporation that has (or had) an executive officer of the Company on its board of directors, (v) an executive officer of a company that has made payments to, or received payments from, the Company in a fiscal year that exceeded the greater of $1 million or 2% of the other company’s consolidated gross revenues, or (vi) any director who is not considered an independent director.
NCR’s Board of Directors has determined that all of the Company’s non-employee directors and nominees, namely Edward (Pete) Boykin, Gary Daichendt, Mark Frissora, Linda Fayne Levinson Victor Lund,and C.K. Prahalad James Ringler and William Stavropoulos, meet the New York Stock Exchange listing independence standards and the Company’s independence standards. In evaluating and determining the independence of Mr. Frissora, the Board of Directors considered the relationship between NCR and The Hertz Corporation. Mr. Frissora is the Chairman of the Board and Chief Executive Officer of The Hertz Corporation, which ishas various commercial relationships with NCR. The Board of Directors determined that none of these relationships, alone or in the primary supplier of rental cars to NCR.aggregate, were material. There were no other transactions, relationships or arrangements that required review by the Board for purposes of determining director independence.
The Board met 715 times last year. In 2006,2007, all of the directors attended 75%75 percent or more of the totalnumbertotal number of meetings of the Board and the committee(s) on which he or she serves. In addition, while there is no formal policy regarding director attendance at the annual meetings of stockholders, NCR’s directors have a practice of attending the Company’s annual meeting of stockholders each year.meetings. All of the directors who had been elected at the time of the meetingthen in office attended the Company’s 2006 annual meeting of stockholders. There is no formal policy regarding director attendance at the2007 annual meeting of stockholders.
Committees of the Board
NCR’s Board of Directors has four standing committees: the Audit Committee, the Compensation and Human Resource Committee, the Committee on Directors and Governance, and the Executive Committee.
Audit Committee: The Audit Committee is the principal agent of the Board of Directors in overseeing (i) the quality and integrity of the Company’s financial statements; (ii) the assessment of financial risk and risk management programs; (iii) the independence, qualifications, and performance of the Company’s independent registered public accounting firm; (iv) the performance of the Company’s internal auditors; and (v) the integrity of management and the quality and adequacy of disclosures to stockholders. The committee also:
is solely responsible for hiring and terminating the Company’s independent registered public accounting firm and pre-approving all audit, as well as any audit-related, tax and other non-audit services, to be performed by the independent registered public accounting firm;
reviews and discusses with NCR’s independent registered public accounting firm theirits quality control procedures and the Company’s critical accounting policies and practices;
regularly reviews the scope and results of audits performed by the Company’s independent registered public accounting firm and internal auditors;
9
meets with management to review the adequacy of the Company’s internal control framework and its financial, accounting, reporting and disclosure control processes;
reviews the Company’s periodic SEC filings and quarterly earnings releases;
10
reviews and discusses with the Company’s Chief Executive and Financial Officers the procedures they followed to complete their certifications in connection with NCR’s periodic filings with the SEC; and
discusses management’s plans with respect to the Company’s major financial risk exposures.
The Audit Committee has fourthree members, Edward (Pete) Boykin, Gary Daichendt Victor Lund and C.K. Prahalad, each of whom is independent and financially literate as determined by the Board under applicable SEC and New York Stock Exchange (“NYSE”)NYSE standards. In addition, the Board has determined that Messrs.Mr. Boykin and Lund areis an “audit committee financial experts,expert,” as defined under SEC regulations. No member of the committee may receive any compensation, consulting, advisory or other fee from the Company, other than Board compensation described below under the caption “Compensation of Directors,“Director Compensation,” as determined in accordance with applicable SEC and NYSE rules. Members serving on the Audit Committee are limited to serving on no more than two other audit committees of boards of directors of public companies, unless the Board of Directors evaluates and determines that these other commitments would not impair his or herthe member’s effective service to the Company.
A more detailed discussion of the committee’s mission, composition, and responsibilities is contained in the Audit Committee Charter, which was adopted as revised by the Board of Directors in October 2006.2007. A copy of this charter can be found on NCR’s corporate governance website athttp://www.ncr.com/corpgovernance/corpgov_board_charters.htm.
Compensation and Human Resource Committee: This committee reviews and approves the Company’s total compensation goals, objectives and programs covering executive officers and key management employees as well as the competitiveness of NCR’s total executive officer compensation practices. The committee also:
evaluates and reviews the performance levels of NCR’s executive officers and determines base salaries and equity and incentive awards for such officers;
discusses its evaluation of, and determination of compensation to, the ChiefExecutiveChief Executive Officer at executive sessionsessions of the Board of Directors;
reviews and approves NCR’s executive compensation plans;
monitors NCR’s compliance with the Sarbanes-Oxley Act of 2002 relating to 401(k) plans and loans to directors and officers, NYSE rules relating to approval of equity compensation plans and all other applicable laws affecting employee compensation and benefits;
reviews management’s proposals to make significant organizational changes or significant changes to existing executive officer compensation plans; and
oversees NCR’s plans for management succession and development.
This committee may delegate its authority to the Company’s Chief Executive Officer to make equity awards to individuals other than executive officers in limited instances.
This committee currently has threetwo members, Linda Fayne Levinson James Ringler and Mark Frissora, each of whom the Board of Directors has determined meetmeets the New York Stock ExchangeNYSE listing independence standards and the Company’s independence standards. However, Mr. Ringler does not qualify as an “outside director” as defined in Section 162(m) of the Internal Revenue Code. Mr. Ringler does not participate in committee votes pertaining to plan design or compensation decisions under plans intended to be compliant with Section 162(m).
This committee is authorized to and has directly engaged its compensation consultant, Frederic W. Cook & Co., to review the Company’s long-term incentive program, the Management Incentive Plan and other key programs related to the compensation of executive officers. In 2006,2007, the committee directed its consultant to conduct
10
market studies, review publicly available market data and be readily available for consultation with this committee and its members regarding such matters.
A more detailed discussion of the committee’s mission, composition, and responsibilities is contained in the Compensation and Human Resource Committee Charter, which was adopted as revised by the Board of Directors in January 2007.2008. A copy of this charter can be found on NCR’s corporate
11
governance website athttp://www.ncr.com/corpgovernance/corpgov_board_charters.htmcorpgov_board_charters.htm..
Compensation and Human Resource Committee Interlocks and Insider Participation: Mr. Ringler, a former NCR director who served as a director in 2007, served as President and Interim Chief Executive Officer from March 30, 2005, to August 7, 2005.
Committee on Directors and GovernanceGovernance:: This committee is responsible for reviewing the Board’s corporate governance practices and procedures and the Company’s ethics and compliance program, and:
establishes procedures for evaluating the performance of the Board of Directors and oversees such evaluation;
reviews and makes recommendations to the Board concerning director compensation; and
reviews the composition of NCR’sthe Board of Directors and the qualifications of persons identified as prospective directors, recommends the candidates to be nominated for election as directors, and, in the event of a vacancy on the Board, recommends any successors.
This committee is authorized to and directly engaged Watson Wyatt as its consultantengage consultants to review the Company’s director compensation program. In 2006,2007, the committee directedengaged Mercer Human Resource Consulting, Inc. as its consultant to conduct market studies, review publicly available market data concerning various elements of potential director compensation, including retainer and meeting fees and long-term incentive payments, and be readily available for consultation with this committee and its members regarding such matters.
The Committee on Directors and Governance is composed entirely of independent directors, Edward (Pete) Boykin, Linda Fayne Levinson and C.K. Prahalad and William Stavropoulos.Prahalad.
Selection of Nominees for Directors
Your directors and the Committee on Directors and Governance are responsible for recommending candidates for membership to the Board. The director selection process is described in detail in the Board’s Corporate Governance Guidelines, which are posted on the Company’s corporate governance website athttp://www.ncr.com/corpgovernance/guidelines.htm.guidelines.htm In.In determining candidates for nomination, the Committee on Directors and Governance will seekthe input of the Chairman of the Board and the Chief Executive Officer, and, in the event the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Lead Director, and will consider individuals recommended for Board membership by the Company’s stockholders in accordance with the Company’s Bylaws and applicable law. From time to time, the committee may engage outside search firms to assist it in identifying and contacting qualified candidates. In 2006,2007, the Committee on Directors and Governance engaged Spencer StuartEgon Zehnder International to assist in identifying qualified candidates for the open Class A, Class B and Class C Director position. Although Spencer Stuart identified potential candidates,positions. As of the date of this proxy statement, the committee ultimatelyhas not selected a candidate, Mr. Daichendt, who had been recommended to the committee by the Company’s Chief Executive Officer.additional candidates for these open positions. All candidates are evaluated by the committee using the qualification guidelines included as part of the Board’s Corporate Governance Guidelines. As part of the selection process, the Committee on Directors and Governance and the Board of Directors examine candidates’ business skills and experience, personal integrity, judgment, and ability to devote the appropriate amount of time and energy to serving the best interests of stockholders. The Board and the Committee on Directors and Governance are committed to finding proven leaders who are qualified to serve as NCR directors.
11
Stockholders wishing to recommend individuals for consideration as directors should contact the Committee on Directors and Governance by writing the Company’s Corporate Secretary at NCR Corporation, 1700 South Patterson Blvd., Dayton, OH 45479. Recommendations by stockholders that are made in this manner will be evaluated in the same manner as other candidates. Stockholders who want to nominate directors for election at NCR’s next annual meeting of stockholders must follow the procedures described in the Company’s Bylaws, which are available on our corporate governance website athttp://www.ncr.com/corpgovernance/corpgov_bylaws.htm.corpgov_bylaws.htm. See “Procedures for Stockholder Proposals and Nominations” on page 5670 of this proxy statement for further details regarding how to nominate directors.
The directors nominated by the Board of Directors for election at the 20072008 annual meeting were recommended by the Committee on Directors and Governance. All of these candidates for election are currently serving as directors of the Company and have been determined by the Board to be independent.
12
A more detailed discussion of the committee’s mission, composition, and responsibilities is contained in the Committee on Directors and Governance Charter, which was adopted by the Board of Directors as amended in January 2007.Charter. A copy of this charter can be found on NCR’s corporate governance website athttp://www.ncr.com/corpgovernance/corpgov_board_charters.htm.corpgov_board_charters.htm.
Executive Committee: This committee has the authority to exercise all powers of the full Board of Directors, except those prohibited by applicable law, such as amending the Bylaws or approving a merger that requires stockholder approval. This committee meets between regular Board meetings if urgent action is required.
Board Committee Membership
Name | Executive Committee | Compensation and Human Resource Committee | Audit Committee | Committee on Directors and Governance | Executive Committee | Compensation and Human Resource Committee | Audit Committee | Committee on Directors and Governance | |||||||||||||||
James Ringler | X | * | X | ||||||||||||||||||||
Edward (Pete) Boykin | X | X | * | X | X | * | X | ||||||||||||||||
Gary Daichendt | X | X | |||||||||||||||||||||
Mark Frissora | X | X | |||||||||||||||||||||
Linda Fayne Levinson | X | X | * | X | X | X | * | X | |||||||||||||||
Victor Lund | X | ||||||||||||||||||||||
William R. Nuti | X | ||||||||||||||||||||||
William Nuti | X | ||||||||||||||||||||||
C.K. Prahalad | X | X | X | * | X | X | X | * | |||||||||||||||
William Stavropoulos | X | ||||||||||||||||||||||
Number of meetings in 2006 | 0 | 9 | 9 | 3 | |||||||||||||||||||
Number of meetings in 2007 | 0 | 14 | 12 | 4 |
*Chair
Communications with Directors
Stockholders wishing to communicate directly with NCR’s Board of Directors, any individual director, the Chairman of the Board, or NCR’s non-management or independent directors as a group are welcome to do so by writing NCR’s Corporate Secretary at 1700 South Patterson Blvd., Dayton, Ohio 45479. The Corporate Secretary will forward any communications as directed. Any matters reported by stockholders relating to NCR’s accounting, internal accounting controls or auditing matters will be referred to members of the Audit Committee as appropriate. Anonymous and/or confidential communications with the Board of Directors may also be made by writing to this address. For more information on how to contact NCR’s Board, please see the Company’s Corporate Governance website athttp://www.ncr.com/corpgovernance/corpgov_contact.htm.corpgov_contact.htm.
Code of Conduct
The Company has a Code of Conduct that sets the standard for ethics and compliance for all of itsemployees. NCR’s Code of Conduct is available on NCR’s corporate governance web site athttp://www.ncr.com/
12
corpgovernance/corpgov_code_ conduct.htm.conduct.htm. To receive a copy of the Code of Conduct, please send a written request to the Corporate Secretary at the address provided above.
Section 16(a) Beneficial Ownership Reporting Compliance
During 2006,2007, all executive officers and directors of the Company timely filed the reports required under Section 16(a) of the Securities Exchange Act of 1934, except that the Company filed aone late report: (a) in 2006report on behalf of each of Bruce Langos,Christine Wallace, the Company’s Senior Vice President, Global Operations, and Peter Dorsman, Vice President and General Manager, Systemedia Division, eachWorldwide Customer Services, in connection with a single transaction involving the grantuse of performance-based restricted stock and options awarded in September 2006; and (b) in 2007 on behalf of Peter Bocian, Senior Vice President and Chief Financial Officer,shares to satisfy tax withholding in connection with the exercisevesting of options in March 2006.restricted stock previously awarded.
13
BOARD COMPENSATION AND HUMAN RESOURCE COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Human Resource Committee of the Board of Directors (the “Committee”) manages the Company’s compensation programs on behalf of the Board of Directors. The Committee reviewed and discussed with the Company’s management theCompensation Discussion and Analysis included in this Proxy Statement. In reliance on the review and discussions referred to above, the Committee recommended to the Board of Directors that theCompensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20062007 and theCompany’s Proxy Statement to be filed in connection with the Company’s 20072008 Annual Meeting of Stockholders, each of which will be filed with the Securities and Exchange Commission.
Dated: February 26, 20072008
The Compensation and Human Resource Committee:
Linda Fayne Levinson, Chair
Mark P. Frissora, Member
James M. Ringler, Member
14
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
In order to better understand our executive compensation program, it is necessary to understand our business and the markets in which we compete. We provide technology and services that help businesses interact, connect, and relate with their customers. Our specific solutions for the retail and financial industries are provided through our Financial Self Service (which includes our ATM business) and Retail Store Automation businesses. Our Teradata Data Warehousing and Customer Services businesses also provide solutions for these industries, as well as to other major industries, including telecommunications, transportation, insurance, healthcare, manufacturing, travel, logistics and government. Our solutions are based on a foundation of long-established industry knowledge and consulting expertise, value-added software, hardware technology, global customer support services, and a complete line of business consumables and specialty media products.
We are a multinational company that has been in business for more than 120 years and has established a reputation of providing quality products, services and solutions to our customers. We maintain offices in approximately 70 countries and employ approximately 29,000 employees and contractors worldwide.
I. | Executive Summary |
We operate in the intensely competitive information technology industry, which is characterized by rapidly changing technology, evolving industry standards, frequent new product introductions, price and cost reductions, and increasingly greater commoditization of products. As a global company, our business is affected by the economies of the numerous countries in which we operate.We also face many aggressive and well-financed competitors both in the United States and in the various international markets where we operate.
In this environment, our success depends on putting together and maintaining a leadership team with the integrity, skills, and dedication needed to manage a global organization and the vision to anticipate and respond to future market developments. We use our executive compensation program to help us achieve this objective. Asdescribed below, portions of the program have been designed to enable us to assemble and retain a group of executives who have the collective and individual abilities necessary to run our business to meet these challenges. Other portions are intended to focus these executives on achieving financial results that enhance the value of our stockholders’ investment. At the same time, we have structured the program to be flexible, so that we can meet the changing needs of our business over time.
The Company’sOur named executive officers discussed in thisCompensation Discussion and Analysisand the related compensation tables include Messrs. Nuti, Bocian, Collins and Koehler and Ms. Wallaceare the officers listed in the table below (collectively, the “Named Executive Officers”).
William Nuti Chairman of the Board, Chief Executive Officer Peter Bocian Former Senior Vice President and Chief Financial Officer Robert Fishman Interim Chief Financial Officer Malcolm Collins Senior Vice President, Financial Solutions Division Peter Lieb Senior Vice President, General Counsel and Secretary Christine Wallace Senior Vice President, Worldwide Customer Services Michael Koehler Former Senior Vice President, Teradata Division Compensation PhilosophyName Title as of December 31, 2007
and PresidentOur Company’s goal is to attract, motivateThe Compensation and retain key leadership. We believe that, to be successful, we need to be competitive not only in our products and solutions, but also in the qualityHuman Resource Committee of our executives. This, in turn, requires that we pay our executives competitively. Accordingly, ourBoard of Directors (the “Committee”) has the sole authority to make compensation-related decisions for the Company’s executive compensation program is guided by the following four principles:1. Our key program elements are current cash and long-term equity incentives. We compensateofficers, including our Named Executive Officers primarily with cash (base salaryOfficers. The Committee relies on five key objectives to drive its executive compensation decisions: (i) attract, retain and annual incentives)motivate high quality talent; (ii) ensure a strong correlation between our executives’ actual compensation earned and equity awards. We believe these components providethe delivery of successful operating performance for the Company; (iii) establish commonality of interest between our executives with a stable source of income while, atand stockholders; (iv) ensure executive compensation programs are financially sound for the same time, affording us the flexibility, as described below, to structure most of their compensation so that it is directly aligned with our performance.Company; and (v) embrace policies reflecting best practices.In recent years, we have begunThe material elements of executive compensation used to shift the relative mix of cash and equity compensation for our executives. This change supports our objective of ensuring that a large portion of total compensation for executives is tied to the achievement of multi-year operating performance goals and changes in stockholder value. In addition, this change enhances the retentive aspect of the overall program by requiring executives to remain employed for a multi-year period to fully vest in the awards. As part of this process, we have begun to rebalanceachieve these objectives are cash compensation (base salary and annual cash incentives)incentives (“Cash Compensation”)) and long-term equity incentives so that, when(stock options, time-based restricted stock units and performance-based restricted stock units). In addition, we15
achieve targeted financial results, the total compensation of provide to our executives, including the Named Executive Officers will be at the competitive market median.severance and change in control arrangements, and, on a limited basis, retirement benefits and executive perquisites.
Consistent with our focus on cash and equity, we have historically de-emphasized the ancillary components of our program, such as perquisites and other personal benefits. This is intended to minimize the non-performance-based components of the overall compensation program and to place a greater portion of pay “at risk.” As reflected in the Summary Compensation Table on page30, our executives, including the Named Executive Officers, receive a limited number of perquisites. The Compensation and Human Resource Committee (the “Committee”) monitors our perquisite practices closely and must approve any perquisites before they can be offered to an executive.
In addition, as we have transitioned our employee retirement program from a defined benefit to a defined contribution structure, retirement benefits have played an increasingly smaller role in the overall program. Due to restrictions we have placed on participation in our defined benefit pension plans over the past three years, only three of our Named Executive Officers participated in these plans as of the end of 2006,is highly performance-based. We use performance-based cash and for these individuals, their benefits were frozen at pre-2007 levels.
2. We striveequity incentives to pay at competitive market levels. When setting targeted total compensation forreward our executives, including the Named Executive Officers we seek to ensure that bothfor achieving performance targets set annually by the cash (base salary and annual incentive) and equity componentsCommittee. On average in 2007, nearly half of their packages are competitive in the relevant market. This supportstotal compensation (based on target) for our objective of attracting and retaining high quality executives and ensures that the overall economic cost of compensation is reasonable, and therefore sustainable, in relation to our peers. In fashioning the cash component, we look at compensation data about comparable positions at companies in the relevant peer group (as discussed on pages 17-18), as well as the cash compensation arrangements of our other senior executives. To set the target value of equity awards, we consider several factors, including compensation data about comparable positions in the peer group, amounts previously awarded to our other executives, and, in the case of a new hire, the amount that the prospective executive may be forfeiting by leaving his or her current employer.
3. To motivate and reward our executives for superior performance, the majority of our key program elements are performance-based. Although we provide our executives, including the Named Executive Officers with a competitive base salary, most of their compensation iswas performance-based. Importantly, theThe portion of performance-based “at risk” compensation increases directly with the executive’s role and responsibility within the Company. Consequently, the senior-most executivesCompany, ensuring that our senior officers are held most accountable to stockholders for the achievement of operational targets and strategic goals. Generally, we use three different vehicles to achieve this purpose:our stockholders.
A performance-based annual cash incentive plan;
II. | Overview of Executive Compensation |
Annual performance-based equity awards; and
Special performance awards for exemplary individual contributions (which are made in the form of either cash or equity).
A. | Introduction |
We believe that,OurCompensation Discussion and Analysis includes: (i) an overview of the Company’s executive compensation program, including a discussion of the compensation philosophy of the Committee and the material elements of compensation earned by emphasizing these vehicles, we are ableor paid to reinforce our goalNamed Executive Officers; and (ii) an analysis of maintaining a results-oriented culture that provides above-target rewards only when performance is also above target. Thus, the interests of our executives are directly aligned with those of our stockholders ascompensation decisions made by the financial success of both is contingent upon performance.
Equity compensation is used as a tool to unite all executivesCommittee in a common set of goals and foster stock ownership, which creates commonality of interest with stockholders, while the annual incentive plan is used to ensure that performance targets vary among business units in a manner consistent with each business unit’s key objectives.2007.
4.To encourage high-performing executives to stayInformation regarding two Named Executive Officers, Messrs. Bocian and Koehler, who are no longer with us, key program elements are structured to enable them to shareNCR, is included in our long-term growthCompensation Discussion and success.Analysis. Mr. Bocian is included because he served as the Company’s Chief Financial Officer (“CFO”) until May 2007, which caused him to be a Named Executive Officer under the SEC proxy disclosure rules. Mr. Koehler is included because he served as the Company’s Senior Vice
15
President, Teradata Division, during 2007 and his compensation for services to the Company during 2007 caused him to be a Named Executive Officer under the SEC proxy disclosure rules. Also included is Mr. Fishman, who served as our Interim Chief Financial Officer (“Interim CFO”) during 2007 and part of 2008. Mr. Fishman was no longer serving as our Interim CFO as of the filing date of this proxy statement, but he continues to serve as the Company’s Controller.
In order to understand the compensation decisions made in 2007, it should be noted that in September 2007, the Company completed a transaction in which it strategically separated one of its business units, referred to as the Teradata Division (“Teradata”), into a separate publicly-held corporation, Teradata Corporation. The spin-off of Teradata (the “Spin-Off”) required the Committee to take a number of actions, such as the adjustment of equity awards, the grant of Spin-Off recognition awards and the reevaluation of the Company’s peer group.
B. | Compensation Philosophy and Framework |
Our executive compensation program is designed to achieve five key objectives. Each objective, including its underlying supporting principles, is described below.
1. Attract, retain and motivate high quality talent. To ensure that our effortsachieve this objective, we generally set target compensation for Named Executive Officers at or near the competitive market median. For certain high performing executives or as needed to attract and motivateexecutives from outside the Company, we may set target compensation levels above the median or even near the 75th percentile. In addition, we condition our executives provide benefits to our stockholders, we have designed our key program elementsequity awards upon multi-year vesting schedules to encourage our executives to remain with us throughout the entire vesting period. We also offer a highly-leveraged performance-based compensation program that allows our executives to attain higher payouts based on their successful performance.
2. Ensure a strong correlation between our executives’ actual compensation earned and the delivery of successful operating performance for the Company. For example,A significant portion of our executives’ compensation and our key program elements are performance-based. Performance-based compensation is a strong motivator of key, successful behaviors because it links compensation earned with company performance. We use three types of programs to accomplish this: annual performance-based equity awards, our performance-based annual cash incentive plan, and special performance awards for exemplary individual contributions paid in the form of cash or equity. As a result of the substantial focus on performance-based compensation, actual realized pay may fall above or below the targeted levels described above.
3. Establish commonality of interest between our executives and stockholders.We use both performance-based cash and equity programs, including performance shares and stock options, that tie actual payouts to Company performance and changes in stockholder value. This ensures that the majority of executive compensation is paid only in the event that operating performance objectives are subject toachieved and stockholder value increases. The performance measures focus on the successful attainment of both individual executive and Company-level objectives over both annual and multi-year vesting schedules and we set our cash compensation at competitive levels. We also devote significant attention to talent management and succession planning toperiods. Thus, the performance measures support the individual careerCompany’s short-term and long-term strategy and the use of equity-based compensation helps to ensure that executives think and act like stockholders. Additionally, we maintain an executive stock ownership policy that encourages executives to accumulate a specified amount of Company stock, to retain a portion of shares acquired through the vesting of performance stock units or restricted stock units, and to hold shares obtained through the exercise of stock options.
4. Ensure executive compensation programs are financially sound for the Company.We take appropriate steps to maximize the tax-deductibility of executive compensation and to avoid unnecessary cash flow costs, accounting charges and share dilution. Costs under the annual incentive plan and the performance share plan are incurred only to the extent that underlying performance goals are attained. In addition, an annual budget is set for both annual incentive payouts and aggregate long-term incentive expense and share dilution, each of which is set based on careful assessment of competitive peer levels and affordability compared to the annual operating plan approved by the Board of Directors.
16
growth of5. Embrace policies reflecting best practices.We strive to be a leader in best practices by monitoring evolving executive compensation best practice standards and implementing such policies into our executives and to identify promotion opportunities for key individuals.executive compensation programs as appropriate.
The Committee, which oversees our executive compensation program, evaluates these principlesobjectives regularly to ensure that they are consistent with our goals and needs.
C. | Role of Compensation Consultant and Chief Executive Officer |
General Compensation Levels
The Committee has the authority to determine compensation-related decisions for the Company’s executive officers, set plan metrics and make other compensation-related decisions as authorized and required by its charter. The Committee considers recommendations from its compensation consultant, Frederic W. Cook & Co. (“FWC”), as well as our Chief Executive Officer and Chairman of the Board, Mr. Nuti (whom we refer to as our “CEO”) in making such decisions.
As discussed on page 10 of this proxy statement, under its Charter, the Committee is authorized to and has directly engaged FWC, who is independent of the Company’s management and reports directly to the Committee. FWC has no economic relationships with the Company other than its role in advising the Committee. FWC works with management only under the direction and approval of the Committee on matters that fall within the Committee’s responsibility as outlined in its charter. FWC plays an integral role in providing the Committee expert advice regarding compensation matters for the executive officers, including the CEO, such as information about competitive market rates; assistance in the design of the variable incentive plans, including the establishment of performance goals; assistance in the design of indirect compensation programs (e.g., change in control policy, general severance and perquisites); and assistance with Section 162(m) compliance, disclosure matters, and other technical matters.
Our CEO attends most meetings of the Committee and participates by discussing with, and making recommendations to, the Committee regarding candidates for executive positions, compensation packages for new and existing executives, and executive benefits. Our CEO also provides recommendations to the Committee concerning the financial performance metrics to be used to determine short-term and long-term incentive compensation for all executive officers. Although our CEO provides written input regarding his compensation that describes his accomplishments for the applicable calendar year, he is not present at Committee meetings during the time decisions are made regarding his compensation levels, as the decision-making authority on this matter rests with the Committee. In an effort to ensure our compensation consultant remains independent from management, our CEO typically will not meet with the Committee’s compensation consultant in the absence of the Committee. Our CEO did not meet with or speak directly with FWC at any time in 2007 in the absence of the Chair of the Committee.
D. | General Compensation Levels |
Each year, we review the base salaries, and annual incentive opportunities and long-term incentive opportunities offered to our executives, including the Named Executive Officers, to ensure that they are competitive with market practices, support our executive recruitment and retention objectives, and are internally equitable among executives. While we do not set specific total compensation targets, our process essentially results in ade facto target – that is, a totalThe Committee establishes the amount of each compensation that we will pay an executive if all corporateelement using the factors described in thisCompensation Discussion and individual performance objectives are fully met. Each of our key program componentsAnalysis for each compensation element. Cash Compensation is generally set with market median as a guideline, except that long-termguideline. However, we may at times pay top performers in key business roles closer to the 75th percentile in order to attract and/or retain them. In some cases, the actual compensation of a Named Executive Officer may be below median, and the actual compensation of a Named Executive Officer who is in a key business role may be below the 75th percentile. Long-term incentives are generally based upon a combination of affordability, market practicespractice and retention objectives.
As part of this process,In setting compensation, the Committee considers market dataaffordability to the Company by balancing the Company’s desire to attract, motivate, and input provided by itsretain top executives against the cost of providing executive compensation consultant, Frederic W. Cook & Co.,at
17
levels necessary to do so. As a result, affordability considerations are central to the Committee’s compensation-setting process. Sections II and our management. The market dataIII of thisCompensation Discussion and Analysis describe the Committee’s consideration of affordability for each element of compensation, as applicable.
Our compensation policies and practices are consistently applied to each Named Executive Officer. Our CEO is derived from several published high-technologycompensated at substantially higher Cash Compensation and general industry compensation surveys. We use this data to match our specific executive positions to those with similar functional descriptions at companies with similar business characteristics. For example, survey data from high-technology companies is weighted more heavily forequity levels than the other Named Executive Officers in chargeto reflect the market rate for CEO talent, the strategic nature of business units using more advanced technology (suchhis position as Teradata) than for the Named Executive Officers in charge of “lower technology” businesses (such as Systemedia or Customer Services).
In most cases, each Named Executive Officer is specifically matched to comparable positions within the compensation surveys to ascertain the appropriate placement relative to market. Where it is not possible to match a Named Executive Officer’s role, he or she will be compared with several other senior executive positions based on functionalleading the entire organization, the extent and scope of his responsibilities, revenue size of the business unit, and individual experience. We also take into consideration market trends todetermine how base salary and annual cash incentives are changing from year to year and how each component relates as a percentage of total compensation. We generally start by setting base salary at the relevant market median and build on that, factoring inhis performance and the experiencejudgment that he brings to his position.
E. | Analytical Tools |
The Company’s management and skillsthe Committee’s compensation consultant, FWC, conduct analyses of the Named Executive Officer. However, we use the market data as context only,our executive compensation and any cash compensationrelated decisions also factor in individual experienceusing various tools to assess external and internal fairness. Accordingly, base salary will –factors. Management and does – vary among the Named Executive Officers. Annual cash incentive award target levels are set as a percentageFWC complete analyses of base salary. Through this process, we believe that the cash compensation package for our Named Executive Officers has been balanced for bothexternal factors using market surveys and peer group data. Management conducts analysis of internal factors using internal equity, tally sheets and external fairness.affordability.
Peer Groups and Benchmarking
1. | External Analysis—Market Surveys and Peer Group Analysis |
We use several methods to benchmark the various elements of our executive compensation program in order to gauge where we stand versus the market and our competitors. We use several methods to benchmark our executive compensation practices against other companies. First, we use publicly available market surveys to match the roles of our Named Executive Officers to roles in the surveys. We then compare the actual base salary and annual cash incentives for our Named Executive Officers to those disclosed in the surveys. In addition, we conduct a total compensation study which is reviewed for accuracy and appropriateness by the Committee’s compensation consultant. The Committee’s compensation consultant also conducts an analysis of the Named Executive Officers to assist the Company with establishing a budget for overall long-term incentive awards and assists the Committee with setting compensation for our executives. Both management and FWC prepare separate analyses of competitive data. These two separate sources of data are used to ensure that adequate perspective and information is available to the Committee to use when making compensation decisions. FWC generally leads the effort to develop and present peer group data that is used by the Committee. FWC’s typical independent analysis includes an examination of the cash and equity elements of compensation for the five most highly compensated executives in each peer company and a comparison of NCR’s similarly ranked Named Executive Officers. For further perspective, we evaluate the base salary, annual incentive awards, and long-term incentives providedOfficers to the named executive officerslower, median and upper quartiles of the companies in our peerentire group. We extract this data from publicly available sources.The analysis also includes a comprehensive analysis of long-term incentive costs and resulting levels of stockholder value transfer and dilution, which helps the Committee to develop an annual budget for aggregate, Company-wide long-term incentives.
The unique combination of industries represented by our business units creates challenges in identifying comparable companies for executive compensation benchmarking. We select our primary peer group by examining our competitors in terms of industry, size and recruiting. That is, we look first at companies with similar business models in comparable industries that
17
are of reasonably similar size based primarily on annual revenue and market capitalization. Then, in addition to industry peers, we examine companies that compete with us for executive talent on a national and geographically-specific basis. Because of
Prior to the Spin-Off, our unique business mix, when appropriate, we may use alternative peer groups that provide more accurate market information concerning a particular industry in which we operate. For 2006, our primary peer group includedfor 2007 consisted of the following companies:
Avaya Inc. | Cognos Inc. | CA International | Diebold Inc. | |||
DST Systems Inc. | EMC Corporation | Fiserv Inc. | Hewlett-Packard | |||
Hyperion Solutions Corp. | IBM | Lexmark International Inc. | Micros Systems Inc. | |||
Oracle Corporation | Pitney Bowes, Inc. | Symbol Technologies Inc. | Unisys Corp. |
Cognos, Inc.
CA International
Diebold, Inc.
DST Systems, Inc.
EMC Corporation
Fiserv Inc.
Hewlett-Packard
Hyperion Solutions Corporation
IBM
Lexmark International Inc.
Micros Systems, Inc.
Oracle Corporation
Pitney Bowes Inc.
Symbol Technologies, Inc.
Unisys CorpThe Committee reevaluated the Company’s peer group in connection with the Spin-Off to reflect the change in our business. Following the Spin-Off, our peer group for 2007 consisted of the following companies:
Agilent Technologies Inc. | Andrew Corporation | Avaya Inc. | Commscope Inc. | |||
Diebold Inc. | DST Systems Inc. | EMC Corporation | Fiserv Inc. | |||
Harris Corp. | Imation Corp. | Juniper Networks Inc. | Lexmark International Inc. | |||
Logitech International SA | Network Appliance Inc. | Pitney Bowes, Inc. | SanDisk Corp. | |||
Seagate Technology | Sun Microsystems Inc. | Tellabs Inc. | Unisys Corp. | |||
Western Digital Corp. |
18
Management’s analyses typically concentrate on comparing the compensation of our executive officers against that of similar roles found in publicly available executive compensation market surveys. In 2007, we used five surveys for the analysis, three of which were general industry in nature and two of which concentrated on companies in high-tech industries. The surveys included both NCR competitors and non-competitors. The number of companies in each survey ranged from approximately 100 to over 700. The Committee was not provided with the names of the companies who participated in these surveys. We chose these particular surveys for several reasons. First, a few surveys are global surveys that enable us to obtain salary structure market data in numerous countries under a consistent methodology. Second, the surveys are broad in that they include positions in a variety of disciplines. Using this approach allows us to collect substantial and meaningful market data through the purchase of a limited number of surveys. Management’s market survey process involves matching the roles of our executives to descriptions of roles in various surveys based on job content, organizational alignment, revenue size, and, at times, industry. We then compare the actual base salary, target annual cash incentives, and actual long-term incentive values for our Named Executive Officers to those found for the matching roles in the surveys. We generally make comparisons at the median and 75th percentile levels. Management also periodically reviewreviews survey data compiled by other compensation consultants to benchmark how we compare to the market on other compensation components, such as executive perquisites or the provisions of severance plans or agreements. In such instances where management presents competitive or market data to the Committee that affects our Named Executive Officers, FWC reviews the methodology and results for appropriateness and accuracy.
2. | Internal Analysis—Internal Equity, Tally Sheets and Affordability |
We strive to balance the compensation of our executives with the external market, as described above, and our internal compensation structure. The Committee regularly reviews tally sheets prepared by management when considering compensation changes for our executives. Tally sheets provide total compensation history, an analysis of the value of future vestings at current and assumed future prices, and estimates of benefits provided to each executive upon various termination scenarios. The tally sheets are used by the Committee to review the degree to which historic compensation, including unvested equity awards and separation benefits, support the Company’s retention objectives. The tally sheets are also used to compare year over year compensation as part of the process of setting compensation for the next year.
ElementsIn addition to the tally sheets, management also prepares an overview of Executive Compensationeach executive’s base salary, annual incentive targets, and long term incentive award in comparison to internal peers. To maintain fairness throughout the executive ranks, we strive to ensure a level of consistency with differences based on the degree of judgment and strategic nature of the role of the executive, as well as each executive’s performance.
While, as described earlier, our primary emphasis was onAffordability considerations from both a cash outlay and accounting expense impact are central to the Committee’s compensation-setting process. When considering decisions for every element of compensation (cash, equity, perquisites and other benefits), both the needs of the business and the cost of the compensation weprograms are considered to ensure the sustainability of any changes going forward. The Committee’s goal with respect to all elements is to pay enough to attract, motivate, and retain talented executives while maintaining the overall cost of the Company’s executive compensation program at a level that the Committee deems to be reasonable and in the best interests of the Company’s stockholders.
F. | Elements of Executive Compensation |
We used several compensation elements in our executive compensation program in 2006, including:2007, consisting of:
Cash compensation,Compensation, consisting of:
o | Base salary, and |
o | Annual incentives (such as the annual cash award opportunities available under the Management Incentive |
19
Long-term equity incentives
Executive perquisitesperquisites; and other personal benefits
Welfare benefits
Post-termination compensation, (such asincluding severance, and change in control arrangements)
When designing compensation plans or making compensation decisions, certain elements are evaluated together, if appropriate, and the magnitude of compensation in one element may impact the magnitude and design of other elements. For example, base salary and annual cash incentives, which together comprise Cash Compensation, are evaluated together so as to make better comparisons both internally and externally. The ratio between the two components is evaluated to ensure our cash compensation structure is leveraged appropriately for the position and against our competitors. When an increase in base salary is proposed, the impact on annual incentives is also evaluated since the incentive is calculated via a formula applied to base salary. Cash Compensation relative to peer group companies and market data is a factor when determining the amount of, and even the form of, annual long-term incentive awards for the Named Executive Officers. Total direct compensation and the amount of leverage in the total compensation package are evaluated against competitive data as well. The fact that NCR has relatively few executive perquisites is a factor, albeit usually a small one, when making base salary decisions. This factor does become more important when hiring an executive from outside the company who has significantly more perquisites at his or her prior company as we may increase salary to compensate for the forfeited perquisites. While the actual payouts or results of post-termination compensation decisions are dependent upon cash compensation and equity compensation decisions (since they are based on a multiple of compensation), post-termination plan designs are generally made independently of and do not factor into cash compensation and equity decisions. In addition, post-termination compensation decisions are made less frequently than decisions on the other elements of compensation.
1. | Cash Compensation |
In 2006,2007, we provided cash compensationCash Compensation to our Named Executive Officers through base salary and one or more annual incentive opportunities. This is consistent with both general market practice and the practices of our peer groups,group, which typically provide base salary and annual incentives in the form of cash.
Base SalaryIn determining the Cash Compensation component for each Named Executive Officer, we look at compensation data of comparable positions at companies in the peer group, comparable positions as reflected in market surveys, and the Cash Compensation arrangements of our other senior executives. In the case of a new hire, we would also consider the amount of performance or retention bonuses that the prospective executive may be forfeiting by leaving his or her current employer. Affordability considerations are also central to the Committee’s compensation-setting process for all elements, including Cash Compensation. With respect to Cash Compensation, affordability is measured on the basis of the amount of cash that is necessary to fund each element. For short-term incentives, we analyze whether payouts above target are balanced against the additional profitability the over-performance drives.
a. | Base Salary |
We
In order to ensure successful business performance, we strive to set base salary to besalaries at a level that is competitive with the general market and our peer groups. In additiongroup to base salary, we rely on other formsattract and retain top quality executive talent and to ensure a reasonable level of compensation (both cash and equity) to motivate and reward the Named Executive Officers.
overall fixed costs. Generally, the median of the relevant market data as described above is used as a guideline for determining base salary. In January or February of each year, and at other times during the year as necessary, the base salary of each of our Named Executive Officers is reviewed and approved. Adjustments to base salary levels on a year-over-yearyear over year basis depend largely on the Committee’s assessment of market data and Company, business unit, and individual performance. The Named Executive Officers’ experience,performance, expertise, and internal positioning are also factored into the annual review, and the CEO provides recommendations as to pay actions with respect to the Named Executive Officers other than himself. During our 2006 review, the Committee decided to increase the salaries for Mr. Bocian and Mr. Koehler in support of our retention objectives, and because Mr. Bocian’s salary was well below the market median. In addition, in March 2006, the Committee approved an increase in base salary for Ms. Wallace in connection with her new assignment.
The base salaries paid to the Named Executive Officers during 2006 are reported in the Summary Compensation Table on page 30.20
b. | Short-Term Incentives |
Short-Term Incentives
Our annual incentive awards are payable in cash under our stockholder-approved Management Incentive Plan, which was approved by our stockholders in 2006 (“MIP”), and are performance based to ensure that amounts payable to senior executives are deductible for NCR’s federal income
18
tax purposes. We believe it is important to provide annual cash incentives to motivate our executive officers to attain specific short-term performance objectives that, in turn, further our long-term objectives. This planOur short-term incentive structure ensures that a significant portion of each executive officer’s cash compensationCash Compensation is “at risk” and payable only when our stockholders have also benefited from his or her efforts. The annual cash incentives paid in 2007 were paid under the Management Incentive Plan, which was approved by our stockholders in 2006 (the “Management Incentive Plan”).
We haveThe Management Incentive Plan is designed to comply with the MIP soperformance-based compensation requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), such that the awards payablebonuses paid to theour Named Executive Officers will beunder this plan are fully deductible for NCR’s federal income tax purposes. AsThe awards payable are established pursuant to a result, the award payable to each Named Executive Officer for 2006 was based on the Company’s earnings before interestformula approved by our stockholders, and taxes (“EBIT”). The award was 1.5% of actual EBIT for Mr. Nuti and 0.75% of EBIT for each of the other Named Executive Officers. Pursuant to the terms of the MIP, however, the Committee has the ability tomay use and did use its negative discretion to reduce the amount of the awards that were generated pursuant to this formula.such awards.
For 2006, theThe Committee established a series of objectives to be considered, in addition to any other factors the Committee deemed appropriate, in exercising such negative discretion for awards granted in 2007 (the “2007 Management Incentive Plan Objectives”). The 2007 Management Incentive Plan Objectives consisted of three components:
1. | Financial Performance Objectives: Each Named Executive Officer was assigned financial performance objectives linked to corporate and/or business unit performance applicable to his or her role. |
2. | Stretch Objectives: Our CEO, Mr. Nuti, and Named Executive Officers with business unit responsibilities (Messrs. Collins and Koehler and Ms. Wallace) were assigned objectives relating to their respective business unit’s financial performance, if applicable, or strategic business goals in addition to the performance metrics assigned for the financial performance objectives described above. |
3. | Diversity Objectives: Each Named Executive Officer was subject to objectives relating to the Company’s endeavors to increase the diversity of its domestic managerial workforce. |
2. | Long-Term Incentives |
We implemented our long-term incentive program to ensure that a large portion of total compensation for executives is directly aligned with Company performance and tied to changes in stockholder value. Long-term equity awards granted to our Named Executive Officers in 2007 were made under the 2006 NCR Corporation Stock Incentive Plan (the “Stock Incentive Plan”) approved by our stockholders in 2006. The use of equity (i) unites all executives in a common set of goals and fosters stock ownership, which creates commonality of interests with stockholders, and (ii) enhances the retentive aspect of the overall compensation program by requiring executives to remain employed for a multi-year period until awards fully vest.
Our long-term incentive opportunities offered to our executives, including the Named Executive Officers, are granted in amounts that are (i) competitive with market practices, (ii) supportive of our executive recruitment and retention objectives, (iii) internally equitable among our executives, and (iv) fit within the expense plan of the Company. As described in more detail in Section III.C.1 and 2 of thisCompensation Discussion and Analysis, equity awards are granted during our annual awards cycle and, from time to time, on an ad-hoc basis.
We used three types of equity awards under our long-term incentive plan in 2007: performance-based restricted stock units, stock options and time-based restricted stock units.
• | Performance-Based Restricted Stock Units. The performance-based restricted stock units granted to our Named Executive Officers during the normal award process vest only if, at the end of a three-year performance period, we have achieved specific Cumulative Net Operating Profit (“CNOP”) goals. Additional details regarding the awards and CNOP are provided in the narrative to the 2007 Grants of Plan-Based Awards Table on pages 40-41. Fifty percent of the annual awards granted in 2007 were in the form of performance-based restricted stock units. |
21
• | Stock Options. The stock option awards granted to our Named Executive Officers in 2007 vest through continued service over four years in equal annual 25 percent increments. This feature is intended to ensure that a Named Executive Officer will realize meaningful value from his or her award only if he or she remains employed with us for at least four years and the market price of our common stock appreciates over that time. Fifty percent of the annual awards granted in 2007 were in the form of Stock Options. |
• | Time-Based Restricted Stock Units. The time-based restricted stock units granted to our Named Executive Officers in 2007 vest at a predetermined date in the future. The vesting schedules of all grants awarded during 2007 are illustrated in the Grants of Plan-Based Awards Table on pages 42-43. During 2007, time-based awards were granted to the Named Executive Officers in connection with the Spin-Off. |
3. | Executive Perquisites |
Consistent with our compensation philosophy to maximize performance-based components of the overall compensation program, perquisites and other personal benefits do not comprise a significant aspect of our executive compensation program. The perquisites provided to our Named Executive Officers are limited to items that enable them to be more efficient (such as financial counseling), balance their personal, business, and travel schedules (such as limited use of the corporate aircraft, Company-owned lodging at a historical site the Company uses for meetings and other events, and rental cars), and promote their continued good health (such as the Executive Medical Program). The Committee monitors our perquisite practices closely and must approve any perquisites before they can be offered to an executive.
4. | Retirement Benefits |
We provide retirement benefits to our employees to attract and retain talented employees and to assist our employees in planning for their retirement. Historically, we have provided retirement benefits to our United States (“U.S.”) employees under a number of defined benefit pension plans. However, all of our U.S. defined benefit plans were closed to new entrants in 2004 and were frozen as of December 31, 2006. Plans that are applicable to one or more of our Named Executive Officers consist of:
The NCR Pension Plan – a broad-based tax-qualified defined benefit pension plan for our U.S. employees;
The NCR Nonqualified Excess Plan – a non-tax-qualified defined benefit pension plan that restores benefits to participants in the NCR Pension Plan that would otherwise be lost under that plan due to limitations under the federal income tax laws on the provision of benefits under tax-qualified defined benefit pension plans; and
The Retirement Plan for Officers of NCR – a non-tax-qualified supplemental executive retirement plan that provides more generous benefits than the NCR Nonqualified Excess Plan for designated executives, including some of the Named Executive Officers.
The actuarial present values of the accumulated pension benefits of the Named Executive Officers who participate in these plans as of the end of 2007, as well as other information about each of our defined benefit pension plans, are reported in the Pension Benefits Table and the narrative thereto on page 50.
5. | Change in Control Arrangements |
Potential transactions that could result in a change in control may be considered by the Company. We want to ensure that in such an event, we retain key staff members and promote independence and objectivity in the consideration of potential transactions that may maximize stockholder value. In order to further these objectives, in 2006, we adopted a Change in Control Severance Plan. The design and magnitude of benefits under this plan
22
were considered in the context of other factors, such as the amount of unvested equity compensation and the value of such awards, which together create a strong linkage between management’s interests and those of stockholders.
The Change in Control Severance Plan provides for separation payments and benefits to our executives based on the plan level, or “tier,” to which the executive is assigned by the Committee. We selected these benefit levels for the different tiers because, based on our analysis, they represent the most common market practices. The market data supports including the CEO and CFO in Tier I. While market data supports inclusion of business unit Senior Vice President positions and infrastructure positions in either Tier I or Tier II, our CEO recommended, and our Committee agreed, that business unit Senior Vice President positions should be in Tier I and infrastructure positions should be in Tier II. This differentiation was made because of the increased need to retain the focus of the specialized leaders of our revenue-producing business units during a time of change, while maintaining the affordability of the entire change in control program. Accordingly, Messrs. Nuti and Collins and Ms. Wallace participate in Tier I, and Messrs. Fishman (as Controller) and Lieb participate in Tier II. In addition, in 2007, Messrs. Bocian and Koehler participated in the plan in Tier I while they were employees of NCR, and Mr. Fishman participated in the plan in Tier I while he served as Interim CFO.
The Change in Control Severance Plan has a double-trigger – the events that trigger such payment are that a change in control has occurred, and, within the two year period following the change in control, (i) a participant’s employment is terminated by the Company without cause (other than by reason of the participant’s death or disability) or (ii) a participant’s employment is terminated by the participant for good reason. Additional details regarding the payments and benefits provided to the Named Executive Officers upon satisfaction of the double-trigger are described in the discussion of Potential Payments Upon Termination and Change in Control beginning on page 51 of this proxy statement.
6. | Severance Benefits |
To ensure that we offer a competitive executive compensation program, we believe it is important to provide reasonable severance benefits to our executive officers, including the Named Executive Officers.
We do not have individual severance agreements with Messrs. Bocian, Fishman, Collins, Lieb, Koehler or Ms. Wallace. Instead, they are or were covered under our standard U.S. Reduction-in-Force Plan, with the exception of Mr. Collins, who is covered under our United Kingdom (“U.K.”) Reduction-in-Force Plan. Generally, these plans provide employees with severance benefits if we terminate their employment in connection with a business restructuring (unless the termination is for cause). The Spin-Off did not trigger a severance payment to Mr. Koehler. The payments and other benefits provided under these plans reflect the fact that it may be difficult for these individuals to find comparable employment within a short period of time. We have a separate severance arrangement with Mr. Nuti. A description of the reduction-in-force plans and the severance arrangement with Mr. Nuti, as well as the estimated payments and benefits payable to the Named Executive Officers assuming an event triggering payment under these plans and arrangements as of December 31, 2007, are reported in the discussion of Potential Payments Upon Termination or Change in Control beginning on page 51 of this proxy statement.
G. | Equity Award Grant Practices |
Our approval process for making equity awards to our executives and other employees works as follows:
• | Annual Awards: Grants of annual equity awards, including stock option grants, are effective on the first calendar day of the month immediately following the date the Committee meets to approve the award. Because the Committee traditionally reviews grant recommendations and approves annual equity awards at its February meeting, the effective date for annual grants will typically be March 1 each year, as was the case for annual awards granted in 2007. |
23
• | Ad hoc Awards: In the case of an award approved by the Committee at any meeting that is scheduled at least 30 days in advance of the meeting date, the effective date for the award will be the first calendar day of the month immediately following the date the Committee approves the award. In the case of awards approved by the Committee at any meeting that is scheduled with less than 30 days notice (a “special meeting”), or via an action by unanimous written consent (“Action by Consent”), the effective date for the award will be determined as follows: |
o | With respect to awards approved at a special meeting held on or before the 15th day of the month, or via an Action by Consent fully executed on or before the 15th day of the month, the effective date will be the first calendar day of the month immediately following the special meeting or Action by Consent. |
o | With respect to awards approved at a special meeting held on or after the 16th day of the month, or via an Action by Consent fully executed on or after the 16th day of the month, the effective date will be the first calendar day of the second month immediately following the special meeting or Action by Consent. |
o | In no case will an ad hoc award for a newly hired employee be effective prior to the recipient’s effective date of employment. |
Our processes for determining exercise price as well as the number of shares granted are as follows:
• | Exercise Price: The exercise price for stock option awards is the closing market price of our common stock on the effective date of the award. |
• | Shares Awarded: It is our practice to determine the dollar amount of equity compensation, approved by the Committee, that we want to provide to our Named Executive Officers and then to convert those values into a specific number of shares or options using the average closing price of NCR stock on the 20 trading days immediately preceding but not including the grant effective date. |
H. | Equity Ownership Guidelines |
We have adopted stock ownership guidelines for our executive officers, including the Named Executive Officers, which operate to promote commonality of interest between management and our stockholders by encouraging our executives to accumulate a substantial stake in our common stock. The guidelines encourage the executives to accumulate ownership of common stock equal to two times base salary (three times base salary in the case of our CEO) over a period of five years. For these purposes, ownership includes shares owned outright by the executive, interests in restricted stock and restricted stock units, stock acquired through our employee stock purchase plan, and investments in NCR stock through the Company’s Section 401(k) savings plan. Stock options are not taken into consideration in exercising its negative discretionmeeting the ownership guidelines.
The guidelines are intended to ensure that our executive officers maintain an equity interest in the Company at a level sufficient to assure our stockholders of our executive officers’ commitment to value creation.
I. | Tax Deductibility Policy |
Under Section 162(m) of the Code, certain compensation in excess of $1 million annually is not deductible for federal income tax purposes unless it is awarded pursuant to a performance-based plan approved by stockholders. We believe that the incentive compensation paid in 2007 to our executive officers, including the Named Executive Officers, qualifies as performance-based compensation for purposes of Section 162(m) of the Code and determiningis fully deductible for federal income tax purposes, except that a limited number of incentive awards that were accelerated in connection with the Spin-Off became non-deductible upon such acceleration. While we generally try to ensure the deductibility of the incentive compensation paid to our executive officers, the Committee has not adopted a policy that requires all compensation to be deductible because we want to preserve the ability to award amounts (the “2006 Annual MIP Objectives”). These objectives consisted of three components. First,cash or equity compensation to an executive that is not deductible under Section 162(m) if we believe that it is in our stockholders’ best interests.
24
III. | Analysis of Compensation Decisions Made in 2007 |
A. | Base Salary |
Base salary decisions are made after evaluating peer group data, market data, internal equity among executives, and individual performance. The table below describes, for each Named Executive Officer, was assigned financial performance objectives linkedall actions that the Committee took in connection with salary in 2007.
Named Executive Officer | Change in Salary | Rationale | ||
Nuti, William | None | Mr. Nuti did not receive an increase to his base salary in 2007 to ensure that a larger portion of his total compensation was performance-based, thereby holding him more accountable to stockholders. | ||
Bocian, Peter | $40,000 Merit Increase | Mr. Bocian’s ten percent merit increase was provided in order to bring him closer to market median for his role as CFO. | ||
Fishman, Robert | $29,500 Promotion- Related Increase | This increase was awarded upon Mr. Fishman’s promotion to Controller. This, when combined with a higher bonus opportunity, afforded Mr. Fishman with a 25 percent increase in cash compensation, which we consider to be substantial yet reasonable for a promotion to this level. | ||
$10,000 Merit Increase | This increase represented a five percent merit increase for Mr. Fishman, which is in line with the standard merit increase of top performing, U.S.-based NCR employees. | |||
$30,000 Promotion- Related Increase | This increase was awarded upon Mr. Fishman’s promotion to Interim CFO. This increase recognized his interim position and allowed him to be in line not only with market median for his role as Controller, but also with the former NCR Controller. | |||
Collins, Malcolm | £29,000 Merit Increase | Mr. Collins’ salary was increased to reduce the gap between his current salary and that of U.K.-based market data for a comparable position. | ||
Lieb, Peter | $20,000 Merit Increase | A five percent merit increase was provided to Mr. Lieb to bring him closer to market median for his role as General Counsel. | ||
Wallace, Christine | $20,000 Merit Increase | Ms. Wallace was provided this increase to bring her closer to market median for her role in leading a major sector of the Company. | ||
$30,000 Positioning Increase | This increase was provided to Ms. Wallace to enhance the parity among the top functional leaders in the new organizational model. | |||
Koehler, Michael | $75,000 Merit Increase | Mr. Koehler’s increase was provided in anticipation of him becoming CEO of Teradata Corporation in connection with the Spin-Off. |
The base salaries paid to corporate and/or business unit performance applicable to his or her role. Second, thosethe Named Executive Officers with business unit responsibilities were assigned stretch objectives relatingduring 2007 are reported in the Summary Compensation Table on page 35.
25
B. | Short-Term Incentives |
The cash incentive awards payable in 2007 to his or her respective business unit’s financial performance. Finally, each Named Executive Officer were made under the Management Incentive Plan. The awards payable to each Named Executive Officer equaled 1.5 percent and 0.75 percent of the Company’s earnings before interest and taxes (EBIT) for Mr. Nuti and each of the other Named Executive Officers, respectively. The awards were then adjusted downward by the Committee through the application of negative discretion. EBIT is used to determine the awards payable to ensure that bonuses are determined as a percentage of controllable profit. We use a measure that excludes interest and taxes to ensure that profit is defined based on operating results that the Named Executive Officers can directly influence. The funding percentages were set at a level sufficient to ensure reasonable award levels under all expected future scenarios, taking into consideration possible changes in the level of EBIT that might result from operational performance, as well as merger and acquisition and related activities, such as the Spin-Off that occurred in 2007. The Management Incentive Plan, including the formula to determine awards payable, was subjectapproved by stockholders at the April 26, 2006 Annual Stockholders’ Meeting.
In 2007, the Committee used its discretion to adjust the awards payable under the Management Incentive Plan downward based on: (i) the 2007 Management Incentive Plan Objectives, which included financial performance objectives, relatingstretch objectives and diversity objectives; and (ii) other factors it deemed appropriate, each as discussed below. The table below presents the award payable using EBIT (due to the Company’s endeavors to increaseSpin-Off, the diversity of its workforce. The Committee determined each executive’s actual award by comparingTeradata data warehousing business results are not included in EBIT) and the actual corporate and/or business unit performance againstawards paid under the Management Incentive Plan for 2007. The awards paid under the Management Incentive Plan in 2007 are reported in the Summary Compensation Table on page 35 and the Summary Compensation Supplemental Table on page 37. Additional information about these awards is also reported in the Grants of Plan-Based Awards Table on pages 42-43.
Named Executive Officer | Award Established by EBIT Formula ($) | Actual Award Granted ($) | ||
Nuti, William | 3,900,000 | 2,368,432 | ||
Bocian, Peter | 1,950,000 | 0 | ||
Fishman, Robert | 1,950,000 | 270,318 | ||
Collins, Malcolm | 1,950,000 | 575,489 | ||
Lieb, Peter | 1,950,000 | 373,029 | ||
Wallace, Christine | 1,950,000 | 515,841 | ||
Koehler, Michael* | 1,950,000 | 338,627 |
*The amount reported for Mr. Koehler reflects his earnings under the Management Incentive Plan for the nine months he was employed by NCR. Due to Mr. Koehler’s appointment in connection with the Spin-Off as the Chief Executive Officer of Teradata Corporation, Teradata Corporation has determined and will pay such amount to Mr. Koehler in accordance with the metrics and objectives described above. In no circumstances could an actual award exceedit set under the award level established in the MIP.Teradata Management Incentive Plan.
1. | Financial Performance Objectives |
The 2006 Annual MIP Objectives2007 financial performance objectives were based on a percentage of base salary and were comprised of a set of financial performance metrics measured at the corporate level and, if applicable, business unit level.level, as illustrated in the table below. The weightings of such performance metrics are also reflected in the table. We determined the target payouts for 2006 were set at 100%bonus payout as a percent of base salary for the CEO and 75% of base salary for the CFO and for the Senior Vice Presidents of our Teradata, Financial Solutions, and Customer Services Divisions (“Business Unit SVPs”). We determinedthese percentages after assessing external market conditions and evaluating annual incentive award levels in the relevant peer group and in the various industries in which we operate. This external research indicated that, depending on the level of responsibility and size of the organization, executives typically received bonuses in the range of 50 to 100 percent of base salary. Target bonus levels were set based on the executive’s level of responsibility and impact on the success of the business.
The 2006 target payouts for the CFO and the Business Unit SVPs reflected an increase over the 2005 target payouts (which were 60% of base salary). We made this adjustment because we wanted a higher percentage of our senior executive officers’ total compensation to be performance based. The Business Unit SVP positions were singled out for this treatment due to their direct influence on the performance of our principal business units. 26
Depending on the executive officer and actual performance results, between 0%zero and 200%200 percent of each executive’s target payout could be possible under the 2006 Annual MIP Objectives.financial performance objectives for 2007.
Named Executive Officer | Target Bonus Payout (% of Base Salary) | Weighting of Performance Metrics | ||||||
Corporate NPOICC* | Business Unit NPOI** | Business Unit Revenue | ||||||
Nuti, William | 100% | 100% | — | — | ||||
Bocian, Peter | 75% | 100% | — | — | ||||
Fishman, Robert | 75% | 100% | — | — | ||||
Collins, Malcolm | 75% | 25% | 37.5% | 37.5% | ||||
Lieb, Peter | 60% | 100% | — | — | ||||
Wallace, Christine | 75% | 50% | 50% | — | ||||
Koehler, Michael | 75% | 25% | 37.5% | 37.5% |
* NPOICC – Non-Pension Operating Income after Capital Charge
** NPOI – Non-Pension Operating Income
In 2006, we usedAs the MIP and the 2006 Annual MIP Objectives established by the Committee to promote a vision of shared success among our executive officers by providing a clear, concise framework that unified our multiple business units around our overall corporate success. To achieve this result,table indicates, at least 25%a portion of the target annual incentive award for each Named Executive Officer was basedOfficers’ annual financial objective is dependent on our “non-pensionthe corporate non-pension operating income after capital charge”charge (“NPOICC”). In 2007, the corporate NPOICC threshold, target and maximum performance goals, as adjusted in connection with the Spin-Off, were set at $416.1 million, $449.2 million, and $544.0 million, respectively, for the year. Forall Named Executive Officers, whoexcept that in connection with the Spin-Off, the goals for Mr. Koehler were not aligned with a specific business unit, Messrs. Nutiset by Teradata Corporation, and Bocian, their entire target annual incentive award was based on this measure.Teradata Corporation determined and will pay such awards. Non-pension operating income (“NPOI”) is essentially our operating income as reported under generally accepted accounting principles, but without taking into consideration the impact of pension income or expense for the year (“NPOI”).year. Generally, we exclude the impact of our pension plans when calculating our operating income because their impact on financial performance is better considered over several years, and does not directly relate to an executive officer’s performance or the Company’s success in operations. In addition, for purposes of determining annual incentive award payouts, from time to time we may also exclude non-operational items, such as significant currency fluctuations, acquisitions or restructurings, when computing NPOI for the Company as a whole or our business units. The NPOI of the Company was not adjusted in 2006, but in some cases2007 for the NPOIwrite-off of aradio frequency identification assets. Some business unit wasNPOIs were also adjusted in 2007 for the impact of foreign currency rate fluctuation, the sale of lines of business and items that impacted
19
the business unit’s results, but were not included in such business unit’s original 20062007 financial plans. Business unit revenue was also adjusted for the impact of foreign currency rate fluctuation.
Non-pension operating income is then adjusted to take into consideration capital charges for the year as these charges represent our cost of capital as used in our operations and corporate activities. By incorporating this factor into the performance measure, we are able to ensure the Named Executive Officers consider the long-term impact of their decisions as well as the short-term financial consequences. The long-term impact is based on charging a cost of capital for long-term assets to reflect our investors’ assumed expected return on equity capital. The short-term financial consequence is based on the charge associated with working capital items such as accounts receivable, inventory and other current liabilities. As a result, we expect the 2007 Management Incentive Plan Objectives to motivate the Named Executive Officers to prudently manage our assets as they strive to increase revenue and lower operating costs. We use NPOINPOICC as a performance measure because it reflects our highest business imperative – driving growth in profit by increasing revenue and controlling operating costs. We also use this measure because it is simple to calculate and easily understood by both employees and stockholders, and it is a measure that we track throughout the year. As a result, by using this measureNPOICC as a primary consideration in the exercise of our negative discretion, we believe that we are able to influence behaviors that will lead to our financial success.
We adjust NPOI to take into consideration capital charges forFor the year. These capital charges represent our cost of capital as usedannual financial objectives in our operations and corporate activities. By incorporating this factor into the performance measure, we are able to ensure that the Named Executive Officers consider the long-term impact of their decisions as well as the short-term financial consequences. The long-term impact is based on charging a cost of capital for long-term assets to reflect our investors’ required rate of return. The short-term financial consequence is based on the charge associated with working capital items such as accounts receivable, inventory and other current liabilities. As a result, we expect the MIP to motivate the Named Executive Officers to prudently manage our assets as they strive to increase revenue and lower operating costs.
In addition to this corporate performance measure, Named Executive Officers who are aligned with a specific business unit have at least 50% of their target annual incentive award tied to their business unit’s operating income and/or revenue for the year under the 2006 Annual MIP Objectives.
Under the 2006 Annual MIP Objectives, each of the Business Unit SVPs also had the potential to receive a stretch incentive award equal to 25% of his or her base salary if his or her business unit achieved a specific order or revenue target considered to be significantly above the unit’s annual plan. We used the respective business unit’s three-year strategic and operating plan to help determine these stretch goals. We included this component on an “all or none” basis. That is, if the goal was achieved, the executive received the full award; if it was not achieved, he or she received nothing.
For 2006 Annual MIP Objectives,2007, we set the target level for our non-pension operating income after capital chargeNPOICC at our projected one-year business growth objective as we believed that achieving this goal representsrepresented a solid step in meeting our longer-termlong-
27
term strategic financial objectives. We set the operating income and/or revenue target levels for each business unit to exceed its 20052006 operating results by an amount that would represent acceptable growth if the business unit was being evaluated as a stand-alone business and would reflect an appropriate contribution relative to our other business units towards our operating income objectives. In the case of the stretch incentive awards for the Business Unit SVPs, target levels were tailored to the strategic measure (for example, customer orders) or financial measure (for example, revenue) which we considered to be a key metric in evaluating that business unit’s competitive position in its market and the levels were set to ensure annual progress towards fulfilling the unit’s three year strategic and operating plan. In making determinations of the desired threshold, target, and maximum performance levels for each financial and strategic measure, we also considered the general economic climate and the specific market conditions that we were likely to face in the upcoming year in each of the business sectors in which we operate. The 2006 Annual MIP ObjectivesWe also contained a payout threshold, which suggested that there would be no payout for 2006 unless the Company as a whole achieved, at a minimum, our actual 2005 operating results as measured by NPOI.
In the case of our core financial performance objectives applied at the Company level, over the past five years, we have performed significantly below target one time, slightly below target three times, and in excess of target one time, but have not achieved the maximum performance level. In the case of the stretch financial performance objectives, 2006 was the first year in which such objectives were set, so no historical performance periods are available for comparison.
When setting objectives to take into consideration when exercising negative discretion under the MIP, we tend to set the threshold, target, and maximum performance levels for annual incentive awards to ensure that the relative level of difficulty of achieving the target level is consistent from year to year. However,The 2007 annual financial objectives also contained a payout threshold, below which there would be no payout for 2007 unless the Company as a whole achieved, at a minimum, our actual 2006 operating results as measured by NPOI.
To provide a sense of how achievable our annual performance metrics are, below is a historical view of how the Company has performed against its corporate NPOICC objectives and the business unit-specific objectives, each as a percentage against target, that have been set for the past five years. The table shows the weighted payout for each year.
Year | Corporate NPOICC | Metrics Set for FSD | Metrics Set for WCS | |||
2003 | 96% | 110% | 104% | |||
2004 | 116% | 120% | 106% | |||
2005 | 94% | 72% | 110% | |||
2006 | 84% | 100% | 116% | |||
2007 | 137% | 133% | 134% |
2. | Stretch Objectives |
In 2007, the Committee also set stretch objectives for certain executives that it considered in the exercise of its downward discretion in determining awards payable under the Management Incentive Plan. The stretch objectives were based on a percent of salary ranging from 25 to 50 percent of base salary and were considered on an “all or none” basis. That is, if the goal was achieved, the executive received the full award; if it was not achieved, he or she received nothing. For our CEO, a stretch objective was set based on achievement of specific profit and strategic business goals and the amount payable under this objective was based on 50 percent of his base salary. For the executives other than our CEO, the stretch objectives were set based on the respective business unit’s three-year strategic and operating plan and were based on 25 percent of salary, which provided the opportunity for the applicable executive to receive a total payout under the Management Incentive Plan close to the 75th percentile of market if the executive achieved upper level performance.
The stretch objectives were selected based on the Company’s areas where growth is most needed. In the case of Mr. Nuti, one of the stretch awards for 2006, we settwo objectives was based on NPOICC to encourage our CEO to improve profitability at a rate higher than the performance levelannual operating plan approved by the Board of Directors. The other objective was based on an “all orthe successful Spin-Off because it was a strategic goal of the Company. In the case of Mr. Collins, the objective was based on Financial Solutions Division NPOI as a percent of revenue to incent him to reduce product cost at a faster rate than the decreasing price of products in this market. In the case of Ms. Wallace, the objective was based on Worldwide Customer Services NPOI as a percent of revenue to incent her to increase profit margins in WCS by improving labor, parts and logistics efficiencies in this area of our business. In the case of Mr. Koehler, the objective was based on Teradata revenue to reflect the business goal of the Company to aggressively grow revenue in this area.
2028
none” basisThe table below details each yearNamed Executive Officer’s stretch objective metric and potential payout.
Named Executive Officer | Stretch Objective Metric | Target Bonus Payout (% of Base Salary) | ||
Nuti, William | NCR NPOICC | 25% | ||
Successful Spin-Off | 25% | |||
Bocian, Peter | N/A | N/A | ||
Fishman, Robert | N/A | N/A | ||
Collins, Malcolm | FSD NPOI as a % of Revenue (Solution) | 25% | ||
Lieb, Peter | N/A | N/A | ||
Wallace, Christine | WCS NPOI as a % of Revenue | 25% | ||
Koehler, Michael | Teradata Revenue | 25% |
Stretch Objective Metric Key:
FSD – Financial Solutions Division
NPOI – Non-Pension Operating Income
NPOICC – Non-Pension Operating Income After Capital Charge
WCS – Worldwide Customer Services
The Committee sets stretch objectives at a level that will be met only when actual results significantly exceed the Company’s projections as to the applicable measure. The first year in which such objectives were set was 2006, and in that year no payout was made. In 2007, stretch objectives were set for four of difficulty that reflectsour Named Executive Officers. Mr. Nuti and Ms. Wallace each met his or her objective and will receive a significant increase frompayout accordingly. Mr. Collins did not meet the prior year’s operating results and would represent a significant increasestretch objective set for him in customer orders or revenue, as2007. In addition, Mr. Koehler, who was appointed Chief Executive Officer of Teradata Corporation in connection with the case may be, relative to our competitors.Spin-Off, did not meet the stretch objective set for him in 2007.
3. | Diversity Objectives |
Finally, each
The Committee set objectives based on diversity goals that it considered in the exercise of the Named Executive Officers had the potential to receive an additional diversity componentits downward discretion in determining awards payable under the 2006 Annual MIP Objectives. They hadManagement Incentive Plan. The diversity objectives were based on the potential to receive an award equal to 10%achievement of their base salary if the Company achieved three separate measures surrounding the interviewing and hiring of women or ethnic minorities at the management level in the U.S. These threeThe amount payable for this objective was based on ten percent of base salary for each of our Named Executive Officers. The intent of this incentive program is to drive the appropriate behaviors towards increasing our diversity mix within the Company, which we believe is critical to the success of the Company. This percentage was determined to be the appropriate amount as providing anything lower would not be a significant motivator of key behaviors, but anything higher than this amount would begin to overshadow other key behaviors driven by our other incentives programs. Unlike the stretch objective, the diversity objective was based on total Company performance, rather than individual or business unit performance, in order to better promote the Company-wide efforts to increase the diversity of its domestic workforce.
The measures for the diversity objective were:
1) | 25% of open roles above a certain level are filled by diverse candidates; |
2) | 40% of candidates interviewed for the |
3) | An increase in the percentage of diverse employees in the targeted population versus the prior year. |
LikeSimilar to the stretch incentive award,objective, we considered this awardthe diversity objective on an “all or none” basis. If the goal was achieved, the Named Executive Officers received the full award; if it was not achieved, no award was payable. Unlike the stretch incentive award, the diversity award measures were based on total Company, rather than individual or business unit, performance, in order to better promote the Company-wide efforts to increase the diversity of its workforce. For 2006,2007, all three of the above measures were achieved and each Named Executive Officer received the award payouts.
The annual cash incentive awards earned by the Named Executive Officers for 2006 are reported in the Summary Compensation Table on page 30. Additional information about these awards is reported in the Grants of Plan-Based Awards Table on page 34.
4. | Other Factors Considered in the Exercise of Downward Discretion |
Long-Term Incentives
A substantial portion of our executives’ total compensation is delivered inIn exercising its discretion to reduce the form of equity compensation. In 2006, this portion varied directly with each executive’s role and degree of responsibility in the Company. In recent years, we have used three different equity vehicles - stock options, time-basedrestricted stock, and performance-based restricted stock - to provide long-term incentives to our Named Executive Officers. However, in 2006, as part of our emphasis on performance-based compensation, we did not make any time-based restricted stock awards to our Named Executive Officers. Equity awards granted to our Named Executive Officers prior to April 26, 2006, were madeaward payable under the Management Stock Plan. Awards made on or after April 26, 2006, were madeIncentive Plan, the Committee considered, along with the 2007 Management Incentive Plan Objectives discussed above, the overall exemplary
29
performance of our CEO. The Committee determined that in recognition of the successful Spin-Off, a smooth transition and creation of a solid foundation for our Company going forward, strong financial performance, and a clear vision and strategy, the award payable under the StockManagement Incentive Plan approved by our stockholders at our 2006 annual meeting.
Stock Options. The stock option awards granted to our Named Executive Officers in 2006 vest through continued service over four years in equalCEO should include a performance-based award of $400,000. The Committee determined that the amount of the award payable under the Management Incentive Plan for exemplary performance should be 40 percent of target for the annual 25% increments. This feature is intended to ensure that a Named Executive Officer will realize meaningful value from his or her award only if he or she remains employed with us for at least four years and the market pricefinancial objective because of our common stock appreciates over that time.
Performance-Based Restricted Stock. The performance-based restricted stock awards granted to our Named Executive OfficersCEO’s success in 2006 vest only if,delivering outstanding performance outside of the normal operation of the business in connection with the Spin-Off, while, at the endsame time, successfully driving the core performance of the three-year performance period, we have achieved specific Cumulative Net Operating Profit (“CNOP”) goals for the period from January 1, 2006 through December 31, 2008. To determine CNOP, we:
Multiplied Controllable Capital by 10% (which approximates our weighted average cost of capital), and
Subtracted this amount from the sum of NPOI as reported for each quarterly reporting period during the performance period.
By Controllable Capital, we mean:Company.
In 2007, we granted an equity award to each of our Named Executive Officers during the annual awards cycle. In addition, we granted to several of our Named Executive Officers an ad-hoc award as a result of a promotion, in recognition of exemplary performance, in recognition of a successful Spin-Off or for retention purposes.
We use CNOP because it is the measure that we use to monitor progress in achieving our long-term business objectives.
21
We apply straight-line interpolation to our actual CNOP for the performance period to compute the number of shares earned by the Named Executive Officers between the specified threshold, target, and maximum payout levels. However, regardless of our CNOP for the performance period, we pay awards only if we achieve a minimum cumulative Return on Capital goal of 40% for the 2006-2008 performance period. Return on Capital is equal to our NPOI divided by Controllable Capital.
For the awards made in 2006, we set the target level for our CNOP atour projected long-term business growth objective over the next three years. In making determinations of the desired threshold, target, and maximum performanceThe 2007 annual award levels we also considered the general economic climate and the specific market conditions that we were likely to face in the upcoming years. We set the target performance levels for performance-based restricted stock awards such that the levels are challenging but achievable, in that the target levels represent projected long-term meaningful growth of the Company. We set our threshold and maximum performance levels approximately 10% below and above, respectively, the target performance level. Although our assessment is subject to change over time, our performance was generally on target for 2006 and we are currently expensing our outstanding performance-based restricted stock for financial statement purposes based upon an assumption of achieving the target performance levels.
Other than performance-based equity awards made to Mr. Nuti in connection with his employment in 2005, this was the first year in which we used performance-based restricted stock awards as a primary equity vehicle for Named Executive Officers.
Annual Awards
We determine the target amount of equity compensation that we want to deliver to the Named Executive Officers each yeardetermined using both internal and external data.analytical tools. We rely on the Committee’s compensation consultant to validate our assessment of external conditions and to analyze competitive equity award levels in the relevant peer group and in the various industries in which we operate. The peer groups that we use for evaluating the size of each Named Executive Officer’s target compensation level are selected as discussed on pages 17-18.page 18. We use this information, as well as the initial award recommendations of the CEO (in the case of the other Named Executive Officers), to make final decisions. We set the size of the equity awards as adollara dollar amount to facilitate our comparison of this component with the other components of each executive’s compensation package and to aid us in assessing targeted total compensation.
In 2006,2007, the Named Executive Officers each received an annual equity award that was divided equally between stock options and performance-based restricted stock.stock units. This reflected a change from 2005 in which equity awards consisted of combinations of stock options and time-based restricted stock. We believe that the mix was used in 2006 providedto provide the most appropriate alignment with both stockholder and economic interests. While a stock option provides a direct link to financial performance as measured by growth in the market price of our common stock and emphasizes our overall performance in the market, the performance-based restricted stock awards driveunit award drives results since theirits payout is directly tied to the achievement of specific pre-established financial performance goals that have been crafted to help us reach our long-term strategic objectives.
The equity mix reflected in our long-term incentives is consistent with our objective of emphasizing performance-based compensation. The upside potential in stock options is attractive to our Named Executive Officers, and the greater reward that an option provides when we experience favorable long-term performance and growth aligns this vehicle with our stockholders’ interests. The performance-based restricted stock unit reduces the impact of share price volatility in compensation realized by the executives without sacrificing upside or downside leverage in the program because the ultimate value realized by the executive is influenced by both the number of shares earned, which reflects performance versus predetermined operating objectives, and changes in share price.
We also consider affordability to the Company as a factor in determining the size and mix of each equity award granted. When determining the overall annual equity program for the Company for the upcoming year, we grant. Thebalance the size of individual awards, the number of participants, and accounting expenses from prior year grants with the total annual expense recognizedplan approved by the Company in 2006 with respect toBoard of Directors. As mentioned above, FWC also conducts a comprehensive analysis of long-term incentive awards earned bycosts and resulting levels of stockholder value transfer and dilution, which helps the Named Executive Officers during 2006 and earlier years is reported in the Summary Compensation Table on page 30.Committee to develop an annual budget for aggregate, Company-wide long-term incentives. Additional information on these awards, including the number of shares subject to each award, is reported in the Grants of Plan-Based Awards Table on page 34pages 42-43 and the Outstanding Equity Awards at Fiscal Year-End Table on page 36.pages 45-46.
Ad Hoc Awards30
The annual award granted to the CEO was determined by the Committee through analysis of market data and peer group data, as well as consideration of Mr. Nuti’s past awards and performance to date. In an effort to build internal equity among their peers, comparable annual awards were granted to Messrs. Bocian, Collins, Lieb and Koehler and Ms. Wallace, as reflected in the table below. The factors used to determine the annual award amount were (i) internal equity among peers, (ii) a general equity range among top executives derived from market research and (iii) consideration of any retentive measures that should be taken based on the individual’s equity portfolio. These factors were reviewed by the CEO and the Committee prior to determining each of these Named Executive Officer’s annual award. At the time the awards were granted, Mr. Fishman was serving as the Company’s Controller and had not been appointed to serve as the Company’s Interim CFO. However, Mr. Fishman was granted an annual award in excess of the guideline award granted to employees in his internal grade level at that time in recognition of his outstanding performance during the past year.
Annual Equity Awards Table | ||
Named Executive Officer | Annual Equity Award Value as of Grant Date ($) | |
Nuti, William | 5,500,000 | |
Bocian, Peter | 700,000 | |
Fishman, Robert | 100,000 | |
Collins, Malcolm | 750,000 | |
Lieb, Peter | 700,000 | |
Wallace, Christine | 700,000 | |
Koehler, Michael | 750,000 |
From time to time, we may grant equity
2. | Ad Hoc Awards |
Equity awards to the Named Executive Officersgranted outside the annual award process, suchknown as in connection with the hiring of a new executive, for retention purposes, to reward exemplary performance, and/or for promotional
22
recognition. The CEO provides initial award recommendations to the Committee for approval. Generally, these “ad hoc” awards, take the form of eitherare generally stock options or performance-based restricted stock.stock units. In 2006,2007, the ad hoc awards to the Named Executive Officers had effective dates that correspondedof the first day of the month following the month in which the Committee approved the award. In total, six ad hoc awards were made to the laterNamed Executive Officers in 2007. Each award granted served one or more of either the datefollowing purposes: to recognize Spin-Off activities, to recognize promotions, and/or to provide retentive value. The Committee and the CEO reviewed, and the Committee approved (or ratified, in the case of the May 1, 2007 ad hoc award to Mr. Fishman), all ad hoc awards made in 2007. For each ad hoc award made to our Named Executive Officers in 2007, our CEO made a recommendation to the Committee approvalas to the potential recipient and proposed size of the award. The recommendation was based on consideration of internal equity and a review of the potential recipient’s relevant cash and equity compensation history as provided by the Company’s executive compensation team, or, in the case of aspin-related awards, the distribution of an overall award budget to executives based on the contribution level of each executive to the Spin-Off and the executive’s role in the new hire,organization. Upon review of the CEO’s recommendation and after considering other factors that the Committee deemed to be relevant to the proposed awards, the Committee approved the awards in the amounts proposed by the CEO.
Mr. Fishman received three ad hoc awards during 2007. The first date of employment. Only two ad hoc awards were granted in connection with promotions – the first, granted on May 1, 2007, as a result of his promotion to Controller, and the second, granted on June 1, 2007, as a result of his promotion to Interim CFO. The June 1, 2007 award was also structured to serve a retentive purpose to encourage Mr. Fishman to remain with the Company. The value of his May 1, 2007 award was in line with promotion awards granted for his internal grade level in prior years. The value of his June 1, 2007 award was higher than the normal promotion award for his internal grade level because it was designed to serve the two purposes described above. Mr. Fishman’s third ad hoc award was granted in connection with his exemplary efforts toward the successful Spin-Off. Mr. Collins’ ad hoc award fulfilled two purposes,
31
promotion and retention, with a focus on his promotion into his new role as Senior Vice President, Global Sales and Marketing, effective January 1, 2008. Mr. Collins’ award value is in line with awards provided to Section 16 Officers receiving promotions. Similar to Mr. Fishman, Mr. Lieb received an equity award in recognition of his exemplary efforts toward the successful Spin-Off. Ms. Wallace’s ad hoc award was granted as a retention award to ensure Ms. Wallace would remain with the Company and to ensure the successful continuation of NCR’s customer services business following the Spin-Off. Ms. Wallace’s retention award value is a standard retention value used by the Company for top leaders. The table below provides a view of the ad hoc awards provided to the Named Executive Officers in 2006.during 2007.
Fishman, Robert Collins, Malcolm Lieb, Peter Wallace, Christine The Executive Medical Exam Program: We Equity Award Grant PracticesAd Hoc Equity Awards Table Named Executive Officer Purpose Grant Date Ad Hoc Equity
Award Value
as of Grant
Date ($)Promotion May 1, 2007 75,000 Promotion / Retention June 1, 2007 250,000 Spin-Off Recognition October 1, 2007 200,000 Promotion / Retention October 1, 2007 250,000 Spin-Off Recognition October 1, 2007 200,000 Retention October 1, 2007 100,000 Committee approves all equity awards, includingvarious performance levels that are set under the long-term incentive plan are based on the projected long-term growth of our annual equity awards,Company. Accordingly, the likelihood of achieving the performance levels is equal to our executives, includingthat of achieving the Named Executive Officers. Generally, itprojected long-term growth, which is our practice forset at a challenging but achievable level. The number of performance-based restricted stock units that vest depends upon the Committeeachievement of CNOP levels at the end of a three-year performance period, as discussed in more detail in the narrative to make annual awards during its prescheduled February meeting. As reflected in the Grants of Plan-Based Awards Table on page 34,Table. Although we set threshold, target and maximum levels to determine the effective dateamount of the annual awards made in 2006 corresponded to the date on which the Committee approved these awards.We do not coordinate the release of information about the Company to affect the value of stock options or other equity awards that are partwill vest at the end of the Named Executive Officers’ total compensation packages. Nor do weperformance period, these levels only represent various points along a continuum used to determine the actual amount of the awards that will vest. The threshold and maximum levels are generally set at approximately ten percent above and below, respectively, the target level. Historical data regarding the achievement of the long-term incentive awards is not available because 2006 was the first year in which these awards, which have a program, plan, or practice specifically designed to coordinate the grant of ad hoc awards with the release of information about the Company. Nevertheless, starting in 2007 we revised our approval process for making equity awards to our executives and other employees in order to standardize the grant dates for our equity awards and to ensure that there is no potential discretion in selecting the timing of awards and specific grant dates. This process works as follows:three-year performance period, were granted. •D. Annual Awards: Grants of annual equity awards, including stock option grants, are effective on the first calendar day of the month immediately following the date the Committee meets to approve the award. Because the Committee traditionally reviews grant recommendations and approves annual equity awards at its February meeting, the effective date for annual grants will typically be March 1 each year.Executive Perquisites•Ad hoc Awards: In the case of an award approved by the Committee at any meeting that is scheduled at least 30 days in advance of the meeting date, the effective date forthe award will be the first calendar day of the month immediately following the date the Committee approves the award. In the case of awards approved by the Committee at any meeting that is scheduled with less than 30 days notice (a “special meeting”), or via an action by unanimous written consent (“Action by Consent”), the effective date for the award will be determined as follows:ºWith respect to awards approved at a special meeting held on or before the 15th day of the month, or via an Action by Consent fully executed on or before the 15th day of the month, the effective date will be the first calendar day of the month immediately following the special meeting or Action by Consent.ºWith respect to awards approved at a special meeting held on or after the 16th day of the month, or via an Action by Consent fully executed on or after the 16th day of the month, the effective date will be the first calendar day of the second month immediately following the special meeting or Action by Consent.ºIn no case will an ad hoc award for a newly hired employee be effective prior to the recipient’s effective date of employment.Once a stock option grant has been approved by the Committee, the award’s exercise price (which must be equal to the fair market value of our common stock on the grant date) is determined under the methodology approved by the Committee. In 2006, we determined the fair market value of our common stock (and, thus, the option’s exercise price) by averaging the high and low trading prices on the effective dateAs part of the award. However, in responseCompany’s objective to market trends,embrace best practice policies within our Compensation program, our executives are eligible for a very limited offering of perquisites. The perquisites we provide support our objective to attract and after completing an extensive analysis,retain high quality talent and are designed to allow our executives to focus on their business responsibilities without concern for the Committee decided that, effective January 1, 2007,situations covered by these perquisites. Each perquisite we would compute the fair market value of our common stock (and, thus, the exercise price of our stock option awards) by using the closing market price of the common stock on the effective date of the award.provide is described below.do not have any program, plan, or practice for setting the exercise price of our stock option23
awards on any date other than the effective date of the award. If an award’s effective date happens to fall on a non-trading day (such as a Saturday, Sunday, or holiday), we use the first trading date immediately preceding the effective date of the award to compute the option’s exercise price. It is our policy not to permit the repricing of stock option awards.
As previously described, it is our practice to determine the dollar amount of equity compensation that we want tocurrently provide to our Named Executive Officers up to $5,000 annually under our Executive Medical Program for a comprehensive physical examination and thendiagnostic testing, to convert those values intobe provided by the Cleveland Clinic. This amount was determined by reviewing the offerings presented by the Cleveland Clinic and choosing what we believe to be a specific numberlevel appropriate to provide our executives with a broad and comprehensive range of shares or options using a methodology based on historical trading prices.services. We believe that this perquisite benefits our stockholders by encouraging our executives to proactively maintain their health, thereby minimizing health-related disruptions to our business.
Financial Counseling Program: We also provide the Named Executive PerquisitesOfficers with a $12,000 annual allowance under our Financial Counseling Program to be used for financial and Welfare Benefitstax planning, estate planning,
Perquisites32
financial planning-related legal services, and other personal benefits do not comprise a significant aspectincome tax preparation. We believe that providing expert financial counseling reduces the amount of time and attention the Named Executive Officers would otherwise spend on that topic and maximizes the net financial reward they receive under our executive compensation program. Historically,
Lodging, Meals and Car Rental: In 2007, Messrs. Nuti and Lieb, who maintain their primary residences in another state, were provided with Company-paid lodging and meals at the Company-owned facility described in Section II.F.3 while working at our Dayton, Ohio headquarters. In addition, we have kept the number of executive perquisites to a minimum. The perquisites that are provided to our Named Executive Officers are limited to items that enable them to be more efficient (such as financial planning), balance their personal, business,paid for Messrs. Nuti and travel schedules (such asLieb’s use of the corporate aircraft, Company-owned lodginga rental or leased car to commute to work from this facility. In addition, Mr. Collins also has use of a Company-paid car for business, commuting, and rental cars), and promote their continued good health (such as the Executive Medical Program). All perquisites for Named Executive Officers must be approved by the Committee.personal purposes.
Aircraft and Commercial Flights: Except as described below, our corporate aircraft areis available to the Named Executive Officers, as well as other employees, for business-related travel only. We permit the family members of the executive officers, including Named Executive Officers, to accompany them on limited occasions on corporate aircraft as long as such travel is approved by the Chief Executive OfficerCEO and the Company does not incur any incremental cost from such use. In addition, as set forth in accordance with the terms of the letter agreement described on pages 28-29,with Mr. Nuti, we have authorized the personal use of our corporate aircraft by Mr. Nuti on an as-available basis, provided that the imputed income from such personal use does not exceed $35,000 per year.year, based on Standard Industry Fare Level Rates as published by the Internal Revenue Service. This amount is included in the negotiated terms of Mr. Nuti’s employment agreement. We alsohave approved the use of our corporate aircraft by Mr. Nuti for commuting between his residence and work location on a weekly or less frequent basis. Mr. Lieb is also authorized for commuting use of the corporate aircraft on an as-available basis within reasonable limits. In addition, the Company pays for his commute on commercial flights from his residence to his work location. Mr. Lieb’s use of our corporate aircraft is reviewed on a quarterly basis by the Committee. Approved use for commuting purposes was negotiated with these two executives at the time of hire in order to attract these executives, each of whom resided at the point of hire in a geographically distant area.
Messrs. Nuti and Lieb received tax reimbursements for Mr. Nutiimputed income incurred from their use of our corporate aircraft and commercial flights as described above, as well as the Company-paid meals, lodging and rental cars associated with commuting. The tax reimbursements are offered to make these perquisites a tax-neutral benefit to the extent ofexecutive. However, in December 2007, the Committee determined that tax reimbursements for imputed income that he incurs from hisrelating to personal use of our corporate aircraft.
In 2006, Mr. Nuti, who maintains his primary residence in another state, was provided with Company-paid lodging and meals at a Company-owned facility while working at our Dayton, Ohio headquarters. In addition, we paid for Mr. Nuti’s useaircraft would be eliminated effective as of a rental car to commute to work from this facility. In addition, Mr. Collins also has use of a Company-paid car for business, commuting, and personal purposes.
We currently provide our Named Executive Officers up to $5,000 annually under our Executive Medical Program for a comprehensive physical examination and diagnostic testing. In 2006, we arranged for the Cleveland Clinic to provide these services. We believe that this perquisite benefits our stockholders by encouraging our executives to proactively maintain their health, thereby minimizing health-related disruptions of our business.
We also currently provide the Named Executive Officers with a $12,000 annual allowance under our Financial Counseling Program that may be used for financial and tax planning, estate planning, financial planning-related legal services, and income tax preparation. We believe that good financial planning by experts reduces the amount of time and attention that the Named Executive Officers would otherwise spend on that topic and maximizes the net financial reward that they receive under our executive compensation program.
Under Mr. Nuti’s employment letter agreement, we agreed to reimburse him for the legal expenses he incurred in negotiating the terms of his employment, up to $25,000. We incurred $23,841 of this expense during 2005 and $1,159 during 2006.January 1, 2008.
The incremental costs to the Company associated with providing each of these perquisites to the Named Executive Officers is described in the Perquisites Table on page 32.39.
The Named Executive Officers are eligible to participate in our Company-wide medical, dental, life, and disability insurance plans. Any participant, including a Named Executive Officer, may purchase higher levels of coverage for particular benefits. Some of the Named Executive Officers have taken advantage of this option. Mr. Collins is based in the United Kingdom and his benefits include standard medical, life and disability insurance plans generally available to our United Kingdom employees.
24
Retirement Benefits
Historically, we have provided retirement benefits to our U.S. employees under a number of defined benefit pension plans. The plans that are applicable to our Named Executive Officers include: the NCR Pension Plan, the NCR Nonqualified Excess Plan and the Retirement Plan for Officers of NCR. The NCR Pension Plan is a broad-based tax-qualified defined benefit pension plan for our U.S. employees. The NCR Nonqualified Excess Plan is a non-tax-qualified defined benefit pension plan that restores benefits to participants in the NCR Pension Plan that would otherwise be lost under that plan due to limitations under the federal income tax laws on the provision of benefits under tax-qualified defined benefit pension plans. The Retirement Plan for Officers of NCR is a non-tax-qualified supplemental executive retirement plan that provides more generous benefits than the NCR Nonqualified Excess Plan for designated executives, including some of the Named Executive Officers.
Starting in 2004, we began transitioning our U.S. retirement program from a defined benefit to a defined contribution structure. In 2004, we closed the plans to new participants and froze the pension benefits for existing U.S. participants under the age of 40. In 2006, we froze the pension benefits under these plans as of December 31, 2006, for all of the remaining U.S. participants, including the Named Executive Officers. Freezing the plans means that, while participants retain the pension benefits already accrued, no additional contributions will be made by the Company after the effective date of the freeze. At the same time, we increased our matching contribution to our Section 401(k) savings plan. The changes to the defined benefit pension plans and the enhancement to the Section 401(k) plans were designed to provide a valued benefit to our employees while balancing our need to manage costs, be more competitive and optimize stockholder value.
Mr. Collins is an employee in the U.K. and participates in the U.K. Defined Contribution Pension, which is a defined contribution plan. He is not a participant in the U.K. pension plan, which was closed to participants in 2004.
Mr. Bocian, Mr. Koehler and Ms. Wallace are the only Named Executive Officers eligible for benefits under our defined benefit pension plans.Because Mr. Nuti joined NCR after the plans had been closed to new participants, he is not eligible to receive any pension benefits from the Company.
The actuarial present values of the accumulated pension benefits of the Named Executive Officers who participate in these plans as of the end of 2006, as well as other information about each of our defined benefit pension plans, are reported in the Pension Benefits Table on page 40.
Change in Control Arrangements
From time to time, we may explore potential transactions that could result in a change in control of the Company. We believe that when a transaction is perceived as imminent, or is taking place, we should be able to receive and rely on the disinterested service of the Named Executive Officers, without them being distracted or concerned by the personal uncertainties and risks associated with such a situation. We further believe that our stockholders are best served if their interests are aligned with the interests of our executives, and providing change in control benefits should eliminate, or at least reduce, the reluctance of senior management to pursue potential transactions that may enhance the value of our stockholders’ investments.
In order to further these objectives, in 2006, we adopted a Change in Control Severance Plan. The plan provides for separation payments and benefits to our executives based on the plan level, or “tier,” to which the executive is assigned by the Committee. We selected these benefit levels for the different tiers because, based on our analysis, they represent the most common market practices among our peer group. Messrs. Nuti, Bocian, Koehler and Collins and Ms. Wallace participate in Tier I, which provides for the following benefits:
A payment equal to 300% of the executive’s annual base salary and targeted bonus opportunity under the Management Incentive Plan;
|
Accelerated vesting of all performance-based and time-based restricted stock and options;
25
Medical and dental benefits and life insurance coverage for the executive and his or her dependents at the same level he or she received during his or her employment for a period of three years;
Outplacement assistance for a period of one year; and
An excise tax gross-up, if applicable.
The estimated payments and benefits payable to the Named Executive Officers assuming an event triggering payment under these plans and arrangements as of the last day of 2006 are reported in the discussion of Potential Payments Upon Termination or Change in Control beginning on page 44 of this proxy statement. In general terms, events that trigger such payment are that a change in control has occurred, and, within the two year period following the change in control, (i) a participant’s employment is terminated by the Company without cause (other than by reason of the participant’s death or disability) or (ii) a participant’s employment is terminated by the participant for good reason.
Severance Agreements
To ensure that we are offering a competitive executive compensation program, we believe it is important to provide reasonable severance benefits to our executive officers, including the Named Executive Officers.
We do not have individual severance agreements with Mr. Bocian, Mr. Koehler, Ms. Wallace or Mr. Collins. Instead, they are covered under our standard U.S. Reduction-in-Force Plan, except for Mr. Collins, who is covered under our U.K. Reduction-in-Force plan. Generally, these plans provide employees with severance benefits if we terminate their employment in connection with a business restructuring (unless the termination is for cause). The payments and other benefits provided under these plans reflect the fact that it may be difficult for these individuals to find comparable employment within a short period of time.
The U.S. plan provides our U.S. employees with one week of separation pay for each full year of service (employees with one year of service or less receive a minimum of two weeks of separation pay, while employees with either two or three full years of service receive a minimum of four weeks ofseparation pay). Payments are capped at an amount equal to 26 weeks of separation pay. The plan also provides employees with outplacement services to assist them with securing new employment and the continuation of Company-subsidized medical coverage for them and their dependents for up to 26 weeks. Finally, the plan gives us the discretion to increase the number of weeks of separation pay that an employee receives. It is generally our practice to negotiate such terms with each of our most senior executives, including our Named Executive Officers.
Our U.K. plan is statutorily prescribed and provides our U.K. employees with a half of a week of pay per year of service for service provided during the time the employee was between 18 and 21 years old, plus one week of pay per year of service for service provided during the time the employee was between 22 and 40 years old, plus one and a half weeks of pay per year of service for service provided during the time the employee was more than 40 years old, up to a total limit of 30 weeks of pay with a weekly pay limit in 2006 of GBP £290. Our U.K. plan includes, in addition to the statutorily prescribed component, a discretionary severance benefit that allows the Company to provide an additional severance benefit of two weeks of pay per year of service up to a maximum of 23 years of service. Like the U.S. plan, the U.K. plan permits us to exercise our discretion to adjust Mr. Collins’ separation pay if we consider it appropriate.
We have a separate severance arrangement with Mr. Nuti under the letter agreement dated as of July 29, 2005 that we entered into with him when he became our CEO. The agreement provides that, in the event we terminate his employment (other than for cause) or if he were to voluntarily terminate employment for good reason, he would receive:
A payment equal to 150% of his annual base salary;
A payment equal to 150% of his targeted bonus opportunity under the Management Incentive Plan;
|
Medical benefits for himself and his dependents, equal to the level he received
26
|
The estimated paymentsIn December of 2007, the Committee approved the cash and benefits payableequity compensation package offered to Mr. Anthony Massetti, who was appointed as the Named Executive Officers assuming an event triggering payment under these plans and arrangementsCFO of the Company effective as of January 28, 2008. Due to his new role, Mr. Massetti will be a named executive officer of the last dayCompany in 2008, and an analysis of 2006 are reportedthe decisions made by the Committee with respect to Mr. Massetti’s compensation will be provided in the discussion of Potential Payments Upon Termination or Change in Control beginning on page 44 of this proxy statement.
Equity Ownership Guidelines
We have adopted stock ownership guidelines for our executive officers, including the Named Executive Officers. These guidelines encourage our executives to increase their ownership of common stock to a market value equal to two times base salary (three times base salary in the case of our CEO) over a period of five years. For these purposes, ownership includes interests in restricted stock, stock acquired through our employee stock purchase plan, and investments in NCR stock through the Company’s Section 401(k) savings plan. Stock options are not taken into consideration in meeting the ownership guidelines.
The guidelines are intended to ensure that our executive officers maintain an equity interest in the Company at a level sufficient to assure our stockholders of their commitment to value creation, while satisfying an individual’s needs for portfolio diversification.
Tax Deductibility Policy
We believe that the incentive compensation paid to our executive officers, including the Named Executive Officers, for 2006 qualifies as “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code and, thus, is fully deductible for federal income tax purposes. While we generally try to ensure the deductibility of the incentive compensation paid to our executive officers, from time to time we award cash or equity compensation to an executive that is subject to Section 162(m) if we believe that it is in our best interests and our stockholders’ best interests, even if these amounts are not fully tax deductible.
The following tables provide additional detail on the topics discussed in thisCompensation Discussion and Analysis with respect to our Named Executive Officers.for 2008.
2733
COMPENSATION TABLES
Summary Compensation Table
The table that follows this discussion summarizesshows the total compensation paid to or earned by each of our Named Executive Officers for the fiscal year ended December 31, 2006. The narrative below describes current employment agreements and material employment terms with each of our2007. In addition, for the 2007 Named Executive Officers as applicable.who were also Named Executive Officers in 2006, the table shows the total compensation paid to or earned by each such executive officer for the fiscal year ended December 31, 2006. The table includes actual salary earned, non-performance-based bonuses, stock awards and option awards (the amount reported is the dollar amount recognized for financial statement reporting purposes in accordance with FAS 123R), non-equity incentive plan compensation (cash awards granted pursuant to the Management Incentive Plan), the amount of increase in actuarial values in each of the Named Executive Officer’s benefits under various pension plans, other than Messrs. Nuti, Collins and Lieb, and all other compensation, which reflects amounts reported in the 2007 All Other Compensation Table below.
Employment Agreements and Material Employment Terms
During 2006,2007, Messrs. Nuti, andFishman, Collins, Lieb and Ms. Wallace served as executive officers of NCR pursuant to letter agreements with the Company. With the exception of Mr. Fishman, all letter agreements were entered into prior to 2007. Each letter agreement sets forth, among other things, the Named Executive Officer’s initial base salary, bonus opportunities, entitlement to participate in NCR’s benefit plans and initial equity awards. Any adjustments to these terms have been described in Section III of theCompensation Discussion and Analysis. None of the letter agreements has a fixed expiration date. Messrs. Bocian and Koehler dodid not have agreements with NCR regarding their service as executive officers.
In 2007, we entered into a letter agreement with Mr. Fishman relating to his services as Interim CFO. Pursuant to the terms of the letter agreements,agreement, the base salariessalary, as of May 11, 2007, for Messrs. Nuti and Collins and Ms. Wallace were: Mr. Nuti, $1,000,000;Fishman was $240,000. The letter agreement provided that Mr. Collins, GBP £237,709; and Ms. Wallace, $294,000 through February 28, 2006, and $330,000 thereafter. The base salariesFishman was eligible for Messrs. Bocian and Koehler established by the Committee were: Mr. Bocian, $350,000 through February 28, 2006, and $400,000 thereafter; and Mr. Koehler, $385,000 through February 28, 2006, and $425,000 thereafter.The letter agreements for Messrs. Nuti and Collins and Ms. Wallace provide that they will each be eligible to receive a bonus under NCR’sthe Business Performance Plan (the “BPP”), a bonus plan available to non-sales employees. The Committee later approved Mr. Fishman’s eligibility under the Management Incentive Plan, (the “MIP”). Actual receiptin lieu of a bonus depends on whether NCR meets certain annual performance metrics that are established by the Committee. The letter agreements provide that bonuses may range from 0%BPP, due to the length of target if the targeted objectives are not met up to a maximum bonusinterim assignment and Mr. Fishman’s fulfillment of 200% of target, with a target bonus equal to 100% of annual base salaryduties both as the Controller and Interim CFO. See Section III.B for Mr. Nuti and 75% of annual base salary for Mr. Collins and Ms. Wallace. Pursuant to his letter agreement, in 2006 Mr. Collins received a guaranteed award under the MIP equal to 100% of his annual base salary. The Committee has also determined that Messrs. Bocian and Koehler are eligible to participate in the MIP.See “Short TermIncentives” in theCompensation Discussion and Analysis above for a further discussion of potential bonus awards under the MIP.
TheManagement Incentive Plan. Finally, the letter agreement signed by Mr. Collins in 2006 also provided for an initiala promotional grant of stock options and performance-based restricted sharesstock units upon his becoming employed by NCR.appointment to Interim CFO. Pursuant to this provision, Mr. CollinsFishman received an award of stock options and performance-based restricted sharesstock units with an aggregate grant date fair value of $2,385,793. Mr. Nuti’s letter agreement also provided for initial equity awards, which were granted in 2005 and consisted of stock options and restricted shares with an aggregate grant date fair value of $12,499,570, and for a subsequent equity award, to be granted in 2006 and consisting of stock options and performance-based restricted shares with an aggregate minimum value of $2,500,000. The letter agreement signed by Ms. Wallace in 2006 in connection with her appointment to the position of Senior Vice President, Worldwide Customer Services, from her former position of Senior Vice President, Human Resources, also provided for an award of stock options and performance-based restricted shares with an aggregate grant date fair value of $315,561. See “Long Term Incentives” in theCompensation Discussion and Analysis above for further information regarding the terms of these awards.$257,717.
Pursuant to his letter agreement, Mr. Nuti is entitled to use NCR’s corporate aircraft for commuting between his personal residence and NCR’s offices and for personal use on an availability basis up to $35,000 of imputed income (or such higher amount as approved by the Committee), with such amount grossed-up for tax purposes. NCR also provides Mr. Nuti with temporary housing, meals and rental cars while he is working at NCR’s offices. Pursuant to his letter agreement, in 2006 Mr. Collins received a one-time lump sum payment of £55,931 related to the move of Mr. Collins and his family from their home in the United States to the United Kingdom. Mr. Collins is also entitled to either a company vehicle or vehicle allowance, at his discretion.
The letter agreements described above each provide that the applicable Named Executive Officer
28
is entitled to participate in the Change in Control Severance Plan. In addition, the Committee has determined that Messrs. Bocian and Koehler are entitled to participate in such plan. Please see “Change in Control Arrangements” in theCompensation Discussion and Analysis above for a description of the Change in Control Severance Plan.
Each letter agreement also provides that the particular Named Executive Officer will be entitled to participate in applicable employee benefit plans maintained by NCR.
Salary and Bonus in Proportion to Total Compensation
NCR’s Named Executive Officers generally receive 60-65% of their total direct compensation inthe form of base salary and cash incentive awards under the MIP. As noted in theCompensationDiscussion and Analysis beginning on page 15 of this Proxy Statement, the Committee believes that a significant portion of each Named Executive Officer’s compensation should be in the form of equity awards. The Committee believes that NCR’s current compensation program gives our Named Executive Officers a substantial alignment with stockholders, while also permitting the Committee to incentivize the Named Executive Officers to pursue short and long-term performance goals. Please see theCompensation Discussion and Analysis for a description of the objectives of NCR’s compensation program and overall compensation philosophy.
2934
20062007 Summary Compensation Table
Name and Principal Position | Year (b) | Salary ($) (c) | Bonus ($) (d) | Stock (e)(4) | Option ($) (f)(5) | Non-Equity (g)(7) | Change in Pension ($) (h)(13) | All Other (i)(14) | Total ($) (j) | |||||||||
Nuti, William President and Chief Executive Officer | 2006 | 1,000,000 | — | 1,460,125 | 3,230,347(6) | 935,140(8) | — | 348,780 | 6,974,392 | |||||||||
Bocian, Peter Senior Vice President and Chief Financial Officer | 2006 | 390,000 | — | 225,774 | 226,855 | 290,542(9) | 121,726 | 27,296 | 1,282,193 | |||||||||
Koehler, Michael Senior Vice President, Teradata Division | 2006 | 417,000 | — | 852,963 | 259,156 | 332,150(10) | 175,405 | 27,682 | 2,064,356 | |||||||||
Collins, Malcolm(1) Senior Vice President, Financial Solutions Division | 2006 | 367,803 | 464,514(3) | 336,823 | 249,350 | 38,555(11) | — | 136,281 | 1,593,326 | |||||||||
Wallace, Christine(2) Senior Vice President, Worldwide Customer Services | 2006 | 322,800 | — | 273,420 | 240,148 | 296,067(12) | 125,466 | 27,332 | 1,285,233 |
A significant portion of the change reported in the table below with respect to Mr. Nuti’s total compensation from 2006 to 2007 is due to modification accounting expense booked in connection with the Spin-Off and the Company’s over-performance against metrics to date. See footnote 1 for additional details regarding this matter.
Name and Principal Position (a) | Year (b) | Salary ($) (c) | Bonus ($) (d) | Stock Awards ($) (e)(3) | Option (f)(4) | Non-Equity Incentive Plan Compensation ($) (g)(6) | Change in Value and (h)(7) | All Other (i)(8) | Total ($) (j) | |||||||||||||
Nuti, William(1) | 2007 | 1,000,000 | 0 | 4,131,140 | (1) | 8,755,214 | (1),(5) | 2,368,432 | 0 | 556,788 | 16,811,574 | (1) | ||||||||||
Chairman of the Board, Chief Executive Officer and President | 2006 | 1,000,000 | 0 | 1,460,125 | 3,230,347 | 935,140 | 0 | 349,471 | 6,975,083 | |||||||||||||
Bocian, Peter | 2007 | 176,166 | 0 | 6,104 | 229,618 | 0 | -2,291 | 28,459 | 438,056 | |||||||||||||
Former Senior Vice President and Chief Financial Officer | 2006 | 390,000 | 0 | 225,774 | 226,855 | 290,542 | 121,726 | 26,254 | 1,281,151 | |||||||||||||
Fishman, Robert | 2007 | 226,483 | 0 | 93,510 | 61,800 | 270,318 | -5,064 | 10,768 | 657,815 | |||||||||||||
Interim Chief Financial Officer | ||||||||||||||||||||||
Collins, Malcolm(2) | 2007 | 522,832 | 0 | 1,293,920 | 386,441 | 575,489 | 0 | 41,017 | 2,819,699 | |||||||||||||
Senior Vice President, Financial Solutions Division | 2006 | 367,803 | 464,514 | 336,823 | 249,350 | 38,555 | 0 | 136,281 | 1,593,326 | |||||||||||||
Lieb, Peter | 2007 | 400,923 | 0 | 874,331 | 277,135 | 373,029 | 0 | 145,043 | 2,070,461 | |||||||||||||
Senior Vice President, General Counsel and Secretary | ||||||||||||||||||||||
Wallace, Christine | 2007 | 349,615 | 0 | 645,276 | 362,531 | 515,841 | -7,541 | 29,239 | 1,894,961 | |||||||||||||
Senior Vice President, Worldwide Customer Services | 2006 | 322,800 | 0 | 273,420 | 240,148 | 296,067 | 125,466 | 26,273 | 1,284,174 | |||||||||||||
Koehler, Michael | 2007 | 369,327 | 0 | 871,057 | 171,797 | 338,627 | (9) | 5,492 | 38,807 | 1,795,107 | ||||||||||||
Senior Vice President, Teradata Division | 2006 | 417,000 | 0 | 852,963 | 259,156 | 332,150 | 175,405 | 26,426 | 2,063,100 |
(1) The amounts reported for Mr. Nuti in columns (e) and (f) for 2007 are significantly higher than the amounts reported in 2006 due, in large part, to additional expenses incurred by the Company in 2007 in connection with the Spin-Off and over-performance against performance targets (“modification accounting expense”). The total amounts attributable to modification accounting expense do not correlate directly with the value of stock-based compensation actually received by Mr. Nuti. For enhanced clarity, if Mr. Nuti’s compensation had been reported using the grant date fair value of the annual stock and option awards he received in 2007 and 2006, respectively, rather than using the FAS 123R expense incurred by the Company in those years in connection with all outstanding awards, then his total compensation would have been $9,308,550 in 2007 and $7,393,184 in 2006.
(2) Mr. Collins is based in the U.K., and his annual base salary is in Great Britain Pounds (“GBP”). The amounts reported in the Summary Compensation Table with respect to Mr. Collins are in U.S. dollars and were converted from GBP using the average exchange rate for the month in which each payment was made or accrued, as applicable, except that his Bonus amount and Non-Equity Incentive Compensation amount were converted from GBP using the average exchange rate for January of the appropriate year.
(3) The amounts reported in this column are equal to the dollar amount recognized for financial statement reporting purposes in 2007 in connection with performance-based restricted stock or units granted under the Company’s Management Stock Plan, which was effective through April 25, 2006, and the Company’s Stock Incentive Plan, which was approved by the Company’s stockholders and became effective on April 26, 2006. With respect to performance-based restricted stock or units granted in 2007 and 2006, see Note 8 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 for a discussion of the relevant assumptions used in calculating the dollar amount recognized for financial statement reporting purposes with respect to the applicable fiscal year in accordance with Financial Accounting Standards Board Statement of Financial Accounting
3035
Standards no. 123 (revised 2004), Share Based Payment (“FAS 123R”). For further information about awards made in 2007, see the Grants of Plan-Based Awards table beginning on page 40 of this proxy statement. In addition, approximately $3.2 million of the amounts reported in column (e) are attributable to modification accounting expense, including approximately $1.6 million with respect to Mr. Nuti. See footnote 1 for additional information regarding modification accounting expense.
(4) Except as set forth in footnote 5, the amounts reported in this column are equal to the dollar amount recognized for financial statement reporting purposes in 2006 and 2007 in connection with options granted under the Company’s Management Stock Plan, which was effective through April 25, 2006, and the Company’s Stock Incentive Plan, which was approved by the Company’s stockholders and became effective on April 26, 2006. With respect to options granted in 2007, 2006, 2005 and 2004 see Note 8 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 for a discussion of the relevant assumptions used in calculating the dollar amount recognized for financial statement reporting purposes with respect to the applicable fiscal year in accordance with FAS 123R. For further information about awards made in 2007, see the Grants of Plan-Based Awards table beginning on page 40 of this proxy statement.
(5) The amount reported for Mr. Nuti includes an amount equal to the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2007 in connection with performance-based options granted to Mr. Nuti in 2005 pursuant to the terms of his letter agreement. Approximately $4.7 million of the amount reported is attributable to modification accounting expense. See footnote 1 for additional information regarding modification accounting expense. See Note 8 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, for a discussion of the relevant assumptions used in calculating grant date fair value of such options pursuant to FAS 123R. For further information about this award, see the Outstanding Equity Awards at Fiscal Year-End table beginning on page 45 of this proxy statement.
(6) The amounts reported in this column for 2007 consist of payments made in March 2008 with respect to the Company’s Management Incentive Plan. For more information regarding the Management Incentive Plan measurement criteria and eligibility, see the Grants of Plan-Based Awards table beginning on page 40 of this proxy statement.
(7) The amounts reported in this column reflect the aggregate change in actuarial values of each of the Named Executive Officer’s benefits under the Company’s various qualified and nonqualified defined benefit pension plans.
(8) The amounts reported in this column consist of the aggregate incremental cost to the Company with respect to perquisites provided to the Named Executive Officer in 2007, contributions made by the Company to the Company’s Savings Plan on behalf of each of the Named Executive Officers, any insurance premiums paid by the Company with respect to life insurance for the benefit of the Named Executive Officers and gross-ups and reimbursements for the payment of taxes made to the Named Executive Officers during 2007 as detailed in the All Other Compensation Table below. With respect to insurance premiums paid by the Company for life insurance, the amounts reported in this column for 2006 reflect updated information received from the Company’s outsource provider.
(9) The amount reported in this column for 2007 reflects Mr. Koehler’s earnings under the Management Incentive Plan for the nine months he was employed by NCR in 2007. Due to Mr. Koehler’s appointment in connection with the Spin-Off as the Chief Executive Officer of Teradata Corporation, Teradata Corporation has determined and will pay this amount to Mr. Koehler in accordance with the metrics it set under the Teradata Management Incentive Plan.
3136
2006 All Other2007 Summary Compensation Table Supplemental Table
Name | Year | Perquisite and Other Personal Benefits ($) (A) | Tax Reimbursements ($) | Insurance Premiums ($) (C) | Company ($) (D) | Severance ($) | Change in ($) | Total ($) | ||||||||||||||
Nuti, William President and | 2006 | 317,208 | 19,46 | 1(B) | 1,397 | 10,714 | — | — | 348,780 | |||||||||||||
Bocian, Peter Senior Vice President and Chief Financial Officer | 2006 | 17,000 | — | 2,260 | 8,036 | — | — | 27,296 | ||||||||||||||
Koehler, Michael Senior Vice President, | 2006 | 17,050 | — | 2,596 | 8,036 | — | — | 27,682 | ||||||||||||||
Collins, Malcolm Senior Vice President, | 2006 | 132,084 | — | 519 | 3,678 | — | — | 136,281 | ||||||||||||||
Wallace, Christine Senior Vice President, Worldwide Customer Services | 2006 | 17,000 | — | 2,082 | 8,250 | — | — | 27,332 |
2006 Perquisites TableThe table below shows the Cash Compensation earned under the Management Incentive Plan, including the three 2007 Management Incentive Plan Objectives.
Named Executive Officer | Corporate Aircraft Usage(I) | Temporary Housing Expenses(II) | Meals(III) | Legal Expenses(IV) | Security Monitoring | Relocation | Rental Cars | Executive Medical Program(V) | Financial Planning Allowance(VI) | |||||||||||||||||||||||
William Nuti | $ | 282,750 | $ | 8,944 | $ | 1,331 | $ | 1,159 | NE | NE | $ | 6,024 | $ | 5,000 | $ | 12,000 | ||||||||||||||||
Peter Bocian | $— | NE | NE | NE | NE | NE | NE | $ | 5,000 | $ | 12,000 | |||||||||||||||||||||
Michael Koehler | $— | NE | NE | NE | $50(VII) | NE | NE | $ | 5,000 | $ | 12,000 | |||||||||||||||||||||
Malcolm Collins | $— | NE | NE | NE | NE | $ | 101,800 | $ | 12,679 | $ | 5,000 | $ | 12,605 | |||||||||||||||||||
Christine Wallace | $— | NE | NE | NE | NE | NE | NE | $ | 5,000 | $ | 12,000 |
Name and Principal Position | Year | Annual Financial Objective ($) | Stretch Incentive Objective ($) | Diversity Incentive Objective ($) | Other Awards Pursuant to the Management Incentive Plan ($) | Total ($) | ||||||||
Nuti, William | 2007 | 1,368,432 | 500,000 | 100,000 | 400,000 | (1) | 2,368,432 | |||||||
Chairman of the Board, Chief Executive Officer and President | 2006 | 835,140 | NE | 100,000 | 935,140 | |||||||||
Bocian, Peter | 2007 | 0 | NE | 0 | 0 | 0 | ||||||||
Former Senior Vice President and Chief Financial Officer | 2006 | 250,542 | NE | 40,000 | 290,542 | |||||||||
Fishman, Robert | 2007 | 246,318 | NE | 24,000 | 0 | 270,318 | ||||||||
Interim Chief Financial Officer | ||||||||||||||
Collins, Malcolm | 2007 | 523,033 | 0 | 52,456 | 0 | 575,489 | ||||||||
Senior Vice President, Financial Solutions Division | 2006 | 0 | (2) | 0 | 38,555 | 38,555 | ||||||||
Lieb, Peter | 2007 | 332,529 | NE | 40,500 | 0 | 373,029 | ||||||||
Senior Vice President, General Counsel and Secretary | ||||||||||||||
Wallace, Christine | 2007 | 382,841 | 95,000 | 38,000 | 0 | 515,841 | ||||||||
Senior Vice President, Worldwide Customer Services | 2006 | 263,067 | 0 | 33,000 | 296,067 | |||||||||
Koehler, Michael(3) | 2007 | 297,377 | 0 | 41,250 | 0 | 338,627 | ||||||||
Senior Vice President, Teradata Division | 2006 | 289,650 | 0 | 42,500 | 332,150 |
Throughout this table, the notation “NE” indicates that an executive was not eligible or authorized to receive a specific perquisite.
(1) The amount in this column was awarded to Mr. Nuti based on his exemplary performance in 2007 as described in Section III.B.4 of theCompensation Discussion and Analysis.
(2) As provided in Mr. Collin’s offer letter at the time of his employment by the Company, Mr. Collins was guaranteed a minimum award under the Company’s 2006 Management Incentive Award equal to 100 percent of his 2006 annual base salary. This amount is not reported under this column, but rather under the Bonus column of the Summary Compensation Table on page 35.
(3) The amounts reported for 2007 for Mr. Koehler reflect his earnings under the Management Incentive Plan for the nine months he was employed by NCR in 2007. Due to Mr. Koehler’s appointment in connection with the Spin-Off as the Chief Executive Officer of Teradata Corporation, Teradata Corporation has determined and will pay such amounts to Mr. Koehler in accordance with the metrics it set under the Teradata Management Incentive Plan.
3237
2007 All Other Compensation Table
The table below shows the value of perquisites described in the 2007 Perquisites Table described below, tax reimbursements (the value of tax gross-ups paid to our Named Executive Officers), the insurance premiums paid by the Company with respect to life insurance, and Company contributions to the Company Savings Plan made on behalf of each of the Named Executive Officers. There were no severance or change in control accruals made in 2007.
Name | Year | Perquisites and Other Personal Benefits ($)(A) | Tax Reimbursements ($) | Insurance Premiums ($)(D) | Company Contributions to Retirement and 401(k) Plans ($)(E) | Total ($) | |||||||
Nuti, William | 2007 | 481,554 | 62,075 | (B) | 2,088 | 11,071 | 556,788 | ||||||
Chairman of the Board, Chief Executive Officer and President | 2006 | 317,208 | 19,461 | (B) | 2,088 | 10,714 | 349,471 | ||||||
Bocian, Peter | 2007 | 17,000 | 0 | 580 | 10,879 | 28,459 | |||||||
Senior Vice President and Chief Financial Officer | 2006 | 17,000 | 0 | 1,218 | 8,036 | 26,254 | |||||||
Fishman, Robert | 2007 | 0 | 0 | 594 | 10,174 | 10,768 | |||||||
Senior Vice President and Chief Financial Officer, Interim | |||||||||||||
Collins, Malcolm | 2007 | 31,932 | 0 | 669 | 8,416 | 41,017 | |||||||
Senior Vice President, Financial Solutions Division | 2006 | 132,084 | 0 | 519 | 3,678 | 136,281 | |||||||
Lieb, Peter | 2007 | 97,222 | 35,695 | (C) | 1,340 | 10,786 | 145,043 | ||||||
Senior Vice President, General Counsel and Secretary | |||||||||||||
Wallace, Christine | 2007 | 17,000 | 0 | 1,148 | 11,091 | 29,239 | |||||||
Senior Vice President, Worldwide Customer Services | 2006 | 17,000 | 0 | 1,023 | 8,250 | 26,273 | |||||||
Koehler, Michael | 2007 | 26,831 | 0 | 1,109 | 10,867 | 38,807 | |||||||
Senior Vice President, Teradata Division | 2006 | 17,050 | 0 | 1,340 | 8,036 | 26,426 |
(A) The amounts reported in this column are the aggregate incremental costs to the Company in fiscal year 2007 for the items set forth in the Perquisites Table. Perquisites, other than corporate aircraft usage, are valued at the actual amount paid to each provider of such perquisites, or if applicable, to the Named Executive Officer for use in connection with a perquisite program.
(B) Per Mr. Nuti’s employment letter, Mr. Nuti receives a tax gross up relating to his living expenses in Dayton, Ohio and his commuting and personal use of the corporate aircraft.
(C) Per Mr. Lieb’s employment letter, Mr. Lieb receives a tax gross up relating to his living expenses in Dayton, Ohio and his commuting use of the corporate aircraft.
(D) The amounts reported in this column include the dollar value of any insurance premiums paid by the Company with respect to life insurance for the benefit of the Named Executive Officers. For Mr. Collins, the amount reported was converted from GBP using the average monthly exchange rate for July of the applicable year, the month in which the premium was paid. The amounts reported in this column for 2006 reflect updated information received from the Company’s outsource provider.
(E) The amounts reported in this column consist of contributions made by the Company to the Company’s Savings Plan on behalf of each of the Named Executive Officers.
38
2007 Perquisites Table
The table below shows: (i) the incremental cost to the Company of corporate aircraft usage, temporary housing expenses, meals and miscellaneous living expenses incurred in connection with commuting travel; (ii) the value of legal expenses paid by the Company on behalf of Mr. Nuti and Mr. Koehler; (iii) security monitoring; (iv) relocation, (v) car lease/rental in connection with commuting; (vi) executive medical program allowances; and (vii) executive financial planning allowances.
Named Executive Officer | Year | Corporate Aircraft Usage ($)(I) | Temporary Housing Expenses ($)(II) | Meals ($) (III) | Legal Expenses ($)(IV) | Security Monitoring ($)(V) | Relocation ($) | Rental / Lease Cars ($) | Executive Medical Program ($)(VI) | Financial Planning Allowance ($)(VII) | Total ($) | |||||||||||
Nuti, William | 2007 | 447,169 | 10,494 | 1,414 | 0 | NE | NE | 5,477 | 5,000 | 12,000 | 481,554 | |||||||||||
2006 | 282,750 | 8,944 | 1,331 | 1,159 | NE | NE | 6,024 | 5,000 | 12,000 | 317,208 | ||||||||||||
Bocian, Peter | 2007 | NE | NE | NE | NE | NE | NE | NE | 5,000 | 12,000 | 17,000 | |||||||||||
2006 | NE | NE | NE | NE | NE | NE | NE | 5,000 | 12,000 | 17,000 | ||||||||||||
Fishman, Robert | 2007 | NE | NE | NE | NE | NE | NE | NE | NE | NE | 0 | |||||||||||
Collins, Malcolm | 2007 | NE | NE | NE | NE | NE | NE | 14,791 | 5,000 | 12,141 | 31,932 | |||||||||||
2006 | NE | NE | NE | NE | NE | 101,800 | 12,679 | 5,000 | 12,605 | 132,084 | ||||||||||||
Lieb, Peter | 2007 | 62,601 | 10,912 | 1,660 | NE | NE | NE | 5,049 | 5,000 | 12,000 | 97,222 | |||||||||||
Wallace, Christine | 2007 | NE | NE | NE | NE | NE | NE | NE | 5,000 | 12,000 | 17,000 | |||||||||||
2006 | NE | NE | NE | NE | NE | NE | NE | 5,000 | 12,000 | 17,000 | ||||||||||||
Koehler, Michael | 2007 | NE | NE | NE | 9,781 | 50 | NE | NE | 5,000 | 12,000 | 26,831 | |||||||||||
2006 | NE | NE | NE | NE | 50 | NE | NE | 5,000 | 12,000 | 17,050 |
Throughout this table, the notation “NE” indicates that an executive was not eligible or authorized to receive a specific perquisite.
(I) The amounts reported in this column represent the incremental costs to the Company of personal and commuting usage of the corporate aircraft. Mr. Nuti’s costs are associated with his personal usage of the corporate aircraft and his commuting flights between his residence and the Company office. Mr. Lieb’s costs reflect his commuting flights on corporate aircraft between his residence and the Company office, only when he was not accompanying Mr. Nuti, and his commercial commuting flights. On shared corporate aircraft flights, incremental costs were charged fully to Mr. Nuti. The incremental cost to the Company of personal or commuting usage of corporate aircraft was calculated by determining the variable operating cost to the Company, which includes items such as fuel, landing and terminal fees, crew travel expenses and operational maintenance. Expenses that were determined to be less variable in nature, such as pilot compensation, general administration and depreciation, were not included in the determination of the Company’s incremental cost. On occasion, other individuals traveled with Named Executive Officers on corporate aircraft; however, the Company incurred de minimis incremental costs as a result of such travel.
(II) The amounts reported in this column represent the incremental costs to the Company incurred in connection with providing temporary housing for Messrs. Nuti and Lieb at a Company-owned location in Dayton, Ohio.
(III) The amounts reported in this column represent the payments made by the Company for meals and other miscellaneous living expenses for Messrs. Nuti and Lieb while he was living away from his residence and at his principal Company location.
(IV) The amount reported in this column represents the legal expenses paid by the Company (i) on Mr. Nuti’s behalf in connection with the negotiation of his employment letter, as provided in his employment letter, and (ii) on Mr. Koehler’s behalf for review by outside counsel Mr. Koehler’s employment agreement in connection with his appointment as CEO of Teradata Corporation.
(V) The amount reported consists of expenses relating to a residential security telephone line that reported to NCR’s central station prior to the Spin-Off. The cost of monitoring such security is estimated to be less than $50 per year.
(VI) In 2006, the Company implemented an executive medical program, which provided reimbursement of up to $5,000 for each executive to receive medical diagnostic services at a designated medical facility. Although not all of the Named Executive Officers used all of their allowance in 2007, due to privacy considerations associated with the receipt of medical services, the Company has elected to disclose the total amount of the maximum benefit available to each executive, rather than the amounts actually used by each individual.
(VII) The amounts reported in this column represent the payment made by the Company to each executive for financial planning assistance, as part of the Company’s Financial Planning Allowance Program. The amount reported with respect to Mr. Collins is in U.S. dollars and was converted from GBP using the average exchange rate for the month in which the payment was made.
39
Grants of Plan-Based Awards Table
Plan-Based Awards
During 2006,The table that follows this discussion shows both non-equity and equity awards provided during 2007 by the Committee granted equity awards to each of our Named Executive OfficersOfficers. Non-equity awards were made pursuant to NCR’s equity incentive plans.
Grants made to our Named Executive Officers prior to April 26, 2006 were made under NCR’s Management StockIncentive Plan which wasdescribed in effect until that date,Section II of theCompensation Discussion and grants made to our Named Executive Officers after April 26, 2006Analysis. Equity awards were made under NCR’s 2006 Stock Incentive Plan, which became effective on April 26, 2006, also described in Section II. These equity awards are described in detail below.
In 2007, the Committee granted performance-based restricted stock units to all Named Executive Officers on various dates as reflected in the Grants of Plan-Based Awards Table. The chart below describes the performance cycles of such awards.
Grant Date | Performance Cycle | |
Prior to October 1, 2007 | October 1, 2007 through December 31, 2009 | |
October 1, 2007 | January 1, 2008 through December 31, 2010 | |
October 24, 2007 | October 1, 2007 through December 31, 2008 |
The units will vest at the end of the applicable performance cycle after the Committee determines to what extent the metrics for the performance cycle are met. No units will vest if the threshold performance levels are not achieved.
The performance metrics are based on NCR’s CNOP, which we determine using the following formula:
Multiplying Controllable Capital by 10 percent (which approximates our annual weighted average cost of capital), and
Subtracting this amount from the sum of NPOI as reported for each quarterly reporting period during the performance period.
By Controllable Capital, we mean:
(i) | Our working capital (accounts receivable plus inventory, minus the sum of accounts payable, deferred revenue and customer deposits), plus |
(ii) | The sum of Property, Plant & Equipment, other current assets excluding taxes, and capitalized software, minus |
(iii) | The sum of payroll and employee benefits and other current liabilities, excluding taxes and severance. |
We use CNOP to determine whether to pay awards because it is the measure we use to monitor progress in achieving our long-term business objectives, as this measure represents projected long-term meaningful growth of the Company. CNOP accurately demonstrates the value that date.the Company generates from its operations. That is, while it is possible to create a short-term increase in NPOI by growing receivables, inventory, and investments in Property, Plant and Equipment (each of which is an element of Controllable Capital), in the long-term, these types of short-term gains may begin to erode and Return on Capital will subsequently decrease. By using Return on Capital, the Committee can ensure that the NPOI growth is based on sound investments by taking into account the impact of the cost of generating the additional NPOI.
We apply straight-line interpolation to our actual CNOP for the performance period to compute the number of units earned by the Named Executive Officers between the specified threshold, target, and maximum payout levels. However, regardless of our CNOP for the performance period, we pay awards only if we achieve a minimum cumulative Return on Capital goal of 40 percent for the applicable performance period. Return on Capital is equal to our NPOI divided by Controllable Capital.
40
Below is a sample straight-line interpolation graph that illustrates how the number of units is computed. The graph assumes the following data for illustrative purposes only:
Results | Payouts | ||
1 | 25 | % | |
2 | 62.5 | % | |
3 | 100 | % | |
4 | 125 | % | |
5 | 150 | % |
As illustrated by this graph, if the results were at level 4, then the payout percentage would be 125 percent. Thus, an executive officer with a target award of 100 units would receive 125 units.
The Committee also granted options to purchase shareseach of NCR common stock to Messrs. Nuti, Bocian and Koehler and Ms. Wallacethe Named Executive Officers on February 13, 2006, and to Mr. Collins and Ms. Wallacevarious dates in 2007 as reflected on March 1, 2006.the Grants of Plan-Based Awards Table. Twenty-five percent of these options vest on each of the first, second, third and fourth anniversaries of the grant date. The exercise price for each of these options is equal to the average of the high and low sale pricesclosing price of NCR’s common stock on the date of grant. TheExercise prices for options granted prior to October 1, 2007 have been adjusted for the spin. Mr. Nuti was granted substitute performance-based options as a result of the conversion of his 2005 performance-based options. As a result of the Spin-Off, the exercise price for Mr. Nuti’s award was also adjusted from the original 2005 exercise price consistent with the treatment of all non- performance options granted to other Named Executive Officers. These performance-based options will vest based on NCR’s CNOP for the period from October 1, 2007 through December 31, 2008.
Additionally, the Committee also granted performance-basedtime-based restricted sharesstock units to Messrs. Nuti, BocianFishman, Collins and KoehlerLieb and Ms. Wallace on February 13, 2006,October 24, 2007, and to Mr. CollinsMessrs. Fishman and Ms. WallaceLieb on MarchOctober 1, 2006. These shares will vest at2007. All time-based restricted stock unit awards granted on October 24, 2007 were substitute awards resulting from the endspin-related conversion of the three year performance cycle at such time as2006 performance-based restricted stock awards. See the Committee determines that such performance metrics are met. The performance metrics are based on NCR’s cumulative net operating profit for the period from January 1, 2006 through December 31, 2008. No shares will vest if the performance metrics are not met. If the performance metrics are met, the number of shares shown in the “Target” column in the Grants of Plan-Based Awards table will vest; if the performance metrics are exceeded, an additional number of shares will vest, up to the number shown in the “Maximum” column in such table. Performance-based restricted sharesinclude the right to vote and the right to receive dividends, but may not be sold or transferred during the vesting period.
In 2006, the Committee established objectives to be considered when exercising its negative discretion under the MIP for calculating potential bonuses for each of our Named Executive Officers under the MIP. The objectives focused primarily on the level of NCR’s non-pension operating income (“NPOI”) during 2006. Each Named Executive Officer had the potential to receive a bonus as described more specifically“Long Term Incentives” section in theCompensation Discussion and Analysis. For Messrs. Nuti and Bocian, 100% for a further discussion of the potential bonus was based on Company performance. For Messrs. Collins and Koehler, 75% of the potential bonus was based on the performance of the division for which such Named Executive Officer was responsible during 2006. For Ms. Wallace, 50% of the potential bonus was based on the performance of the division for which she was responsibleall awards granted in 2006 and 50% of the potential bonus was based on Company performance.2007.
Pursuant to the terms of his employment offer letter, in 2006 Mr. Collins received a guaranteed MIP bonus equal to 100% of his annual base salary; Mr. Collins did not receive an additional bonus based on NCR’s performance in 2006. Using the objectives taken into consideration by the Committee, Messrs. Collins and Koehler and Ms. Wallace were also each eligible to earn an additional bonus if the division for which each such Named Executive Officer was responsible during 2006 achieved certain “stretch” order value or revenue objectives. Each Named Executive Officer was also able to earn an additional bonus under the MIP in the event the Company met certain employment diversity objectives that were established by the Committee.
3341
20062007 Grants of Plan-Based Awards Table
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | Estimated Future Payouts Under Equity Incentive Plan Awards(3) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($ / Sh) | Closing ($ / Sh) | Grant Fair | ||||||||||||||||||||||||||||||||
Name | Grant Date | Approval Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||
(a) | (b) | (b1)(1) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j)(4) | (k)(5) | (k1)(6) | (l) | |||||||||||||||||||||||||
Nuti, William | MIP | 500,000 | 1,000,000 | 2,000,000 | ||||||||||||||||||||||||||||||||||
President and Chief | Diversity | 100,000 | ||||||||||||||||||||||||||||||||||||
Executive Officer | 2/13/2006 | 2/13/2006 | 16,524 | 66,096 | 99,144 | — | 2,554,280 | |||||||||||||||||||||||||||||||
2/13/2006 | 2/13/2006 | 165,655 | 38.645 | 38.540 | 2,554,293 | |||||||||||||||||||||||||||||||||
Bocian, Peter | MIP | 150,000 | 300,000 | 600,000 | ||||||||||||||||||||||||||||||||||
Senior Vice President | Diversity | 40,000 | ||||||||||||||||||||||||||||||||||||
and Chief Financial | 2/13/2006 | 2/13/2006 | 2,181 | 8,725 | 13,088 | — | 337,178 | |||||||||||||||||||||||||||||||
Officer | 2/13/2006 | 2/13/2006 | 21,866 | 38.645 | 38.540 | 337,160 | ||||||||||||||||||||||||||||||||
Koehler, Michael | MIP | 159,375 | 318,750 | 637,500 | ||||||||||||||||||||||||||||||||||
Senior Vice President, | Diversity | 42,500 | ||||||||||||||||||||||||||||||||||||
Teradata Division | Stretch | 106,250 | ||||||||||||||||||||||||||||||||||||
2/13/2006 | 2/13/2006 | 2,082 | 8,328 | 12,492 | — | 321,836 | ||||||||||||||||||||||||||||||||
2/13/2006 | 2/13/2006 | 20,872 | 38.645 | 38.540 | 321,833 | |||||||||||||||||||||||||||||||||
Collins, Malcolm | MIP | — | 87,191 | |||||||||||||||||||||||||||||||||||
Senior Vice President, | Diversity | 38,555 | ||||||||||||||||||||||||||||||||||||
Financial Solutions | Stretch | 91,951 | ||||||||||||||||||||||||||||||||||||
Division | 3/1/2006 | 1/26/2006 | — | 7,923 | 31,690 | 47,535 | — | 1,260,787 | ||||||||||||||||||||||||||||||
3/1/2006 | 1/26/2006 | 70,870 | 39.785 | 40.070 | 1,125,006 | |||||||||||||||||||||||||||||||||
Wallace, Christine Senior Vice President, Worldwide | MIP Diversity Stretch | | 123,750 | 247,500 33,000 82,500 | | 495,000 | ||||||||||||||||||||||||||||||||
Customer Services | 3/1/2006 | 2/13/2006 | 992 | 3,966 | 5,949 | — | 157,787 | |||||||||||||||||||||||||||||||
3/1/2006 | 2/13/2006 | 9,939 | 39.785 | 40.070 | 157,774 | |||||||||||||||||||||||||||||||||
2/13/2006 | 2/13/2006 | 1,322 | 5,288 | 7,932 | 204,355 | |||||||||||||||||||||||||||||||||
2/13/2006 | 2/13/2006 | 13,252 | 38.645 | 38.540 | 204,337 |
Approval Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | Estimated Future Payouts Under Equity Incentive Plan Awards(3) | All Other Stock Awards: Number of Shares of Stock Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards ($ / Sh) | Closing Price on Grant Date ($ / Sh) | Grant Date Fair Value ($) | |||||||||||||||||||
Name | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||||
(a) | (b) | (b1)(1) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j)(4) | (k)(5) | (k1)(6) | (l) | |||||||||||||
Nuti, William | Annual Fin. | 500,000 | 1,000,000 | 2,000,000 | ||||||||||||||||||||||
Chairman of the Board, Chief Executive Officer and President | Diversity | 100,000 | ||||||||||||||||||||||||
Stretch | 500,000 | |||||||||||||||||||||||||
10/24/2007 | 10/23/2007 | 168,189 | 252,283 | 336,378 | 16.10 | 25.68 | 2,173,315 | |||||||||||||||||||
10/24/2007 | 10/23/2007 | 32,212 | 827,204 | |||||||||||||||||||||||
10/24/2007 | 10/23/2007 | 15,975 | 63,899 | 95,849 | 1,640,926 | |||||||||||||||||||||
3/1/2007 | 2/12/2007 | 315,345 | 21.27 | 21.27 | 2,691,675 | |||||||||||||||||||||
3/1/2007 | 2/12/2007 | 31,637 | 126,547 | 189,821 | 2,691,655 | |||||||||||||||||||||
Bocian, Peter(7) | Annual Fin. | 165,000 | 330,000 | 660,000 | ||||||||||||||||||||||
Former Senior Vice President and Chief Financial Officer | Diversity | 44,000 | ||||||||||||||||||||||||
3/1/2007 | 2/12/2007 | 40,135 | 21.27 | 21.27 | 342,578 | |||||||||||||||||||||
3/1/2007 | 2/12/2007 | 4,027 | 16,107 | 24,161 | 342,596 | |||||||||||||||||||||
Fishman, Robert | Annual Fin. | 90,000 | 180,000 | 360,000 | ||||||||||||||||||||||
Interim Chief Financial Officer | Diversity | 24,000 | ||||||||||||||||||||||||
10/24/2007 | 10/23/2007 | 290 | 7,447 | |||||||||||||||||||||||
10/24/2007 | 10/23/2007 | 144 | 575 | 863 | 14,766 | |||||||||||||||||||||
10/1/2007 | 9/6/2007 | 10,413 | 23.93 | 23.93 | 99,997 | |||||||||||||||||||||
10/1/2007 | 9/6/2007 | 4,179 | 100,003 | |||||||||||||||||||||||
6/1/2007 | 5/14/2007 | 13,000 | 24.70 | 24.70 | 128,857 | |||||||||||||||||||||
6/1/2007 | 5/14/2007 | 1,304 | 5,217 | 7,826 | 128,860 | |||||||||||||||||||||
5/1/2007 | 4/24/2007 | 4,195 | 23.13 | 23.13 | 38,938 | |||||||||||||||||||||
5/1/2007 | 4/24/2007 | 421 | 1,683 | 2,525 | 38,928 | |||||||||||||||||||||
3/1/2007 | 2/12/2007 | 5,733 | 21.27 | 21.27 | 48,935 | |||||||||||||||||||||
3/1/2007 | 2/12/2007 | 576 | 2,302 | 3,453 | 48,964 | |||||||||||||||||||||
Collins, Malcolm | Annual Fin. | 196,712 | 393,424 | 786,848 | ||||||||||||||||||||||
Senior Vice President, Financial Solutions Division | Diversity | 52,456 | ||||||||||||||||||||||||
Stretch | 131,141 | |||||||||||||||||||||||||
10/24/2007 | 10/23/2007 | 15,444 | 396,602 | |||||||||||||||||||||||
10/24/2007 | 10/23/2007 | 7,659 | 30,636 | 45,954 | 786,732 | |||||||||||||||||||||
10/1/2007 | 9/6/2007 | 13,017 | 23.93 | 23.93 | 125,004 | |||||||||||||||||||||
10/1/2007 | 9/6/2007 | 1,306 | 5,224 | 7,836 | 125,010 | |||||||||||||||||||||
3/1/2007 | 2/12/2007 | 43,000 | 21.27 | 21.27 | 367,033 | |||||||||||||||||||||
3/1/2007 | 2/12/2007 | 4,314 | 17,256 | 25,884 | 367,035 |
3442
Approval Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | Estimated Future Payouts Under Equity Incentive Plan Awards(3) | All Other Stock Awards: Number of Shares of Stock Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards ($ / Sh) | Closing Price on Grant Date ($ / Sh) | Grant Date Fair Value($) | |||||||||||||||||||
Name | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||||
(a) | (b) | (b1) (1) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j)(4) | (k)(5) | (k1)(6) | (l) | |||||||||||||
Lieb, Peter | Annual Fin. | 121,500 | 243,000 | 486,000 | ||||||||||||||||||||||
Senior Vice President, General Counsel and Secretary | Diversity | 40,500 | ||||||||||||||||||||||||
10/24/2007 | 10/23/2007 | 9,222 | 236,821 | |||||||||||||||||||||||
10/24/2007 | 10/23/2007 | 4,573 | 18,293 | 27,440 | 469,764 | |||||||||||||||||||||
10/1/2007 | 9/6/2007 | 10,413 | 23.93 | 23.93 | 99,997 | |||||||||||||||||||||
10/1/2007 | 9/6/2007 | 4,179 | 100,003 | |||||||||||||||||||||||
3/1/2007 | 2/12/2007 | 40,135 | 21.27 | 21.27 | 342,578 | |||||||||||||||||||||
3/1/2007 | 2/12/2007 | 4,027 | 16,107 | 24,161 | 342,596 | |||||||||||||||||||||
Wallace, Christine | Annual Fin. | 142,500 | 285,000 | 570,000 | ||||||||||||||||||||||
Senior Vice President, | Diversity | 38,000 | ||||||||||||||||||||||||
Worldwide Customer Service | Stretch | 95,000 | ||||||||||||||||||||||||
10/24/2007 | 10/23/2007 | 1,933 | 49,639 | |||||||||||||||||||||||
10/24/2007 | 10/23/2007 | 2,577 | 66,177 | |||||||||||||||||||||||
10/24/2007 | 10/23/2007 | 959 | 3,835 | 5,753 | 98,483 | |||||||||||||||||||||
10/24/2007 | 10/23/2007 | 1,278 | 5,113 | 7,670 | 131,302 | |||||||||||||||||||||
10/1/2007 | 9/6/2007 | 5,207 | 23.93 | 23.93 | 50,003 | |||||||||||||||||||||
10/1/2007 | 9/6/2007 | 522 | 2,089 | 3,134 | 49,990 | |||||||||||||||||||||
3/1/2007 | 2/12/2007 | 40,135 | 21.27 | 21.27 | 342,578 | |||||||||||||||||||||
3/1/2007 | 2/12/2007 | 4,027 | 16,107 | 24,161 | 342,596 | |||||||||||||||||||||
Koehler, Michael(8) | Annual Fin. | 187,500 | 375,000 | 750,000 | ||||||||||||||||||||||
Senior Vice President, | Diversity | 50,000 | ||||||||||||||||||||||||
Teradata Division | Stretch | 125,000 | ||||||||||||||||||||||||
3/1/2007 | 2/12/2007 | 43,000 | 21.27 | 21.27 | 367,033 | |||||||||||||||||||||
3/1/2007 | 2/12/2007 | 4,314 | 17,256 | 25,884 | 367,035 |
3543
(1) This column was included in order to demonstrate those situations where the date of approval of an equity award differed from the grant date of the award for FAS 123R purposes. In all instances, the approval of the equity award preceded the grant date of such award.
(2) The entries in columns (c), (d) and (e), with respect to Messrs. Nuti, Bocian, Fishman, Collins, Lieb and Koehler and Ms. Wallace reflect the potential award level for each such Named Executive Officer under the 2007 Management Incentive Plan Objectives. Amounts reported in columns (c), (d) and (e) for Mr. Collins are in U.S. dollars and were converted from GBP using the average exchange rate for January 2008. For additional information regarding these award levels, see the narrative preceding this table. The actual amounts earned under the Management Incentive Plan are reflected in the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table.
(3) With the exception of the first award listed for Mr. Nuti, the numbers reported in columns (f), (g) and (h) relate to performance-based restricted stock units granted to each of the Named Executive Officers in 2007. All grants awarded to the Named Executive Officers with the exception of the October 24, 2007 grants were originally subject to a three-year performance period and require the achievement of specified performance metrics established by the Committee in order for vesting to occur. In addition, the performance period for awards granted prior to the Spin-Off and originally subject to the 2007-2009 performance period has been adjusted. No shares will vest if the objectives are not met. Those performance-based awards granted on October 24, 2007 were granted based on Spin-Off related conversion treatment of the 2006 performance-based grants. See Section III.C of theCompensation Discussion and Analysis for further detail. The first award listed for Mr. Nuti was granted as a substitute award for his original 2005 performance-based option in connection with the Spin-Off.
(4) The numbers reported in this column reflect the number of options to purchase shares that were awarded to the Named Executive Officers in 2007 pursuant to the Stock Incentive Plan. Each of these awards is subject to a four-year vesting schedule, during which 25 percent of the award vests on each anniversary of the grant date.
(5) The exercise or base price of option awards granted in 2007 was set at the closing price of NCR common stock on the grant’s effective date. The only exception to this is Mr. Nuti’s stock option award granted on October 24, 2007. This award was granted based on the conversion of his 2005 performance-based stock option award in connection with the conversion methodology applied at the time of the Spin-Off.
(6) Based on the conversion of Mr. Nuti’s 2005 performance-based options, resulting in a substitute option award as discussed in footnote 5 above, the exercise or base price differed from the closing price of the Company’s stock. This column is included, as prescribed by SEC rules, to identify when the option exercise price differs from the grant date closing price. In addition, the exercise price and closing price on grant date on awards granted prior to the Spin-Off were adjusted using the conversion ratio.
(7) Restricted stock units and options granted to Mr. Bocian on March 1, 2007 were canceled in connection with his resignation from the Company in May of 2007. Additionally, in connection with his resignation, Mr. Bocian forfeited his non-equity incentive plan awards.
(8) All restricted stock units and options granted to Mr. Koehler are reported in the table based on the application of the NCR conversion ratio in connection with the Spin-Off and are shown in the form of NCR equity to be consistent with others in the table. However, these awards were converted into equity awards based on Teradata Corporation shares as of October 1, 2007 in connection with his appointment as the Chief Executive Officer. Mr. Koehler will receive a prorated portion of his non-equity incentive plan award, paid by Teradata Corporation.
44
20062007 Outstanding Equity Awards at Fiscal Year-End Table
Option Awards | Stock Awards | ||||||||||||||||||||||||||
Number of Securities | Number of Securities Underlying Unexercised Options (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive or Other Rights That | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||||
Name | Exercisable | Unexercisable | |||||||||||||||||||||||||
William Nuti | |||||||||||||||||||||||||||
2/13/2006(1) | 165,655 | 38.65 | 2/13/2016 | ||||||||||||||||||||||||
2/13/2006(2) | — | 66,096 | 2,826,265 | ||||||||||||||||||||||||
8/8/2005(3) | 400,000 | 34.92 | 8/8/2015 | ||||||||||||||||||||||||
8/8/2005(1) | 62,500 | 187,500 | 34.92 | 8/8/2015 | |||||||||||||||||||||||
8/8/2005(1) | 63,750 | 2,725,950 | |||||||||||||||||||||||||
Peter Bocian | |||||||||||||||||||||||||||
2/13/2006(1) | 21,866 | 38.65 | 2/13/2016 | ||||||||||||||||||||||||
2/13/2006(2) | 8,725 | 373,081 | |||||||||||||||||||||||||
3/1/2005(1) | 3,037 | 9,113 | 38.97 | 3/1/2015 | |||||||||||||||||||||||
3/1/2005(1) | 2,025 | 86,589 | |||||||||||||||||||||||||
9/2/2004(4) | 6,666 | 3,334 | — | 22.39 | 9/2/2014 | ||||||||||||||||||||||
9/2/2004(5) | 10,000 | 427,600 | |||||||||||||||||||||||||
3/1/2004(4) | 12,000 | 6,000 | 22.65 | 3/1/2014 | |||||||||||||||||||||||
3/1/2004(4) | 1,334 | 57,042 | |||||||||||||||||||||||||
8/4/2003(4) | 3,334 | 13.67 | 8/4/2013 | ||||||||||||||||||||||||
1/26/2001(4) | 3,216 | 22.23 | 1/26/2011 | ||||||||||||||||||||||||
Michael Koehler | |||||||||||||||||||||||||||
2/13/2006(1) | 20,872 | 38.65 | 2/13/2016 | ||||||||||||||||||||||||
2/13/2006(2) | 8,328 | 356,105 | |||||||||||||||||||||||||
10/25/2005(6) | — | 48,170 | 2,059,749 | ||||||||||||||||||||||||
7/1/2005(5) | 5,000 | 213,800 | |||||||||||||||||||||||||
3/1/2005(1) | 3,912 | 11,736 | 38.97 | 3/1/2015 | |||||||||||||||||||||||
3/1/2005(1) | 2,608 | 111,518 |
The table below shows all outstanding options and restricted stock or stock unit awards held by our Named Executive Officers as of December 31, 2007. The number of shares and exercise prices for all awards granted prior to October 1, 2007 has been adjusted to reflect the Spin-Off. Following this table are vesting tables that indicate the vesting schedule of each grant reported below.
Option Awards | Stock Awards | |||||||||||||||||||
Name | Grant Date | Number of Exercisable | Number of Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive or Other Rights That | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||
Nuti, William | ||||||||||||||||||||
10/24/2007 | 32,212 | 808,521 | ||||||||||||||||||
10/24/2007 | 63,899 | 1,603,865 | ||||||||||||||||||
10/24/2007 | 336,378 | 16.10 | 10/24/2017 | |||||||||||||||||
3/1/2007 | — | 126,547 | 3,176,330 | |||||||||||||||||
3/1/2007 | 315,345 | 21.27 | 3/1/2017 | |||||||||||||||||
2/13/2006 | 89,834 | 269,512 | 17.82 | 2/13/2016 | ||||||||||||||||
8/8/2005 | 531,319 | 16.10 | 8/8/2015 | |||||||||||||||||
8/8/2005 | 271,155 | 271,156 | 16.10 | 8/8/2015 | ||||||||||||||||
8/8/2005 | 92,193 | 2,314,044 | ||||||||||||||||||
Fishman, Robert | ||||||||||||||||||||
10/24/2007 | 290 | 7,279 | ||||||||||||||||||
10/24/2007 | 575 | 14,433 | ||||||||||||||||||
10/1/2007 | 4,179 | 104,893 | ||||||||||||||||||
10/1/2007 | 10,413 | 23.93 | 10/1/2017 | |||||||||||||||||
6/1/2007 | 13,000 | 24.70 | 6/1/2017 | |||||||||||||||||
6/1/2007 | 5,217 | 130,947 | ||||||||||||||||||
5/1/2007 | 4,195 | — | 23.13 | 5/1/2017 | ||||||||||||||||
5/1/2007 | 1,683 | 42,243 | ||||||||||||||||||
3/1/2007 | 2,302 | 57,780 | ||||||||||||||||||
3/1/2007 | 5,733 | 21.27 | 3/1/2017 | |||||||||||||||||
2/13/2006 | 806 | 2,428 | 17.82 | 2/13/2016 | ||||||||||||||||
9/5/2005 | 2,169 | 54,442 | ||||||||||||||||||
3/1/2005 | 2,088 | 2,092 | 17.97 | 3/1/2015 | ||||||||||||||||
3/1/2004 | 6,941 | 10.45 | 3/1/2014 | |||||||||||||||||
8/4/2003 | 2,603 | 6.31 | 8/4/2013 |
3645
Option Awards | Stock Awards | ||||||||||||||||||||||||
Name/Award Date | Number of Securities | Number of Securities Underlying Unexercised Options (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive or Other Rights That | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||
Exercisable | Unexercisable | ||||||||||||||||||||||||
3/1/2004(4) | 10,000 | 22.65 | 3/1/2014 | ||||||||||||||||||||||
3/1/2004(4) | 1,000 | 42,760 | |||||||||||||||||||||||
8/4/2003(4) | 5,668 | — | 13.67 | 8/4/2013 | — | — | |||||||||||||||||||
1/1/1996(7) | 3,214 | 137,431 | |||||||||||||||||||||||
Malcolm Collins | |||||||||||||||||||||||||
3/1/2006(1) | — | 70,870 | — | 39.79 | 3/1/2016 | — | — | ||||||||||||||||||
3/1/2006(2) | 31,690 | 1,355,064 | |||||||||||||||||||||||
Christine Wallace | |||||||||||||||||||||||||
3/1/2006(1) | 9,939 | 39.79 | 3/1/2016 | ||||||||||||||||||||||
3/1/2006(2) | 3,966 | 169,586 | |||||||||||||||||||||||
2/13/2006(1) | 13,252 | 38.65 | 2/13/2016 | ||||||||||||||||||||||
2/13/2006(2) | 5,288 | 226,115 | |||||||||||||||||||||||
3/1/2005(1) | 2,531 | 7,594 | — | 38.97 | 3/1/2015 | ||||||||||||||||||||
3/1/2005(1) | 11,046 | 38.97 | 3/1/2015 | ||||||||||||||||||||||
3/1/2005(1) | 1,688 | 72,179 | |||||||||||||||||||||||
2/1/2005(5) | 12,000 | 513,120 | |||||||||||||||||||||||
3/1/2004(4) | 22,666 | 11,334 | 22.65 | 3/1/2014 | |||||||||||||||||||||
3/1/2004(4) | 534 | 22,834 | |||||||||||||||||||||||
8/4/2003(4) | 2,500 | 13.67 | 8/4/2013 | ||||||||||||||||||||||
1/26/2001(4) | 22,800 | 22.23 | 1/26/2011 | ||||||||||||||||||||||
1/4/1999(4) | 21,000 | 20.75 | 1/4/2009 | ||||||||||||||||||||||
1/1/1996(7) | 1,494 | 63,883 |
Option Awards | Stock Awards | |||||||||||||||||||
Name | Grant Date | Number of Exercisable | Number of Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive or Other Rights That | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||
Collins, Malcolm | ||||||||||||||||||||
10/24/2007 | 15,444 | 387,644 | ||||||||||||||||||
10/24/2007 | 30,636 | 768,964 | ||||||||||||||||||
10/1/2007 | 13,017 | — | 23.93 | 10/1/2017 | ||||||||||||||||
10/1/2007 | 5,224 | 131,122 | ||||||||||||||||||
3/1/2007 | 43,000 | 21.27 | 3/1/2017 | |||||||||||||||||
3/1/2007 | 17,256 | 433,126 | ||||||||||||||||||
3/1/2006 | 38,432 | 115,302 | 18.35 | 3/1/2016 | ||||||||||||||||
Lieb, Peter | ||||||||||||||||||||
10/24/2007 | 9,222 | 231,472 | ||||||||||||||||||
10/24/2007 | 18,293 | 459,154 | ||||||||||||||||||
10/1/2007 | 10,413 | — | 23.93 | 10/1/2017 | ||||||||||||||||
10/1/2007 | 4,179 | 104,893 | ||||||||||||||||||
3/1/2007 | 40,135 | 21.27 | 3/1/2017 | |||||||||||||||||
3/1/2007 | 16,107 | 404,286 | ||||||||||||||||||
5/29/2006 | 25,716 | 77,156 | 18.29 | 5/29/2016 | ||||||||||||||||
Wallace, Christine | ||||||||||||||||||||
10/24/2007 | 1,933 | 48,518 | ||||||||||||||||||
10/24/2007 | 2,577 | 64,683 | ||||||||||||||||||
10/24/2007 | 3,835 | 96,259 | ||||||||||||||||||
10/24/2007 | 5,113 | 128,336 | ||||||||||||||||||
10/1/2007 | 2,089 | 52,434 | ||||||||||||||||||
10/1/2007 | 5,207 | 23.93 | 10/1/2017 | |||||||||||||||||
3/1/2007 | 40,135 | 21.27 | 3/1/2017 | |||||||||||||||||
3/1/2007 | — | 16,107 | 404,286 | |||||||||||||||||
3/1/2006 | 5,388 | 16,172 | 18.35 | 3/1/2016 | ||||||||||||||||
2/13/2006 | 7,186 | 21,560 | 17.82 | 2/13/2016 | ||||||||||||||||
3/1/2005 | 10,980 | 10,983 | 17.97 | 3/1/2015 | ||||||||||||||||
3/1/2005 | 2,440 | 61,244 | ||||||||||||||||||
2/1/2005 | 26,031 | 653,378 | ||||||||||||||||||
3/1/2004 | 73,754 | 10.45 | 3/1/2014 | |||||||||||||||||
8/4/2003 | 5,423 | 6.31 | 8/4/2013 | |||||||||||||||||
1/26/2001 | 49,458 | 10.25 | 1/26/2011 | |||||||||||||||||
1/4/1999 | 45,554 | 9.57 | 1/4/2009 |
3746
Options Vesting Table
Grant Date |
10/24/2007 |
10/1/2007 | ||
6/1/2007 | Four-year vesting: 25% annually | |
5/1/2007 | Four-year vesting: 25% annually | |
3/1/2007 | Four-year vesting: 25% annually | |
5/29/2006 | Four-year vesting: 25% annually | |
3/1/2006 | Four-year vesting: 25% annually | |
2/13/2006 | Four-year vesting: 25% annually | |
8/8/2005 (Performance-Based) | Partial vesting based on conversion methodology (Original award was to vest if specified performance conditions were satisfied, as approved by the Committee. Due to the Spin-Off, a portion vested in 2007 and the remainder was replaced by Mr. Nuti’s 10/24/07 performance-based option grant). | |
8/8/2005 (Time-Based) | Four-year vesting: 25% annually | |
3/1/2005 | Four-year vesting: 25% annually | |
3/1/2004 | Three-year vesting: 33% annually | |
8/4/2003 | Three-year vesting: 33% annually | |
1/26/2001 | Three-year vesting: 33% annually | |
1/4/1999 | Three-year vesting: 33% annually |
Time-Based Restricted Stock / Unit Vesting Table
Grant Date | Vesting Schedule | |
10/24/2007 | Vest in full on |
10/1/2007 |
6/1/2007 |
5/1/2007 |
3/1/2007 | ||
9/5/2005 | Three-year cliff vesting: 100% | |
8/8/2005 | Four-year vesting: 25% annually | |
3/1/2005 | Four-year vesting: 25% annually | |
2/1/2005 | Three-year cliff vesting: 100% |
47
Performance-Based Restricted Stock / Unit Vesting Table
Grant Date | Vesting Schedule | |
10/24/2007 | Vest if specified performance conditions are satisfied, as approved by the | |
10/1/2007 | Vest if specified performance conditions are satisfied, as approved by the Committee | |
3/1/2007 | Vest if specified performance conditions are satisfied, as approved by the Committee |
20062007 Option Exercises and Stock Vested Table
Option Awards | Stock Awards | |||||||
Name (a) | Number of (#) (b) | Value ($) (c) | Number of (d) | Value ($) (e) | ||||
William Nuti | 0 | — | 21,250 | 695,831 | ||||
Peter Bocian | 18,608 | 397,529 | 2,009 | 79,928 | ||||
Michael Koehler | 35,668 | 787,344 | 31,869 | 1,259,208 | ||||
Malcolm Collins | 0 | — | 0 | — | ||||
Christine Wallace | 8,000 | 210,149 | 1,096 | 43,604 |
The table that follows shows each Named Executive Officer’s option exercises and restricted stock vestings during 2007. All shares exercised or vested prior to the Spin-Off have been converted in the table above using the NCR conversion ratio in order to present comparable data.
Option Awards | Stock Awards | |||||||
Name (a) | Number of (b) | Value Realized on Exercise ($) (c) | Number of (d) | Value Realized on Vesting ($) (e) | ||||
Nuti, William | — | — | 141,681 | 3,544,323 | ||||
Bocian, Peter | 92,749 | 1,159,315 | 4,358 | 92,675 | ||||
Fishman, Robert | — | — | 861 | 22,110 | ||||
Collins, Malcolm | — | — | 45,829 | 1,176,889 | ||||
Lieb, Peter | — | — | 27,364 | 702,708 | ||||
Wallace, Christine | — | — | 19,003 | 476,187 | ||||
Koehler, Michael | — | — | 4,054 | 86,217 |
Pension Benefits
NCR maintains severalThe table below this discussion summarizes the present value of accrued benefits for all pension plans that provide benefits for certain ofwhich our Named Executive Officers.Officers are eligible.
Starting in 2004, we began transitioning our U.S. retirement program from a defined benefit to a defined contribution structure. In 2004, NCR closed its U.S. pension plans to new participants and froze the pension benefits for existing U.S. participants under the age of 40. Effective December 31, 2006, these plans were frozen for all of the remaining participants, including the Named Executive Officers. Freezing the plans means that, while participants retain the pension benefits already accrued, no additional contributions will be made by the Company after the effective date of the freeze. At the same time, we increased our matching contribution to our Section 401(k) savings plan. The changes to the defined benefit pension plans and the enhancement to the Section 401(k) plans were designed to provide a valued benefit to our employees while balancing our need to manage costs, be more competitive and optimize stockholder value.
Messrs. Bocian, Koehler and KoehlerFishman and Ms. Wallace are the only Named Executive Officers who are participants in NCR’seligible for benefits under our defined benefit pension plans. Mr.Because Messrs. Nuti is not eligible for any pension benefits atand Lieb joined NCR asafter the U.S. pension plans were alreadyhad been closed to new participants, upon his becoming employed by NCR. they are not eligible for benefits under our defined benefit pension plans.
Mr. Collins is a participantemployed in the U.K., and participates in the U.K. Defined Contribution Pension, which is a defined contribution plan. He is not a participant in the U.K. pension plan, which was closed to participants in 2004.2004, prior to him joining NCR.
48
NCR Pension Plan
The NCR Pension Plan is a non-contributory, qualified pension plan that previously covered all NCR employees based in the United States.U.S. The NCR Pension Plan pays a monthly pension benefit and aPensionPlusa PensionPlus benefit, each of which vests after the earlier of fivethree years of service or attaining age 65. The full monthly pension benefit may begin at age 62, but may be started between age 55 and 62 in a reduced amount at the option of the participant after the participant has terminated employment. The PensionPlus benefit may be taken as a lump sum after termination of employment, or may be used to increase the monthly pension benefit.
The monthly pension benefit is computed by multiplying the following three items: (1) the participant’s years of service with NCR, (2) a factor between 1.4%1.3 percent and 1.7%,1.7 percent, depending on the participant’s total years of service, and (3) the participant’s modified average pay. Modified average pay is the average annual base pay and bonus received during a participant’s career, with an adjustment to pay for earlier years when earnings typically were less. The PensionPlus benefit is computed as an account balance, although the account is for bookkeeping purposes only. The plan allocates to a participant’s account each month 1 1/2% (3%1.5 percent (three percent in the case of employees hired on and after June 1, 2002) of the participant’s compensation for such month, and also provides monthly interest credits on the participant’s account balance. These
38
interest credits will continue despite the plan being frozen, as long as the participant remains an employee of NCR. See Note 9 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006,2007, for a discussion of the relevant assumptions used in quantifying the present value of the current accrued benefit as reported in the Pension Benefits Table.
NCR Nonqualified Excess Plan
NCR also maintains the NCR Nonqualified Excess Plan (the “Excess Plan”), which pays the additional pension benefits that would be paid under the NCR Pension Plan if certain federal limits on the amount of pay that may be considered under the NCR Pension Plan were not in effect. Benefits are calculated in the same way as under the NCR Pension Plan, and vesting provisions are the same.benefits vest after the earlier of five years of service or attaining age 65. However, if the participant terminates from NCR prior to reaching age 55, the entire benefit is forfeited. See Note 9 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006,2007, for a discussion of the relevant assumptions used in quantifying the present value of the current accrued benefit as reported in the Pension Benefits Table. Messrs. Bocian and Koehler and Ms. Wallace are participants in the Excess Plan.Plan, although Mr. Bocian forfeited his Excess Plan Benefits upon his termination.
Supplemental Retirement Plans
NCR also maintains a supplemental retirement plan for senior managers called the Retirement Plan for Officers of NCR (the “Officer Plan”). This plan covers senior managers appointed to specified executive levels after November 30, 1988. Messrs. Bocian and Koehler and Ms. Wallace are participants in the Officer Plan.
The Officer Plan pays monthly benefits in an amount equal to 2.5%2.5 percent of career average monthly pay for service after becoming a plan participant and vests after the earlier of five years of service or attaining age 65. The full monthly pension benefit may begin at age 62, but may be started between age 55 and 62 in a reduced amount at the option of the participant after the participant has terminated employment. See Note 9 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006,2007, for a discussion of the relevant assumptions used in quantifying the present value of the current accrued benefit as reported in the Pension Benefits Table.
3949
20062007 Pension Benefits Table
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | |||
Nuti, William(1) | N/A | N/A | N/A | |||
Bocian, Peter(2) | NCR Pension Plan | 24 | 341,898 | |||
Officer Plan | 4.9 | 157,046 | ||||
Excess Plan | 24 | 92,792 | ||||
Fishman, Robert | NCR Pension Plan | 13.6 | 115,193 | |||
Collins, Malcolm(1)(3) | N/A | N/A | N/A | |||
Lieb, Peter(1) | N/A | N/A | N/A | |||
Wallace, Christine(2) | NCR Pension Plan | 27.2 | 473,502 | |||
Officer Plan | 11.1 | 375,338 | ||||
Excess Plan | 27.2 | 204,189 | ||||
Koehler, Michael(2) | NCR Pension Plan | 31.3 | 527,341 | |||
Officer Plan | 12.2 | 435,938 | ||||
Excess Plan | 31.3 | 334,427 |
(1) Messrs. Nuti and Lieb are not participants in, nor eligible with respect to, any of the Company’s pension plans because all of the plans were closed to new participants prior to their respective employment dates.
(2) Pursuant to the terms of the Officer Plan, Messrs. Bocian and Koehler and Ms. Wallace have each been credited with fewer years of service under the Officer Plan than his or her years of service with the Company because they did not become eligible for Officer Plan participation until the attainment of executive status.
(3) Mr. Collins participates in a defined contribution plan in the U.K.
50
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The tables below show the amount of compensation that would have been paid, and/or benefits that would have been provided to each of the Named Executive Officers in the event of termination of such executive’s employment as of December 31, 2007. A description of death and disability benefits and treatment of equity upon termination is provided below. See “Retirement Benefits,” “Change in Control Arrangements” and “Severance Benefits” in Sections II.F.4, II.F.5 and II.F.6, respectively, of theCompensation Discussion and Analysis for a description of such items.
The plans and agreements discussed in “Change in Control Arrangements” and “Severance Benefits” in theCompensation Discussion and Analysis include the following material conditions to the receipt of compensation and/or benefits. In the case of the Change in Control Severance Plan, the compensation and/or benefits provided to each participant are based upon a “tier” level and conditioned upon such participant’s execution of a restrictive covenant and release agreement that includes, among other items, an eighteen-month non-competition, non-solicitation and confidentiality provision.
The Change in Control Severance Plan provides for the following benefits upon the satisfaction of the double-trigger described in Section II.F.5 of thisCompensation Discussion and Analysis related to the change in control of the Company:
A payment equal to 300 percent of the executive’s annual base salary and targeted bonus opportunity under the Management Incentive Plan for Tier I, and 200 percent of the executive’s annual base salary and targeted bonus opportunity under the Management Incentive Plan for Tier II;
A payment equal to a pro rata portion of the current year’s target bonus opportunity under the Management Incentive Plan , based on the number of days in the year prior to the date of termination;
Accelerated vesting of all performance-based and time-based restricted stock, stock units and options;
Medical and dental benefits and life insurance coverage for the executive and his or her dependents at the same level he or she received during his or her employment for a period of three years for Tier I and two years for Tier II;
Outplacement assistance for a period of one year; and
An excise tax gross-up, if applicable.
In the case of severance agreements, it is generally our practice to negotiate the terms of such agreements, when needed, with each of our most senior executives, including our Named Executive Officers. Such negotiated agreements typically include non-competition, non-solicitation and confidentiality provisions. A description of the U.S. and U.K. reduction-in-force plans and the severance arrangement with Mr. Nuti, each of which was previously referenced in “Severance Benefits” in theCompensation Discussion and Analysis, is provided below.
The U.S. Reduction-in-Force Plan provides our U.S. employees with one week of separation pay for each full year of service (employees with one year of service or less receive a minimum of two weeks of separation pay, while employees with either two or three full years of service receive a minimum of four weeks of separation pay). Payments are capped at an amount equal to 26 weeks of separation pay. The plan also provides employees with outplacement services to assist them with securing new employment and the continuation of Company-subsidized medical coverage for them and their dependents for up to 26 weeks. Finally, the plan gives us the discretion to increase the number of weeks of separation pay that an employee receives. It is generally our practice to negotiate such terms with each of our most senior executives, including our Named Executive Officers.
51
Our U.K. Reduction-in-Force Plan is statutorily prescribed and provides our U.K. employees with a half of a week of pay per year of service for service provided during the time the employee was between 18 and 21 years old, plus one week of pay per year of service for service provided during the time the employee was between 22 and 40 years old, plus one and a half weeks of pay per year of service for service provided during the time the employee was more than 40 years old, up to a total limit of 30 weeks of pay with a weekly pay limit in 2007 of £310. Our U.K. plan includes, in addition to the statutorily prescribed component, a discretionary severance benefit that allows the Company to provide an additional severance benefit of two weeks of pay per year of service up to a maximum of 23 years of service. Like the U.S. plan, the U.K. plan permits us to exercise our discretion to adjust Mr. Collins’ separation pay if we consider it appropriate.
We entered into a letter agreement dated as of July 29, 2005 with Mr. Nuti when he became our CEO. The compensation and benefits to be provided pursuant to the terms of the letter agreement are conditioned upon Mr. Nuti’s compliance with an eighteen-month non-competition and non-solicitation provision, and a confidentiality provision. The terms of the arrangement, which were determined through the negotiation process, provide that in the event we terminate his employment (other than for cause) or if he were to voluntarily terminate employment for good reason, he would receive:
A payment equal to 150 percent of his annual base salary;
A payment equal to 150 percent of his targeted bonus opportunity under the Management Incentive Plan;
A payment equal to a pro rata portion of the applicable award payout under the Management Incentive Plan for the year in which the severance occurs; and
Medical benefits for himself and his dependents, equal to the level he received during his employment, for a period of 18 months.
Death and Disability Benefits
Benefits provided to Named Executive Officers under the termination scenarios of death or disability depend on the individual level of benefits chosen by the Named Executive Officer during the annual benefits enrollment process. The Named Executive Officers receive the same company-provided life insurance coverage, short-term disability coverage, and long-term disability coverage as the general NCR population. These core coverages are 200 percent of base salary for life insurance, 100 percent of base salary for two to eighteen weeks depending on years of service and 66.67 percent of base salary for the remainder of a 26-week period for short-term disability coverage, and 50 percent of base salary for the duration of an employee’s long-term disability for long-term disability coverage. Each employee has the option of choosing a higher level of coverage at his or her own expense.
52
Treatment of Equity upon Termination
Under the Stock Incentive Plan, the vesting treatment of equity awards differs based on the form of equity and the termination reason as outlined below for awards granted in 2006 and 2007. The vesting treatment described below is conditioned upon the participant’s compliance with a non-competition and non-solicitation provision of a minimum of twelve month’s duration, as well as a confidentiality provision.
Situation | Restricted Stock or Stock Units | Performance-Based Restricted Stock or Stock Units | Stock Options | |||
Death and Long-term Disability (“LTD”) for awards granted in 2006 | Award vests in full upon the date of death or LTD. | A pro rata portion of the award, calculated as of the date of death or LTD, will continue to vest and payout at the end of the performance period based on actual results. | Awards vest in full upon the date of death or LTD and are exercisable as follows: For the for the one-year period following the date of death or LTD, regardless of the expiration date. If the death or LTD occurs on or after age 55, until the earlier of the three year period or after death or LTD and the expiration date, but in no event earlier than one year following the date of death or disability. | |||
Death and Long-term Disability (“LTD”) for awards granted in 2007 | Award vests in full upon the date of death or LTD. | A pro rata portion of the award, calculated as of the date of death or LTD, will continue to vest and payout at the end of the performance period based on actual results. | Awards vest in full upon the date of death or LTD are and are exercisable as follows: If death or LTD occurs before age of 55, until the later of the one-year anniversary of the death or LTD and the Expiration Date. If death or LTD occurs on or after age 55, this Option may be exercised until the later of the third anniversary of the date of death or LTD and the Expiration Date. | |||
Retirement | Pro rata portion will become fully vested as of date of retirement. | A pro rata portion of the award, calculated as of the date of retirement, will continue to vest and payout at the end of the performance period based on actual results. | Unvested awards are forfeited. Vested awards expire the earlier of three years following retirement date or the expiration date. | |||
Termination due to Reduction in Force (“RIF”) | Pro rata portion will become fully vested as of date of RIF. | A pro rata portion of the award, calculated as of the date of RIF, will continue to vest and payout at the end of the performance period based on actual results. | Unvested awards are forfeited. Vested awards expire the earlier of 59 days after termination or the expiration date. | |||
Voluntary Resignation | Award is forfeited. | Award is forfeited. | Unvested awards are forfeited. Vested awards expire the earlier of 59 days after termination or the expiration date. |
53
Situation | Restricted Stock or Stock Units | Performance-Based Restricted Stock or Stock Units | Stock Options | |||
Involuntary Termination for Cause | Award is forfeited. | Award is forfeited. | Award is forfeited. | |||
Change in Control (“CIC”) for awards granted in 2006 | If Company assumes, and termination occurs (other than for cause or disability) within 24 months of CIC, award vests in full upon termination. If Company does not assume, award vests in full immediately prior to CIC. | If Company assumes, and termination occurs (other than for cause or disability) within 24 months of CIC, award vests in full upon termination. If Company does not assume, award vests in full immediately prior to CIC. | If Company assumes, vesting continues as scheduled and options are exercisable as set by the grant agreement. If Company assumes and termination occurs (other than for cause or voluntary termination for good reason) within 24 months after CIC, award vests in full and are exercisable the later of last date on which it would be exercisable in the absence of CIC or the first anniversary of the termination, but in no case no later than natural expiration. If Company does not assume, award vests in full immediately prior to CIC and exercise periods are not specified. |
54
Situation | Restricted Stock or Stock Units | Performance-Based Restricted Stock or Stock Units | Stock Options | |||
Change in Control (“CIC”) for awards granted in 2007 | If Company assumes and termination (other than for cause or disability, and, in the case of employees who are subject to the NCR CIC Plan and/or Severance Plan, for good reason) occurs within 24 months of CIC, award vests in full upon termination of employment. | If Company assumes and CIC occurs on or prior to the first anniversary of the grant, award vests in full at the end of the performance period at target. If Company assumes and CIC occurs after the first anniversary of the grant, award vests in full at the end of the performance period (without regard to performance after the CIC or pro-ration) based on actual performance through the end of the calendar year immediately prior to CIC. | If Company assumes, vesting continues as scheduled and are exercisable as set by the grant agreement. If Company assumes and termination occurs (voluntary or involuntary other than for cause or disability) within 24 months of CIC, award vests in full and are exercisable the earlier of the natural expiration or the first anniversary of the termination date. | |||
If Company does not assume, award vests in full immediately prior to CIC. | If Company does not assume and CIC occurs on or prior to the first anniversary of the grant, award vests in full prior to the CIC at target. If Company does not assume and CIC occurs after the first anniversary of the grant, award vests in full immediately prior to the CIC (without regard to performance after the CIC or pro-ration) based on actual performance through the end of the calendar year immediately prior to CIC. If Company assumes and termination occurs (involuntary or voluntary other than for cause or disability) within 24 months after CIC award vests according to the above provisions, as applicable, immediately upon date of termination. | If Company does not assume, award vests in full immediately prior to CIC and exercise periods are not specified. |
55
There are grants outstanding and unvested under the Management Stock Plan from the years 2005, 2004 and 2003. The vesting treatment upon termination differs based on the vehicle and the termination reason as outlined below. The vesting treatment described below is conditioned upon the participant’s compliance with a non-competition and non-solicitation provision of a minimum of eighteen month’s duration, as well as a confidentiality provision.
| Stock Options | |||||||
| ||||||||
date of death or LTD. | N/A | Award vests in full upon the date of death or LTD and are exercisable for the ten-year life of the grant. | ||||||
Retirement | ||||||||
|
| |||||||
|
| |||||||
| N/A | Award vests in full. Award may be exercised for the ten-year life of the grant. | ||||||
Termination due to Reduction in Force | Award is forfeited. | |||||||
|
| |||||||
Voluntary Resignation | Award is forfeited. |
Unvested awards are forfeited. Vested awards expire the earlier of one day prior to 60 days post termination or the expiration date. | ||||||
Change-in- Control | Award is forfeited. | N/A | Awards vest in |
56
2007 Potential Payments Upon Termination and Change in Control Table
The table that follows shows the estimated amounts each Named Executive Officer would have received upon the occurrence of the events listed in the table.
Change in Control / Severance | Reduction-in-Force (5),(6) | Death | Disability | Voluntary Resignation | ||||||||||||||||
Nuti, William | ||||||||||||||||||||
Cash | $ | 6,000,000 | $ | 3,000,000 | N/A | N/A | N/A | |||||||||||||
Prorata Bonus | 2,368,432 | 2,368,432 | 2,368,432 | 2,368,432 | N/A | |||||||||||||||
Stock Option(1) | 8,637,620 | 2,440,400 | 8,637,620 | 8,637,620 | N/A | |||||||||||||||
Restricted Stock & Performance-Based Shares(1) | 7,902,760 | 884,731 | 884,731 | 884,731 | N/A | |||||||||||||||
Welfare Benefits | 40,377 | 14,345 | N/A | N/A | N/A | |||||||||||||||
Excise Tax Gross-Up(1),(2),(3),(4) | 7,669,133 | N/A | N/A | N/A | N/A | |||||||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | |||||||||||||||
Life Insurance(7) | N/A | N/A | 1,200,000 | N/A | N/A | |||||||||||||||
Disability Payments(8) | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
TOTAL | $ | 32,628,322 | $ | 8,717,908 | $ | 13,090,783 | $ | 11,890,783 | $ | — | ||||||||||
Bocian, Peter | ||||||||||||||||||||
Cash | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Prorata Bonus | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Stock Option | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Restricted Stock & Performance-Based Shares | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Welfare Benefits | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Excise Tax Gross-Up | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Outplacement | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Life Insurance | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
TOTAL | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Fishman, Robert | ||||||||||||||||||||
Cash | $ | 1,260,000 | $ | 120,000 | N/A | N/A | N/A | |||||||||||||
Prorata Bonus | 270,318 | 270,318 | 270,318 | 270,318 | N/A | |||||||||||||||
Stock Option | 80,142 | — | 80,142 | 80,142 | — | |||||||||||||||
Restricted Stock & Performance-Based Shares | 271,281 | 26,969 | 26,969 | 26,969 | N/A | |||||||||||||||
Welfare Benefits | 35,894 | 4,554 | N/A | N/A | N/A | |||||||||||||||
Excise Tax Gross-Up | 804,353 | N/A | N/A | N/A | N/A | |||||||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | |||||||||||||||
Life Insurance | N/A | N/A | 1,200,000 | N/A | N/A | |||||||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
TOTAL | $ | 2,731,988 | $ | 431,841 | $ | 1,577,429 | $ | 377,429 | $ | — | ||||||||||
Collins, Malcolm | ||||||||||||||||||||
Cash | $ | 2,771,627 | $ | 263,965 | N/A | N/A | N/A | |||||||||||||
Prorata Bonus | 575,489 | 575,489 | 575,489 | 575,489 | N/A | |||||||||||||||
Stock Option | 958,208 | — | 958,208 | 958,208 | — | |||||||||||||||
Restricted Stock & Performance-Based Shares | 1,720,856 | 131,539 | 131,539 | 131,539 | N/A | |||||||||||||||
Welfare Benefits | 7,664 | 889 | N/A | N/A | N/A | |||||||||||||||
Excise Tax Gross-Up | 1,998,408 | N/A | N/A | N/A | N/A | |||||||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | |||||||||||||||
Life Insurance | N/A | N/A | 1,200,000 | N/A | N/A | |||||||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
TOTAL | $ | 8,042,252 | $ | 981,882 | $ | 2,865,236 | $ | 1,665,236 | $ | — | ||||||||||
57
Change in Control / Severance | Reduction-in-Force (5),(6) | Death | Disability | Voluntary Resignation | |||||||||||
Lieb, Peter | |||||||||||||||
Cash | $ | 1,296,000 | $ | 202,500 | N/A | N/A | N/A | ||||||||
Prorata Bonus | 373,029 | 373,029 | 373,029 | 373,029 | N/A | ||||||||||
Stock Option | 691,333 | — | 691,333 | 691,333 | — | ||||||||||
Restricted Stock & Performance-Based Shares | 1,199,805 | 112,609 | 112,609 | 112,609 | N/A | ||||||||||
Welfare Benefits | 2,680 | — | N/A | N/A | N/A | ||||||||||
Excise Tax Gross-Up | 1,094,524 | N/A | N/A | N/A | N/A | ||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | ||||||||||
Life Insurance | N/A | N/A | 1,200,000 | N/A | N/A | ||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | ||||||||||
TOTAL | $ | 4,667,371 | $ | 698,138 | $ | 2,376,971 | $ | 1,176,971 | $ | — | |||||
Wallace, Christine | |||||||||||||||
Cash | $ | 1,995,000 | $ | 190,000 | N/A | N/A | N/A | ||||||||
Prorata Bonus | 515,841 | 515,841 | 515,841 | 515,841 | N/A | ||||||||||
Stock Option | 504,230 | — | 504,230 | 504,230 | — | ||||||||||
Restricted Stock & Performance-Based Shares | 1,590,499 | 116,967 | 116,967 | 116,967 | N/A | ||||||||||
Welfare Benefits | 37,558 | 4,554 | N/A | N/A | N/A | ||||||||||
Excise Tax Gross-Up | 1,188,919 | N/A | N/A | N/A | N/A | ||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | ||||||||||
Life Insurance | N/A | N/A | 1,200,000 | N/A | N/A | ||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | ||||||||||
TOTAL | $ | 5,842,047 | $ | 837,362 | $ | 2,337,038 | $ | 1,137,038 | $ | — | |||||
Koehler, Michael(9) | |||||||||||||||
Cash | N/A | N/A | N/A | N/A | N/A | ||||||||||
Prorata Bonus | N/A | N/A | N/A | N/A | N/A | ||||||||||
Stock Option | N/A | N/A | N/A | N/A | N/A | ||||||||||
Restricted Stock & Performance-Based Shares | N/A | N/A | N/A | N/A | N/A | ||||||||||
Welfare Benefits | N/A | N/A | N/A | N/A | N/A | ||||||||||
Excise Tax Gross-Up | N/A | N/A | N/A | N/A | N/A | ||||||||||
Outplacement | N/A | N/A | N/A | N/A | N/A | ||||||||||
Life Insurance | N/A | N/A | N/A | N/A | N/A | ||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | ||||||||||
TOTAL | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
(1) Equity valuations assume closing price of NCR stock on December 31, 2007 of $25.10.
(2) For purposes of calculating the excise tax gross up, the parachute value of stock options was calculated using the Black-Scholes option valuation methodology and the following assumptions:
(a) Volatility – 32.24%
(b) Dividend Yield – 0%
(c) Risk Free Rate – 4.48%
(d) Option Term – expected option term of 5.0 years less elapsed time since option grant or one year (depending on stock plan in effect at grant)
(3) Discount rates to determine the present values of the accelerated benefit of stock options and restricted shares for the parachute calculation were:
(a) Short Term – 4.61%
(b) Mid Term – 4.91%
(c) Long Term – 5.60%
58
(4) The excise tax gross up is calculated using a 20 percent excise tax rate and a 40 percent individual income tax rate.
(5) Cash severance payment is subject to individual negotiation. The amount provided is an estimate.
(6) The payments reported in these columns include only unvested awards. Vested equity is reported in the Outstanding Equity Awards at Fiscal Year-End Table. Equity would accelerate upon termination for good reason as well.
(7) Proceeds would be payable by a third-party insurer.
(8) Named Executive Officers in the U.S. are provided with core disability payments as discussed under “Death and Disability Benefits” on page 52. Messrs. Nuti, Fishman, Lieb and Koehler and Ms. Wallace each opted for core coverage for 2007. Mr. Collins would have received GBP 112,600 (approximately $227,797) per year as long-term disability benefits.
(9) Mr. Koehler earned nine months of his award payable under the Management Incentive Plan during the time he was employed with NCR. In addition, his equity was converted to awards based on Teradata common stock.
59
DIRECTOR COMPENSATION
Pursuant to authority granted to it by NCR’s Board of Directors, the Committee on Directors and Governance (the “Directors Committee”) adopted the NCR Director Compensation Program oneffective as of April 26, 2006.24, 2007. The Director Compensation Program provides for the payment of annual retainers, annual equity grants and initial equity grants to non-employee members of NCR’s Board of Directors. Mr. Nuti does not receive remuneration for his service as a directorChairman of the Board of NCR.
Annual Retainer
UnderPrior to the Spin-Off (the period from January 1, 2007 to September 30, 2007), under the Director Compensation Program adopted on April 26, 2006,Programs in effect in 2007, each non-employee member of NCR’s Board receivesreceived an annual retainer of $75,000. The Chairman of the Board (Mr. Ringler) receivesreceived an additional retainer of $165,000, and each director serving on the Audit Committee receivesreceived an additional retainer of $5,000. The Chair of the Committee on Directors Committeeand Governance (Mr. Prahalad) receivesreceived an additional retainer of $9,000, and the Chairs of the Audit Committee (Mr. Boykin) and Compensation and Human Resource Committee (Ms. Levinson) each receivereceived an additional retainer of $12,000. PriorAll retainers were paid on a prorated basis.
Following the Spin-Off, effective as of October 1, 2007, the following changes occurred. Messrs. Ringler, Stavropolous and Lund ceased to serve on the adoptionBoard of Directors of NCR in order to serve on the Board of Directors of Teradata Corporation. Mr. Nuti was elected as Chairman of the newBoard and received no additional remuneration for his service in such capacity. Ms. Levinson was elected Independent Lead Director Compensation Program, NCR’s previous director compensation program provided forof the payment ofBoard and received an additional annual retainer as well as meeting fees and committee chair fees.of $75,000 for such service. All other director compensation-related matters were unchanged following the Spin-Off.
Prior to January 1 of each year, a director may elect to receive all or a portion of his or her annual retainer in NCR common stock instead of cash. In addition, a director may elect to defer receipt of shares of common stock payable in lieu of cash. For awards receivedBeginning in 2006, directors could elect to receive payments2007, deferral elections for deferred stock in NCR common stock or in cash. Beginningfor retainers made in 2007 payments forand after will be paid out only in cash unless the director elects in writing, delivered to the Company no later than 60 days prior to the date of distribution (or the date of the first distribution, if made in installments), that all or any designated portion of the deferred stock mayaccount be paid only in cash.shares of NCR common stock.
Initial Equity GrantDeath and Disability Benefits
Benefits provided to Named Executive Officers under the termination scenarios of death or disability depend on the individual level of benefits chosen by the Named Executive Officer during the annual benefits enrollment process. The Named Executive Officers receive the same company-provided life insurance coverage, short-term disability coverage, and long-term disability coverage as the general NCR population. These core coverages are 200 percent of base salary for life insurance, 100 percent of base salary for two to eighteen weeks depending on years of service and 66.67 percent of base salary for the remainder of a 26-week period for short-term disability coverage, and 50 percent of base salary for the duration of an employee’s long-term disability for long-term disability coverage. Each employee has the option of choosing a higher level of coverage at his or her own expense.
52
Treatment of Equity upon Termination
Under the Stock Incentive Plan, the vesting treatment of equity awards differs based on the form of equity and the termination reason as outlined below for awards granted in 2006 and 2007. The vesting treatment described below is conditioned upon the participant’s compliance with a non-competition and non-solicitation provision of a minimum of twelve month’s duration, as well as a confidentiality provision.
Situation | Restricted Stock or Stock Units | Performance-Based Restricted Stock or Stock Units | Stock Options | |||
Death and Long-term Disability (“LTD”) for awards granted in 2006 | Award vests in full upon the date of death or LTD. | A pro rata portion of the award, calculated as of the date of death or LTD, will continue to vest and payout at the end of the performance period based on actual results. | Awards vest in full upon the date of death or LTD and are exercisable as follows: For the for the one-year period following the date of death or LTD, regardless of the expiration date. If the death or LTD occurs on or after age 55, until the earlier of the three year period or after death or LTD and the expiration date, but in no event earlier than one year following the date of death or disability. | |||
Death and Long-term Disability (“LTD”) for awards granted in 2007 | Award vests in full upon the date of death or LTD. | A pro rata portion of the award, calculated as of the date of death or LTD, will continue to vest and payout at the end of the performance period based on actual results. | Awards vest in full upon the date of death or LTD are and are exercisable as follows: If death or LTD occurs before age of 55, until the later of the one-year anniversary of the death or LTD and the Expiration Date. If death or LTD occurs on or after age 55, this Option may be exercised until the later of the third anniversary of the date of death or LTD and the Expiration Date. | |||
Retirement | Pro rata portion will become fully vested as of date of retirement. | A pro rata portion of the award, calculated as of the date of retirement, will continue to vest and payout at the end of the performance period based on actual results. | Unvested awards are forfeited. Vested awards expire the earlier of three years following retirement date or the expiration date. | |||
Termination due to Reduction in Force (“RIF”) | Pro rata portion will become fully vested as of date of RIF. | A pro rata portion of the award, calculated as of the date of RIF, will continue to vest and payout at the end of the performance period based on actual results. | Unvested awards are forfeited. Vested awards expire the earlier of 59 days after termination or the expiration date. | |||
Voluntary Resignation | Award is forfeited. | Award is forfeited. | Unvested awards are forfeited. Vested awards expire the earlier of 59 days after termination or the expiration date. |
53
Situation | Restricted Stock or Stock Units | Performance-Based Restricted Stock or Stock Units | Stock Options | |||
Involuntary Termination for Cause | Award is forfeited. | Award is forfeited. | Award is forfeited. | |||
Change in Control (“CIC”) for awards granted in 2006 | If Company assumes, and termination occurs (other than for cause or disability) within 24 months of CIC, award vests in full upon termination. If Company does not assume, award vests in full immediately prior to CIC. | If Company assumes, and termination occurs (other than for cause or disability) within 24 months of CIC, award vests in full upon termination. If Company does not assume, award vests in full immediately prior to CIC. | If Company assumes, vesting continues as scheduled and options are exercisable as set by the grant agreement. If Company assumes and termination occurs (other than for cause or voluntary termination for good reason) within 24 months after CIC, award vests in full and are exercisable the later of last date on which it would be exercisable in the absence of CIC or the first anniversary of the termination, but in no case no later than natural expiration. If Company does not assume, award vests in full immediately prior to CIC and exercise periods are not specified. |
54
Situation | Restricted Stock or Stock Units | Performance-Based Restricted Stock or Stock Units | Stock Options | |||
Change in Control (“CIC”) for awards granted in 2007 | If Company assumes and termination (other than for cause or disability, and, in the case of employees who are subject to the NCR CIC Plan and/or Severance Plan, for good reason) occurs within 24 months of CIC, award vests in full upon termination of employment. | If Company assumes and CIC occurs on or prior to the first anniversary of the grant, award vests in full at the end of the performance period at target. If Company assumes and CIC occurs after the first anniversary of the grant, award vests in full at the end of the performance period (without regard to performance after the CIC or pro-ration) based on actual performance through the end of the calendar year immediately prior to CIC. | If Company assumes, vesting continues as scheduled and are exercisable as set by the grant agreement. If Company assumes and termination occurs (voluntary or involuntary other than for cause or disability) within 24 months of CIC, award vests in full and are exercisable the earlier of the natural expiration or the first anniversary of the termination date. | |||
If Company does not assume, award vests in full immediately prior to CIC. | If Company does not assume and CIC occurs on or prior to the first anniversary of the grant, award vests in full prior to the CIC at target. If Company does not assume and CIC occurs after the first anniversary of the grant, award vests in full immediately prior to the CIC (without regard to performance after the CIC or pro-ration) based on actual performance through the end of the calendar year immediately prior to CIC. If Company assumes and termination occurs (involuntary or voluntary other than for cause or disability) within 24 months after CIC award vests according to the above provisions, as applicable, immediately upon date of termination. | If Company does not assume, award vests in full immediately prior to CIC and exercise periods are not specified. |
55
There are grants outstanding and unvested under the Management Stock Plan from the years 2005, 2004 and 2003. The vesting treatment upon termination differs based on the vehicle and the termination reason as outlined below. The vesting treatment described below is conditioned upon the participant’s compliance with a non-competition and non-solicitation provision of a minimum of eighteen month’s duration, as well as a confidentiality provision.
Situation | Restricted Stock | Performance-Based Restricted Stock | Stock Options | |||
Death and Long-term Disability | Award vests in full upon date of death or LTD. | N/A | Award vests in full upon the date of death or LTD and are exercisable for the ten-year life of the grant. | |||
Retirement | Award is forfeited. | N/A | Award vests in full. Award may be exercised for the ten-year life of the grant. | |||
Termination due to Reduction in Force | Award is forfeited. | N/A | Unvested awards are forfeited. Vested awards expire the earlier of one day prior to 60 days post termination or the expiration date. | |||
Voluntary Resignation | Award is forfeited. | N/A | Unvested awards are forfeited. Vested awards expire the earlier of one day prior to 60 days post termination or the expiration date. | |||
Involuntary Termination for Cause | Award is forfeited. | N/A | Unvested awards are forfeited. Vested awards expire the earlier of one day prior to 60 days post termination or the expiration date. | |||
Change-in- Control | Award is forfeited. | N/A | Awards vest in full upon the date of CIC. Term is determined by the succeeding company. |
56
2007 Potential Payments Upon Termination and Change in Control Table
The table that follows shows the estimated amounts each Named Executive Officer would have received upon the occurrence of the events listed in the table.
Change in Control / Severance | Reduction-in-Force (5),(6) | Death | Disability | Voluntary Resignation | ||||||||||||||||
Nuti, William | ||||||||||||||||||||
Cash | $ | 6,000,000 | $ | 3,000,000 | N/A | N/A | N/A | |||||||||||||
Prorata Bonus | 2,368,432 | 2,368,432 | 2,368,432 | 2,368,432 | N/A | |||||||||||||||
Stock Option(1) | 8,637,620 | 2,440,400 | 8,637,620 | 8,637,620 | N/A | |||||||||||||||
Restricted Stock & Performance-Based Shares(1) | 7,902,760 | 884,731 | 884,731 | 884,731 | N/A | |||||||||||||||
Welfare Benefits | 40,377 | 14,345 | N/A | N/A | N/A | |||||||||||||||
Excise Tax Gross-Up(1),(2),(3),(4) | 7,669,133 | N/A | N/A | N/A | N/A | |||||||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | |||||||||||||||
Life Insurance(7) | N/A | N/A | 1,200,000 | N/A | N/A | |||||||||||||||
Disability Payments(8) | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
TOTAL | $ | 32,628,322 | $ | 8,717,908 | $ | 13,090,783 | $ | 11,890,783 | $ | — | ||||||||||
Bocian, Peter | ||||||||||||||||||||
Cash | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Prorata Bonus | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Stock Option | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Restricted Stock & Performance-Based Shares | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Welfare Benefits | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Excise Tax Gross-Up | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Outplacement | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Life Insurance | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
TOTAL | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Fishman, Robert | ||||||||||||||||||||
Cash | $ | 1,260,000 | $ | 120,000 | N/A | N/A | N/A | |||||||||||||
Prorata Bonus | 270,318 | 270,318 | 270,318 | 270,318 | N/A | |||||||||||||||
Stock Option | 80,142 | — | 80,142 | 80,142 | — | |||||||||||||||
Restricted Stock & Performance-Based Shares | 271,281 | 26,969 | 26,969 | 26,969 | N/A | |||||||||||||||
Welfare Benefits | 35,894 | 4,554 | N/A | N/A | N/A | |||||||||||||||
Excise Tax Gross-Up | 804,353 | N/A | N/A | N/A | N/A | |||||||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | |||||||||||||||
Life Insurance | N/A | N/A | 1,200,000 | N/A | N/A | |||||||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
TOTAL | $ | 2,731,988 | $ | 431,841 | $ | 1,577,429 | $ | 377,429 | $ | — | ||||||||||
Collins, Malcolm | ||||||||||||||||||||
Cash | $ | 2,771,627 | $ | 263,965 | N/A | N/A | N/A | |||||||||||||
Prorata Bonus | 575,489 | 575,489 | 575,489 | 575,489 | N/A | |||||||||||||||
Stock Option | 958,208 | — | 958,208 | 958,208 | — | |||||||||||||||
Restricted Stock & Performance-Based Shares | 1,720,856 | 131,539 | 131,539 | 131,539 | N/A | |||||||||||||||
Welfare Benefits | 7,664 | 889 | N/A | N/A | N/A | |||||||||||||||
Excise Tax Gross-Up | 1,998,408 | N/A | N/A | N/A | N/A | |||||||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | |||||||||||||||
Life Insurance | N/A | N/A | 1,200,000 | N/A | N/A | |||||||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
TOTAL | $ | 8,042,252 | $ | 981,882 | $ | 2,865,236 | $ | 1,665,236 | $ | — | ||||||||||
57
Change in Control / Severance | Reduction-in-Force (5),(6) | Death | Disability | Voluntary Resignation | |||||||||||
Lieb, Peter | |||||||||||||||
Cash | $ | 1,296,000 | $ | 202,500 | N/A | N/A | N/A | ||||||||
Prorata Bonus | 373,029 | 373,029 | 373,029 | 373,029 | N/A | ||||||||||
Stock Option | 691,333 | — | 691,333 | 691,333 | — | ||||||||||
Restricted Stock & Performance-Based Shares | 1,199,805 | 112,609 | 112,609 | 112,609 | N/A | ||||||||||
Welfare Benefits | 2,680 | — | N/A | N/A | N/A | ||||||||||
Excise Tax Gross-Up | 1,094,524 | N/A | N/A | N/A | N/A | ||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | ||||||||||
Life Insurance | N/A | N/A | 1,200,000 | N/A | N/A | ||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | ||||||||||
TOTAL | $ | 4,667,371 | $ | 698,138 | $ | 2,376,971 | $ | 1,176,971 | $ | — | |||||
Wallace, Christine | |||||||||||||||
Cash | $ | 1,995,000 | $ | 190,000 | N/A | N/A | N/A | ||||||||
Prorata Bonus | 515,841 | 515,841 | 515,841 | 515,841 | N/A | ||||||||||
Stock Option | 504,230 | — | 504,230 | 504,230 | — | ||||||||||
Restricted Stock & Performance-Based Shares | 1,590,499 | 116,967 | 116,967 | 116,967 | N/A | ||||||||||
Welfare Benefits | 37,558 | 4,554 | N/A | N/A | N/A | ||||||||||
Excise Tax Gross-Up | 1,188,919 | N/A | N/A | N/A | N/A | ||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | ||||||||||
Life Insurance | N/A | N/A | 1,200,000 | N/A | N/A | ||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | ||||||||||
TOTAL | $ | 5,842,047 | $ | 837,362 | $ | 2,337,038 | $ | 1,137,038 | $ | — | |||||
Koehler, Michael(9) | |||||||||||||||
Cash | N/A | N/A | N/A | N/A | N/A | ||||||||||
Prorata Bonus | N/A | N/A | N/A | N/A | N/A | ||||||||||
Stock Option | N/A | N/A | N/A | N/A | N/A | ||||||||||
Restricted Stock & Performance-Based Shares | N/A | N/A | N/A | N/A | N/A | ||||||||||
Welfare Benefits | N/A | N/A | N/A | N/A | N/A | ||||||||||
Excise Tax Gross-Up | N/A | N/A | N/A | N/A | N/A | ||||||||||
Outplacement | N/A | N/A | N/A | N/A | N/A | ||||||||||
Life Insurance | N/A | N/A | N/A | N/A | N/A | ||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | ||||||||||
TOTAL | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
(1) Equity valuations assume closing price of NCR stock on December 31, 2007 of $25.10.
(2) For purposes of calculating the excise tax gross up, the parachute value of stock options was calculated using the Black-Scholes option valuation methodology and the following assumptions:
(a) Volatility – 32.24%
(b) Dividend Yield – 0%
(c) Risk Free Rate – 4.48%
(d) Option Term – expected option term of 5.0 years less elapsed time since option grant or one year (depending on stock plan in effect at grant)
(3) Discount rates to determine the present values of the accelerated benefit of stock options and restricted shares for the parachute calculation were:
(a) Short Term – 4.61%
(b) Mid Term – 4.91%
(c) Long Term – 5.60%
58
(4) The excise tax gross up is calculated using a 20 percent excise tax rate and a 40 percent individual income tax rate.
(5) Cash severance payment is subject to individual negotiation. The amount provided is an estimate.
(6) The payments reported in these columns include only unvested awards. Vested equity is reported in the Outstanding Equity Awards at Fiscal Year-End Table. Equity would accelerate upon termination for good reason as well.
(7) Proceeds would be payable by a third-party insurer.
(8) Named Executive Officers in the U.S. are provided with core disability payments as discussed under “Death and Disability Benefits” on page 52. Messrs. Nuti, Fishman, Lieb and Koehler and Ms. Wallace each opted for core coverage for 2007. Mr. Collins would have received GBP 112,600 (approximately $227,797) per year as long-term disability benefits.
(9) Mr. Koehler earned nine months of his award payable under the Management Incentive Plan during the time he was employed with NCR. In addition, his equity was converted to awards based on Teradata common stock.
59
DIRECTOR COMPENSATION
Pursuant to authority granted to it by NCR’s Board of Directors, the Committee on Directors and Governance (the “Directors Committee”) adopted the NCR Director Compensation Program effective as of April 24, 2007. The Director Compensation Program provides that uponfor the payment of annual retainers, annual equity grants and initial electionequity grants to non-employee members of NCR’s Board of Directors. Mr. Nuti does not receive remuneration for his service as Chairman of the Board eachnon-employee director will receive a grant of restricted stock or restricted stock units. A director may elect to defer receipt of the shares of common stock that would otherwise be received upon vesting of restricted stock or restricted stock units. The restricted stock units vest in four equal quarterly installments commencing three months after the grant date. Payment is made only in NCR common stock. Upon his election to the Board in 2006, Mr. Daichendt received an initial equity award valued at $40,000, which consisted of 911 restricted stock units.NCR.
Annual Equity GrantRetainer
ThePrior to the Spin-Off (the period from January 1, 2007 to September 30, 2007), under the Director Compensation Program also provides thatPrograms in effect in 2007, each non-employee member of NCR’s Board received an annual retainer of $75,000. The Chairman of the Board (Mr. Ringler) received an additional retainer of $165,000, and each director serving on the dateAudit Committee received an additional retainer of $5,000. The Chair of the Committee on Directors and Governance (Mr. Prahalad) received an additional retainer of $9,000, and the Chairs of the Audit Committee (Mr. Boykin) and Compensation and Human Resource Committee (Ms. Levinson) each received an additional retainer of $12,000. All retainers were paid on a prorated basis.
Following the Spin-Off, effective as of October 1, 2007, the following changes occurred. Messrs. Ringler, Stavropolous and Lund ceased to serve on the Board of Directors of NCR in order to serve on the Board of Directors of Teradata Corporation. Mr. Nuti was elected as Chairman of the Board and received no additional remuneration for his service in such capacity. Ms. Levinson was elected Independent Lead Director of the Board and received an additional annual retainer of $75,000 for such service. All other director compensation-related matters were unchanged following the Spin-Off.
Prior to January 1 of each year, a director may elect to receive all or a portion of his or her annual meeting of NCR’s stockholders each non-employee director will be granted restricted stock and/or restricted stock units and options to purchase a number of shares ofretainer in NCR common stock in an amount determined by the Directors Committee. Any restricted stock units awarded will vest in four equal quarterly installments commencing three months after the grant date. Any options that are granted will be fully vested and exercisable on the first anniversaryinstead of the grant. If the grant is made in the form of restricted stock units,cash. In addition, a director may elect to defer receipt of the shares of common stock payable when such restrictedin lieu of cash. Beginning in 2007, deferral elections for NCR common stock units vest.
Pursuantfor retainers made in 2007 and after will be paid out only in cash unless the director elects in writing, delivered to the Director Compensation Program, onCompany no later than 60 days prior to the date of NCR’s 2006 annual meeting each non-employee director received an annual equity award valued at $62,500, which was granted indistribution (or the form of 1,486 restricted stock units. Messrs. Boykin, Lund and Ringler each elected to defer his receiptdate of the shares represented byfirst distribution, if made in installments), that all or any designated portion of the restricteddeferred stock units until the date upon which he ceases to serve as a director. Each non-employee director also received an additional annual equity award valued at $62,500, which was grantedaccount be paid in the form of options to purchase 3,724 shares of NCR’sNCR common stock.
41
2006 Director Compensation Table
The following table provides information on 2006 compensation for our non-employee directors:
Name (a) | Fees Earned or (b) (5),(6) | Stock Awards (c) | Option Awards (d) (12), (13) | Non-Equity (e) | Change in Pension ($) (f) | All Other (g) | Total ($) (h) | |||||||||
James Ringler, Chairman(1) | 249,777 | 321,275 | 43,464 | — | — | 18,542(14) | 633,058 | |||||||||
Edward (Pete) Boykin(2) | —(7) | 130,566 | 43,464 | — | — | — | 174,030 | |||||||||
Mark Frissora | 71,846 | 27,395 | 43,464 | — | — | — | 142,705 | |||||||||
Gary Daichendt | —(7) | 78,738 | (11) | 43,464 | — | — | — | 122,202 | ||||||||
Linda Fayne Levinson(3) | 43,923 | (7) | 80,920 | 43,464 | — | — | — | 168,307 | ||||||||
Victor Lund | 75,253 | 31,250 | 43,464 | — | — | — | 149,967 | |||||||||
C.K. Prahalad(4) | —(7) | 117,436 | 43,464 | — | — | — | 160,900 | |||||||||
William Stavropoulos | 65,846 | 27,395 | 43,464 | — | — | — | 136,705 |
42
43
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The tables below reflect the amount of compensation to be paid, and/or benefits to be provided, to each of the Named Executive Officers, in the event of termination of such executive’s employment as of December 31, 2006. A description of death and disability benefits and treatment of equity upon termination is provided below. See “Retirement Benefits,” “Change in Control Arrangements” and “Severance Agreements” in theCompensation Discussion and Analysis for a description of such items.
The agreements discussed in “Change in Control Arrangements” and “Severance Agreements” in theCompensation Discussion and Analysis include the following material conditions to the receipt of compensation and/or benefits. In the case of the Change in Control Severance Plan, the compensation and/or benefits provided to each participant are conditioned upon such participant’s execution of a restrictive covenant and release agreement that includes, among other items, an eighteen month non-competition, non-solicitation a confidentiality provision. As discussed in “Severance Agreements” in theCompensation Discussion and Analysis, it is generally our practice to negotiate the terms of such agreements, when needed, with each of our most senior executives, including our Named Executive Officers. Such negotiated agreements typicallyinclude non-competition, non-solicitation and confidentiality provisions. In the case of the severance arrangement with Mr. Nuti previously discussed in “Severance Agreements,” such compensation and benefits are conditioned upon Mr. Nuti’s compliance with an eighteen month non-competition and non-solicitation provision, and a confidentiality provision.
Death and Disability Benefits
Benefits provided to Named Executive Officers under the termination scenarios of death or disability depend on the individual level of benefits chosen by the Named Executive Officer during the annual benefits enrollment process. The Named Executive Officers receive the same company-provided life insurance coverage, short-term disability coverage, and long-term disability coverage as the general NCR population. These core coverages are 200%200 percent of base salary for life insurance, 100%100 percent of base salary for two to eighteen weeks depending on years of service and 66 2/3%66.67 percent of base salary for the remainder of a 26-week period for short-term disability coverage, and 50%50 percent of base salary for the duration of an employee’s long-term disability for long-term disability coverage. Each employee has the option of choosing a higher level of coverage at his or her own expense.
4452
Treatment of Equity upon Termination
Under the Stock Incentive Plan, the vesting treatment of equity awards may have unique vesting treatment based on a change in employment status. The vesting treatment is uniquediffers based on the form of equity and the termination reason as outlined below for awards granted in 2006.2006 and 2007. The vesting treatment described below is conditioned upon the participant’s compliance with a non-competition and non-solicitation provision of at leasta minimum of twelve month’s duration, as well as a confidentiality provision.
Situation | Restricted Stock or Stock Units | Performance-Based Restricted Stock or Stock Units | Stock Options | |||
Death and Long-term Disability (“LTD”) for awards granted in 2006 | the date of death or | A pro rata portion of the | Awards vest in full upon the date of death or LTD and are exercisable as follows: For the for the one-year period following the date of death | |||
the date of | A pro rata portion of the | Awards vest in full upon the date of death or LTD are and are exercisable as follows: If death or LTD occurs before age of 55, until the later of the one-year anniversary of the death or LTD and the Expiration Date. If death or LTD occurs on or after age 55, this Option may be exercised until the later of the third anniversary of the date of death or LTD and the Expiration Date. | ||||
Retirement | Pro rata portion will become fully vested as of date of retirement. | A pro rata portion of the award, calculated as of the date of retirement, will continue to vest and payout at the end of the performance period based on actual | Unvested awards are forfeited. Vested awards expire the earlier of three years following retirement date or the expiration | |||
Termination due to Reduction in Force (“RIF”) | become fully vested as of date of | A pro rata portion of the | Unvested awards are forfeited. Vested awards expire the earlier of | |||
Voluntary Resignation | Award is | Award is | Unvested awards are forfeited. Vested awards expire the earlier of |
53
Situation | Restricted Stock or Stock Units | Performance-Based Restricted Stock or Stock Units | Stock Options | |||||
Involuntary Termination for Cause | Award is | Award is | Award is | |||||
Change in Control (“CIC”) for awards granted in 2006 | termination occurs (other than for cause or disability) within 24 months of CIC, award vests in full upon termination. If Company does not assume, award vests in full immediately prior to CIC. | If Company assumes, and termination occurs (other than for cause or disability) within 24 months of CIC, award vests in full upon |
| If Company does not assume, award vests in full |
4554
Situation | Restricted Stock or Stock Units | Performance-Based Restricted Stock or Stock Units | Stock Options | |||
Change in Control (“CIC”) for awards granted in 2007 | If Company assumes and termination (other than for cause or disability, and, in the case of employees who are subject to the NCR CIC Plan and/or Severance Plan, for good reason) occurs within 24 months of CIC, award vests in full upon termination of employment. | If Company assumes and CIC occurs on or prior to the first anniversary of the grant, award vests in full at the end of the performance period at target. If Company assumes and CIC occurs after the first anniversary of the grant, award vests in full at the end of the performance period (without regard to performance after the CIC or pro-ration) based on actual performance through the end of the calendar year immediately prior to CIC. | If Company assumes, vesting continues as scheduled and are exercisable as set by the grant agreement. If Company assumes and termination occurs (voluntary or involuntary other than for cause or disability) within 24 months of CIC, award vests in full and are exercisable the earlier of the natural expiration or the first anniversary of the termination date. | |||
If Company does not assume, award vests in full immediately prior to CIC. | If Company does not assume and CIC occurs on or prior to the first anniversary of the grant, award vests in full prior to the CIC at target. If Company does not assume and CIC occurs after the first anniversary of the grant, award vests in full immediately prior to the CIC (without regard to performance after the CIC or pro-ration) based on actual performance through the end of the calendar year immediately prior to CIC. If Company assumes and termination occurs (involuntary or voluntary other than for cause or disability) within 24 months after CIC award vests according to the above provisions, as applicable, immediately upon date of termination. | If Company does not assume, award vests in full immediately prior to CIC and exercise periods are not specified. |
55
Grants made under the Management Stock Plan prior to April 26, 2006, may have unique vesting treatment based on a change in employment status. There are grants outstanding and unvested under the Management Stock Plan from the years 2005, 2004 and 2003. The vesting treatment is uniqueupon termination differs based on the vehicle and the termination reason as outlined below. The vesting treatment described below is conditioned upon the participant’s compliance with a non-competition and non-solicitation provision of at leasta minimum of eighteen month’s duration, as well as a confidentiality provision.
Situation | Restricted Stock | Performance-Based Restricted Stock | Stock Options | |||
Death and Long-term Disability | date of death or | N/A | ||||
Retirement | Award is | N/A | ||||
Termination due to Reduction in Force | Award is | N/A | Unvested awards are forfeited. Vested awards expire the earlier of one day prior to 60 days post termination or the expiration | |||
Voluntary Resignation | Award is | N/A | Unvested awards are forfeited. Vested awards expire the earlier of one day prior to 60 days post termination or the expiration | |||
Involuntary Termination for Cause | Award is | N/A | ||||
Change-in- Control | Award is | N/A | Awards vest in full upon the date of |
4656
2007 Potential Payments Upon Termination and Change in Control SeveranceTable
The table that follows shows the estimated amounts each Named Executive Officer would have received upon the occurrence of the events listed in the table.
Change in Control / Severance | Reduction-in-Force (5),(6) | Death | Disability | Voluntary Resignation | ||||||||||||||||
Nuti, William | ||||||||||||||||||||
Cash | $ | 6,000,000 | $ | 3,000,000 | N/A | N/A | N/A | |||||||||||||
Prorata Bonus | 2,368,432 | 2,368,432 | 2,368,432 | 2,368,432 | N/A | |||||||||||||||
Stock Option(1) | 8,637,620 | 2,440,400 | 8,637,620 | 8,637,620 | N/A | |||||||||||||||
Restricted Stock & Performance-Based Shares(1) | 7,902,760 | 884,731 | 884,731 | 884,731 | N/A | |||||||||||||||
Welfare Benefits | 40,377 | 14,345 | N/A | N/A | N/A | |||||||||||||||
Excise Tax Gross-Up(1),(2),(3),(4) | 7,669,133 | N/A | N/A | N/A | N/A | |||||||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | |||||||||||||||
Life Insurance(7) | N/A | N/A | 1,200,000 | N/A | N/A | |||||||||||||||
Disability Payments(8) | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
TOTAL | $ | 32,628,322 | $ | 8,717,908 | $ | 13,090,783 | $ | 11,890,783 | $ | — | ||||||||||
Bocian, Peter | ||||||||||||||||||||
Cash | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Prorata Bonus | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Stock Option | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Restricted Stock & Performance-Based Shares | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Welfare Benefits | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Excise Tax Gross-Up | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Outplacement | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Life Insurance | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
TOTAL | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Fishman, Robert | ||||||||||||||||||||
Cash | $ | 1,260,000 | $ | 120,000 | N/A | N/A | N/A | |||||||||||||
Prorata Bonus | 270,318 | 270,318 | 270,318 | 270,318 | N/A | |||||||||||||||
Stock Option | 80,142 | — | 80,142 | 80,142 | — | |||||||||||||||
Restricted Stock & Performance-Based Shares | 271,281 | 26,969 | 26,969 | 26,969 | N/A | |||||||||||||||
Welfare Benefits | 35,894 | 4,554 | N/A | N/A | N/A | |||||||||||||||
Excise Tax Gross-Up | 804,353 | N/A | N/A | N/A | N/A | |||||||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | |||||||||||||||
Life Insurance | N/A | N/A | 1,200,000 | N/A | N/A | |||||||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
TOTAL | $ | 2,731,988 | $ | 431,841 | $ | 1,577,429 | $ | 377,429 | $ | — | ||||||||||
Collins, Malcolm | ||||||||||||||||||||
Cash | $ | 2,771,627 | $ | 263,965 | N/A | N/A | N/A | |||||||||||||
Prorata Bonus | 575,489 | 575,489 | 575,489 | 575,489 | N/A | |||||||||||||||
Stock Option | 958,208 | — | 958,208 | 958,208 | — | |||||||||||||||
Restricted Stock & Performance-Based Shares | 1,720,856 | 131,539 | 131,539 | 131,539 | N/A | |||||||||||||||
Welfare Benefits | 7,664 | 889 | N/A | N/A | N/A | |||||||||||||||
Excise Tax Gross-Up | 1,998,408 | N/A | N/A | N/A | N/A | |||||||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | |||||||||||||||
Life Insurance | N/A | N/A | 1,200,000 | N/A | N/A | |||||||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | |||||||||||||||
TOTAL | $ | 8,042,252 | $ | 981,882 | $ | 2,865,236 | $ | 1,665,236 | $ | — | ||||||||||
57
Change in Control / Severance | Reduction-in-Force (5),(6) | Death | Disability | Voluntary Resignation | |||||||||||
Lieb, Peter | |||||||||||||||
Cash | $ | 1,296,000 | $ | 202,500 | N/A | N/A | N/A | ||||||||
Prorata Bonus | 373,029 | 373,029 | 373,029 | 373,029 | N/A | ||||||||||
Stock Option | 691,333 | — | 691,333 | 691,333 | — | ||||||||||
Restricted Stock & Performance-Based Shares | 1,199,805 | 112,609 | 112,609 | 112,609 | N/A | ||||||||||
Welfare Benefits | 2,680 | — | N/A | N/A | N/A | ||||||||||
Excise Tax Gross-Up | 1,094,524 | N/A | N/A | N/A | N/A | ||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | ||||||||||
Life Insurance | N/A | N/A | 1,200,000 | N/A | N/A | ||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | ||||||||||
TOTAL | $ | 4,667,371 | $ | 698,138 | $ | 2,376,971 | $ | 1,176,971 | $ | — | |||||
Wallace, Christine | |||||||||||||||
Cash | $ | 1,995,000 | $ | 190,000 | N/A | N/A | N/A | ||||||||
Prorata Bonus | 515,841 | 515,841 | 515,841 | 515,841 | N/A | ||||||||||
Stock Option | 504,230 | — | 504,230 | 504,230 | — | ||||||||||
Restricted Stock & Performance-Based Shares | 1,590,499 | 116,967 | 116,967 | 116,967 | N/A | ||||||||||
Welfare Benefits | 37,558 | 4,554 | N/A | N/A | N/A | ||||||||||
Excise Tax Gross-Up | 1,188,919 | N/A | N/A | N/A | N/A | ||||||||||
Outplacement | 10,000 | 10,000 | N/A | N/A | N/A | ||||||||||
Life Insurance | N/A | N/A | 1,200,000 | N/A | N/A | ||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | ||||||||||
TOTAL | $ | 5,842,047 | $ | 837,362 | $ | 2,337,038 | $ | 1,137,038 | $ | — | |||||
Koehler, Michael(9) | |||||||||||||||
Cash | N/A | N/A | N/A | N/A | N/A | ||||||||||
Prorata Bonus | N/A | N/A | N/A | N/A | N/A | ||||||||||
Stock Option | N/A | N/A | N/A | N/A | N/A | ||||||||||
Restricted Stock & Performance-Based Shares | N/A | N/A | N/A | N/A | N/A | ||||||||||
Welfare Benefits | N/A | N/A | N/A | N/A | N/A | ||||||||||
Excise Tax Gross-Up | N/A | N/A | N/A | N/A | N/A | ||||||||||
Outplacement | N/A | N/A | N/A | N/A | N/A | ||||||||||
Life Insurance | N/A | N/A | N/A | N/A | N/A | ||||||||||
Disability Payments | N/A | N/A | N/A | N/A | N/A | ||||||||||
TOTAL | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
(1) Equity valuations assume closing price of NCR stock on December 31, 2007 of $25.10.
(2) For purposes of calculating the excise tax gross up, the parachute value of stock options was calculated using the Black-Scholes option valuation methodology and the following assumptions:
(a) Volatility – 32.24%
(b) Dividend Yield – 0%
(c) Risk Free Rate – 4.48%
(d) Option Term – expected option term of 5.0 years less elapsed time since option grant or one year (depending on stock plan in effect at grant)
(3) Discount rates to determine the present values of the accelerated benefit of stock options and restricted shares for the parachute calculation were:
(a) Short Term – 4.61%
(b) Mid Term – 4.91%
(c) Long Term – 5.60%
58
(4) The excise tax gross up is calculated using a 20 percent excise tax rate and a 40 percent individual income tax rate.
(5) Cash severance payment is subject to individual negotiation. The amount provided is an estimate.
(6) The payments reported in these columns include only unvested awards. Vested equity is reported in the Outstanding Equity Awards at Fiscal Year-End Table. Equity would accelerate upon termination for good reason as well.
(7) Proceeds would be payable by a third-party insurer.
(8) Named Executive Officers in the U.S. are provided with core disability payments as discussed under “Death and Disability Benefits” on page 52. Messrs. Nuti, Fishman, Lieb and Koehler and Ms. Wallace each opted for core coverage for 2007. Mr. Collins would have received GBP 112,600 (approximately $227,797) per year as long-term disability benefits.
(9) Mr. Koehler earned nine months of his award payable under the Management Incentive Plan during the time he was employed with NCR. In addition, his equity was converted to awards based on Teradata common stock.
59
DIRECTOR COMPENSATION
Pursuant to authority granted to it by NCR’s Board of Directors, the Committee on Directors and Governance (the “Directors Committee”) adopted the NCR Director Compensation Program effective as of April 24, 2007. The Director Compensation Program provides for the payment of annual retainers, annual equity grants and initial equity grants to non-employee members of NCR’s Board of Directors. Mr. Nuti does not receive remuneration for his service as Chairman of the Board of NCR.
Annual Retainer
Executive | Cash | Prorata Bonus | Stock Options(1) | Restricted Stock & Performance- | Welfare Benefits | Excise Tax Gross-Up(1)(2)(3)(4) | Out- placement | Total | ||||||||||||||||
William Nuti | $6,000,000 | $935,140 | $5,290,595 | $5,552,215 | $32,738 | $7,537,042 | $10,000 | $25,357,730 | ||||||||||||||||
Peter Bocian | $2,100,000 | $290,542 | $313,094 | $944,312 | $32,738 | $1,183,692 | $10,000 | $4,874,378 | ||||||||||||||||
Malcolm Collins | $2,459,218 | $460,417 | $210,832 | $1,355,064 | $7,651 | $2,036,870 | $10,000 | $6,540,052 | ||||||||||||||||
Michael Koehler | $2,231,250 | $332,150 | $331,468 | $2,921,320 | $32,738 | $1,289,071 | $10,000 | $7,147,997 | ||||||||||||||||
Christine Wallace | $1,732,500 | $296,067 | $340,796 | $1,067,760 | $32,738 | $949,219 | $10,000 | $4,429,080 |
Prior to the Spin-Off (the period from January 1, 2007 to September 30, 2007), under the Director Compensation Programs in effect in 2007, each non-employee member of NCR’s Board received an annual retainer of $75,000. The Chairman of the Board (Mr. Ringler) received an additional retainer of $165,000, and each director serving on the Audit Committee received an additional retainer of $5,000. The Chair of the Committee on Directors and Governance (Mr. Prahalad) received an additional retainer of $9,000, and the Chairs of the Audit Committee (Mr. Boykin) and Compensation and Human Resource Committee (Ms. Levinson) each received an additional retainer of $12,000. All retainers were paid on a prorated basis.
Following the Spin-Off, effective as of October 1, 2007, the following changes occurred. Messrs. Ringler, Stavropolous and Lund ceased to serve on the Board of Directors of NCR in order to serve on the Board of Directors of Teradata Corporation. Mr. Nuti was elected as Chairman of the Board and received no additional remuneration for his service in such capacity. Ms. Levinson was elected Independent Lead Director of the Board and received an additional annual retainer of $75,000 for such service. All other director compensation-related matters were unchanged following the Spin-Off.
Prior to January 1 of each year, a director may elect to receive all or a portion of his or her annual retainer in NCR common stock instead of cash. In addition, a director may elect to defer receipt of shares of common stock payable in lieu of cash. Beginning in 2007, deferral elections for NCR common stock for retainers made in 2007 and after will be paid out only in cash unless the director elects in writing, delivered to the Company no later than 60 days prior to the date of distribution (or the date of the first distribution, if made in installments), that all or any designated portion of the deferred stock account be paid in shares of NCR common stock.
Reduction-in-Force SeveranceInitial Equity Grant
Executive | Cash(1) | Prorata Bonus | Stock Options(2)(3) | Restricted Performance- | Welfare Benefits | Out- placement | Total | ||||||||||||||
William Nuti | $3,000,000 | $935,140 | $1,470,938 | $3,554,472 | $14,900 | $10,000 | $8,985,450 | ||||||||||||||
Peter Bocian | $200,000 | $290,542 | $0 | $109,369 | $4,739 | $10,000 | $614,650 | ||||||||||||||
Malcolm Collins | $234,211 | $460,417 | $0 | $377,438 | $7,651 | $10,000 | $1,089,717 | ||||||||||||||
Michael Koehler | $212,500 | $332,150 | $0 | $104,393 | $4,739 | $10,000 | $663,782 | ||||||||||||||
Christine Wallace | $165,000 | $296,067 | $0 | $113,522 | $4,739 | $10,000 | $589,328 |
The Director Compensation Program provides that upon initial election to the Board, each non-employee director will receive a grant of restricted stock or restricted stock units. A director may elect to defer receipt of the shares of common stock that would otherwise be received upon vesting of restricted stock or restricted stock units. The restricted stock units vest in four equal quarterly installments commencing three months after the grant date. Payment is made only in NCR common stock.
DeathAnnual Equity Grant
Executive | Life Insurance(1) | Prorata Bonus | Stock Options(2) | Restricted Performance- | Welfare Benefits | Out- placement | Total | ||||||||||||||
William Nuti | $1,200,000 | $935,140 | $5,290,595 | $3,554,472 | $0 | $0 | $10,980,207 | ||||||||||||||
Peter Bocian | $2,800,000 | $290,542 | $313,094 | $680,600 | $0 | $0 | $4,084,236 | ||||||||||||||
Malcolm Collins | $636,656 | $460,417 | $210,832 | $377,438 | $0 | $0 | $1,685,343 | ||||||||||||||
Michael Koehler | $1,155,000 | $332,150 | $331,468 | $2,669,608 | $0 | $0 | $4,488,226 | ||||||||||||||
Christine Wallace | $0 | $296,067 | $340,796 | $785,581 | $0 | $0 | $1,422,444 |
The Director Compensation Program also provides that on the date of each annual meeting of NCR’s stockholders each non-employee director will be granted restricted stock or restricted stock units and options to purchase a number of shares of NCR common stock, the value of which is determined by the Directors Committee. Any restricted stock units awarded will vest in four equal quarterly installments commencing three months after the grant date. Any options that are granted will be fully vested and exercisable on the first anniversary of the grant. If the grant is made in the form of restricted stock units, a director may elect to defer receipt of the shares of common stock that otherwise would be received upon vesting of restricted stock units.
47Pursuant to the Director Compensation Program, on the date of NCR’s 2007 annual meeting each non-employee director received an annual equity award valued at $62,500, which was granted in the form of 1,305 restricted
60
stock units. Mr. Boykin, and former directors Messrs. Lund and Ringler, each elected to defer his receipt of the shares represented by the restricted stock units until the date upon which he ceases to serve as a director of NCR and/or Teradata Corporation. Each non-employee director also received an additional annual equity award valued at $62,500, which was granted in the form of options to purchase 3,252 shares of NCR’s common stock. The exercise price of for these options at the time of grant was $49.80, which was the closing price on the effective date of grant. The exercise price of these options was adjusted in connection with the Spin-Off using the same methodology applied in all other adjustments related to the Spin-Off.
Disability2007 Director Compensation Table
Executive | Disability Payments(1)(2) | Prorata Bonus | Stock Options(3) | Restricted Performance- | Welfare Benefits | Out- placement | Total | ||||||||||||||
William Nuti | $0 | $935,140 | $5,290,595 | $3,554,472 | $0 | $0 | $9,780,207 | ||||||||||||||
Peter Bocian | $0 | $290,542 | $313,094 | $680,600 | $0 | $0 | $1,284,236 | ||||||||||||||
Malcolm Collins | $0 | $460,417 | $210,832 | $377,438 | $0 | $0 | $1,048,687 | ||||||||||||||
Michael Koehler | $0 | $332,150 | $331,468 | $2,669,608 | $0 | $0 | $3,333,226 | ||||||||||||||
Christine Wallace | $0 | $296,067 | $340,796 | $785,581 | $0 | $0 | $1,422,444 |
The table below shows information on 2007 compensation for our non-employee directors. There were no amounts reportable under non-equity incentive plan compensation, change in pension value and nonqualified deferred compensation earnings or other compensation in 2007.
Name (a) | Fees Earned or Paid in Cash ($) (b)(5),(6) | Stock Awards ($) (c)(8),(9),(10) | Option Awards ($) (d) (11),(12) | Total ($) (h) | |||||
Ringler, James; Former Chairman(1) | 180,000 | 47,497 | 18,457 | 245,954 | |||||
Levinson, Linda Fayne; Independent Lead Director(1),(2) | 52,875 | (7) | 105,002 | 18,457 | 123,459 | ||||
Boykin, Edward (Pete)(3) | — | (7) | 142,562 | 18,457 | 161,019 | ||||
Frissora, Mark | 75,000 | 61,432 | 18,457 | 154,889 | |||||
Daichendt, Gary | — | (7) | 163,160 | 18,457 | 181,617 | ||||
Lund, Victor | 60,000 | 47,497 | 18,457 | 125,954 | |||||
Prahalad, C.K.(4) | — | (7) | 145,529 | 18,457 | 163,986 | ||||
Stavropoulos, William | 56,250 | 53,077 | 18,457 | 127,784 |
Voluntary Resignation(1) Mr. Ringler served as Chairman of the Board of Directors until October 1, 2007 at which time Mr. Nuti was named Chairman of the Board of Directors with Ms. Levinson serving as Independent Lead Director. Mr. Ringler left NCR’s Board of Directors to serve as Chairman of the Board of Directors for Teradata Corporation.
(2) Ms. Levinson serves as Chair of the Compensation and Human Resource Committee. Additionally, she has served as Independent Lead Director since October 1, 2007. In connection with Ms. Levinsion’s new role as Independent Lead Director she received an additional $75,000 retainer per year beginning October 1, 2007. Ms. Levinson was appointed to serve as a member of the Committee on Directors and Governance in 2008, but she did not serve on this Committee or receive any compensation related to service for this Committee in 2007.
(3) Mr. Boykin serves as Chair of the Audit Committee.
(4) Mr. Prahalad serves as Chair of the Committee on Directors and Governance.
(5) Amounts reported in this column represent the annual retainers and meeting fees earned by the directors in 2007 and paid in cash (“Cash Retainers”). Directors may elect to receive these Cash Retainers in the form of cash or common stock, or an even distribution of both. To the extent that a director elected to receive his or her Cash Retainers in common stock, such fees are not reported in column (b); however, the dollar amount, if any, recognized for financial statement reporting purposes in 2007 in accordance with FAS 123R with respect to such stock is reflected in the “stock awards” column (column (c)).
(6) The Board of Directors adopted a new Director Compensation Program, effective April 24, 2007.
(7) Messrs. Boykin, Daichendt and Prahalad elected to receive the following Cash Retainers earned in 2007 in the form of an equivalent number of shares: Mr. Boykin, $92,000; Mr. Daichendt, $80,000; and Mr. Prahalad, $89,000. Ms. Levinson elected to receive her Cash Retainers equally divided between cash and an equivalent number of shares, such that she received $52,875 in the form of cash and $52,875 in the form of shares. In the event a director elects to receive Cash Retainers in the form of stock, he or she may further elect to receive such stock currently or at a future specified date. Mr. Boykin has elected to defer his receipt of shares in respect of his Cash Retainers until the date upon which he ceases to serve as a director.
Executive | Cash | Prorata Bonus | Stock Options(1) | Restricted Performance- | Welfare Benefits | Out- placement | Total | ||||||||||||||
William Nuti(2) | $0 | $0 | $1,470,938 | $3,554,472 | $0 | $0 | $5,025,410 | ||||||||||||||
Peter Bocian | $0 | $0 | $0 | $109,369 | $0 | $0 | $109,369 | ||||||||||||||
Malcolm Collins | $0 | $0 | $0 | $377,438 | $0 | $0 | $377,438 | ||||||||||||||
Michael Koehler | $0 | $0 | $0 | $104,393 | $0 | $0 | $104,393 | ||||||||||||||
Christine Wallace | $0 | $0 | $0 | $113,522 | $0 | $0 | $113,522 |
61
(8) The amounts reported in this column include the dollar amount recognized for financial statement reporting purposes in 2007 in accordance with FAS 123R in connection with annual awards of Restricted Stock Units made to each non-employee director pursuant to the Director Compensation Program (“RSU Awards”). See Note 8 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, for a discussion of the relevant assumptions used in calculating grant date fair value pursuant to FAS 123R. The grant date fair value of the RSU Award given to each non-employee director in 2007 was $62,500 which equated to 1,305 Restricted Stock Units.
(9) The amounts reported in this column also include the dollar amount recognized for financial statement reporting purposes in 2007 in accordance with FAS 123R with respect to Ms. Levinson and Messrs. Boykin, Daichendt and Prahalad who have elected to receive their Cash Retainers in the form of shares, as described in footnote 7 above. See Note 8 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, for a discussion of the relevant assumptions used in calculating grant date fair value pursuant to FAS 123R. The grant date fair value for Cash Retainers paid in stock on March 30, 2007 is $10,878 for Ms. Levinson, $23,002 for Mr. Boykin, $22,283 for Mr. Prahalad and $20,031 for Mr. Daichendt. The grant date fair value for Cash Retainers paid in stock on June 29, 2007 is $10,876 for Ms. Levinson, $23,013 for Mr. Boykin, $20,018 for Mr. Daichendt and $22,277 for Mr. Prahalad. The grant date fair value for Cash Retainers paid in stock on September 7, 2007 is $10,900 for Ms. Levinson, $23,022 for Mr. Boykin, $20,041 for Mr. Daichendt and $22,289 for Mr. Prahalad. The grant date fair value for Cash Retainers paid in stock on December 29, 2006 are $10,917 for Ms. Levinson, $23,032 for Mr. Boykin, $20,035 for Mr. Daichendt and $22,261 for Mr. Prahalad.
(10) Each non-employee director had 653 Restricted Stock Units unvested and outstanding as of December 31, 2007. Mr. Boykin, and former directors Messrs. Ringler and Lund, elected to defer their receipt of shares that would otherwise be issuable in respect of restricted stock units until they vest.
(11) The amounts reported in this column is the dollar amount recognized for financial statement reporting purposes in 2007 in accordance with FAS 123R with respect to the annual stock option grants made to each non-employee director (“Option Awards”). See Note 8 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, for a discussion of the relevant assumptions used in calculating grant date fair value pursuant to FAS 123R. The grant date fair value of the Option Award given to each non-employee director in 2007 was $62,500 and equated to 3,252 options to purchase NCR common stock.
(12) The Option Awards outstanding as of December 31, 2007 for each of the non-employee directors who served in 2007 are as follows: Mr. Ringler, 71,586; Mr. Boykin, 42,976; Mr. Frissora, 22,976; Mr. Daichendt, 6,976; Ms. Levinson, 81,022; Mr. Lund, 30,976; and Mr. Prahalad, 81,022; and Mr. Stavropoulos, 68,976.
4862
EQUITY COMPENSATION PLAN INFORMATION
The table below shows information regarding awards outstanding and shares available for issuance under our Management Stock Plan that was in effect until April 26,25, 2006 and our Stock Incentive Plan that was adopted April 26, 2006.
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a) | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a) | ||||||||||
(a) | (b) | (c) | (a) | (b) | (c) | |||||||||||
Equity compensation plans approved by security holders : | ||||||||||||||||
Management Stock Plan (1) | 7,757,842 | $ | 25.21 | 72,718,865 | ||||||||||||
Stock Incentive Plan (2) | 302,203 | (3) | $ | 39.63 | 11,506,583 | |||||||||||
Management Stock Plan(1) | 7,146,443 | $ | 12.80 | 0 | ||||||||||||
Stock Incentive Plan(2) | 3,443,712 | (3) | $ | 21.43 | 19,715,324 | |||||||||||
Equity compensation plans not approved by security holders: | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||
Total | 8,060,045 | $ | 25.75 | 84,225,448 | 10,590,155 | $ | 15.61 | 19,715,324 | ||||||||
(1) The NCR Management Stock Plan was adopted with stockholder approval, effective January 1, 1997. The plan contained an evergreen provision, pursuant to which the number of shares authorized under the plan was increased by 4% of the outstanding shares on the first day of the year for each year during the ten-year term of the plan without the need for additional Board or stockholder approval. There were no shares authorized under the plan as of December 31, 2007. The NCR Management Stock Plan was terminated as of April 26, 2006, upon the stockholders’ approval of the Stock Incentive Plan; however, such termination did not affect awards previously granted and outstanding under the NCR Management Stock Plan.
(2) The Stock Incentive Plan was adopted with stockholder approval, effective April 26, 2006.
(3) Includes a total of 954,562 performance-based restricted stock units that were outstanding under the Stock Incentive Plan as of December 31, 2007.
4963
RELATED PERSON TRANSACTIONS
Our Committee on Directors and Governance is responsible for determining whether any conflicts of interest exist and the review and approval of each related party transaction. In January 2007 the Board of Directors formalized in writing a Related Person Transactions Policy.
This policy provides for approval or ratification of each related person transaction in accordance with the procedures and policies discussed below (i) by the Company’s Committee on Directors and Governance or (ii) if the Committee on Directors and Governance determines that the approval or ratification of such related person transaction should be considered by all of the disinterested members of the Board of Directors, by such disinterested members of the Board of Directors by the vote of a majority thereof.
The policy provides for our General Counsel to advise the Chairman of the Committee on Directors and Governance of any related person transaction of which the General Counsel becomes aware. The Committee on Directors and Governance shall consider such related person transaction, unless the Committee on Directors and Governance determines that the approval or ratification of such transaction should be considered by all of the disinterested members of the Board of Directors, in which case such disinterested members of the Board of Directors shall consider the transaction. Except as set forth below, no related person transaction not approved in advance shall be entered into by the Company unless the consummation of such transaction is expressly subject to ratification.
If the Company enters into a transaction that it subsequently determines is a related person transaction or a transaction that was not a related person transaction at the time it was entered into but thereafter becomes a related person transaction, then in either such case the related person transaction shall be presented to the Committee on Directors and Governance or the disinterested members of the Board of Directors, as applicable, for ratification. If such related person transaction is not ratified, then the Company shall take all reasonable actions to attempt to terminate the Company’s participation in that transaction.
Factors that are reviewed by the Committee on Directors and Governance or the Board of Directors, as applicable, include: the size of the transaction and the amount payable to a related person; the nature of the interest of the related person in the transaction; whether the transaction may involve a conflict of interest; and whether the transaction involves the provision of goods or services to the Company that are available from unaffiliated third parties and, if so, whether the transaction is on terms and made under circumstances that are at least as favorable to the Company as would be available in comparable transactions with or involving unaffiliated third parties.
The Company previously considered and authorized a related party transaction involving Kimberly Bocian who iswas an employee of the Company until April 2007 and the wife of Peter Bocian, NCR’s former Senior Vice President and Chief Financial Officer. Ms. Bocian received total cash payments of approximately $212,996$108,841 during 2006.2007. In addition, on February 13, 2006,March 1, 2007, Ms. Bocian received an award of 3,5784,299 options to purchase shares of NCR stock. This award vests in four annual installments, beginning on February 13, 2007. On February 13, 2006, Ms. Bocian also receivedstock and an award of 1,428 shares of1,727 performance-based restricted stock. These restricted shares fully vest three years after the datestock units. However, both of issuance.these awards were forfeited upon her departure.
5064
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table presents the approximate fees for professional audit services rendered by the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP (“PwC”), for the audit of the Company’s financial statements for fiscal years 20062007 and 2005,2006, as well as the approximate worldwide fees billed for other services rendered by PwC in such years:
Service | 2006 | 2005 | ||||
Audit Fees(1) | $ | 7,779,400 | $ | 8,542,500 | ||
Audit-Related Fees(2) | $ | 333,800 | $ | 331,400 | ||
Subtotal | $ | 8,113,200 | $ | 8,873,900 | ||
Tax Fees(3) | $ | 1,318,000 | $ | 1,669,000 | ||
All Other Fees(4) | $ | 15,800 | $ | 12,100 | ||
Subtotal | $ | 1,333,800 | $ | 1,681,100 | ||
Total Fees | $ | 9,447,000 | $ | 10,555,000 |
Service | 2007 | 2006 | ||||
Audit Fees(1) | $ | 8,831,300 | $ | 7,779,400 | ||
Audit-Related Fees(2) | $ | 400,800 | $ | 333,800 | ||
Subtotal | $ | 9,232,100 | $ | 8,113,200 | ||
Tax Fees(3) | $ | 1,092,900 | $ | 1,318,000 | ||
All Other Fees(4) | $ | 13,700 | $ | 15,800 | ||
Subtotal | $ | 1,106,600 | $ | 1,333,800 | ||
Total Fees | $ | 10,338,700 | $ | 9,447,000 |
(1) Includes fees required for the review and examination of NCR’s consolidated financial statements, the audit of internal controls over financial reporting, quarterly reviews of interim financial statements, statutory audits, and consultations by management as to the accounting or disclosure treatment of transactions or events and the actual or potential impact of final or proposed rules, standards or interpretations by regulatory and standard setting bodies. Also includes attestation services and review services associated with the Company’s filings with the SEC. The 2007 audit fees also include $1.9 million for services rendered for the audit of the historical financial statements of NCR’s Teradata Data Warehousing business, which was undertaken in connection with the spin-off of Teradata. In addition, this amount includes fees incurred for professional services rendered for the review of the interim financial statements included in Teradata’s filings with the SEC.
(2) Includes fees related to financial audits of employee benefit plans and services related to the filing of securities reports for one of the Company’s international subsidiaries.
(3) Generally includes tax compliance, tax advice, tax planning and expatriate services. In 2007 and 2006 respectively, fees for tax services include:
(a) $37,000 and $27,300 for tax compliance including the preparation, review and filing of tax returns;
(b) $143,400 and $184,100 for Internal Revenue Service consultation and tax audit assistance;
(c) $22,600 and $40,500 for local country statutory financial statement services incidental to the preparation of local country tax returns and a foreign tax consultation among other things; and
(d) $889,900 and $1,066,100 for expatriate services including tax return preparation, tax equalization calculations, tax consultancy, and related international assignment administration services.
(4) Includes fees for all other work performed by PwC that does not meet the above category descriptions. In 2007, of these fees: approximately 22% related to licensing of proprietary software, approximately 15% related to audits pertaining to a foundation and a dormant organization, and approximately 63% related to an excise tax refund interest calculation review. In 2006, of these fees: approximately 33% related to planning, advisory and tax services in connection with the liquidation of previously-acquired corporate entities after their operational integration into the Company; approximately 19% related to licensing of proprietary software; approximately 5% related to non-audit work regarding a compensation analysis performed by the Company; approximately 30% of these fees related to assistance with SEC filings for new stock plans; and approximately 13% of these fees related to audits pertaining to a foundation and a dormant organization.
The Audit Committee has adopted policies and procedures regarding its pre-approval of the audit, audit-related, tax and all other non-audit services to be provided by the Company’s independent registered public accounting firm or its affiliates to NCR or its consolidated subsidiaries (the “Pre-Approval Policy”). This policy is designed
65
to assurethatassure that the provision of such services does not impair the independence of the Company’s independent registered public accounting firm. Under the Pre-Approval Policy, at the beginning of each fiscal year, the Audit Committee will review the services proposed by management and the Company’s independent registered public accounting firm to be
51
provided during that year. The Audit Committee will then provide its pre-approval based on the limitations set forth in the Pre-Approval Policy. These limitations included the following:
In no case should NCR or its consolidated subsidiaries retain the Company’s independent registered public accounting firm or its affiliates to provide management consulting services or any non-audit services that are not permitted under applicable laws and regulations, including, without limitation, the Sarbanes-Oxley Act of 2002 and the SEC’s related rules and regulations.
Unless a type of service to be provided by the independent registered public accounting firm has received general pre-approval, it will require specific pre-approval by the Audit Committee. Any other non-audit services and tax consulting services will require specific pre-approvals by the Audit Committee and a determination that such services would not impair the independence of the Company’s independent registered public accounting firm. Specific pre-approvals by the Audit Committee will also be required for any material changes or additions to the pre-approved services.
The Audit Committee recommends that the ratio of total tax and all other non-audit services to total audit and audit-related services procured by the Company in a fiscal year be less than 1 to 1.
The Audit Committee will not permit the exclusive retention of NCR’s independent registered public accounting firm in connection with a transaction initially recommended by the independent auditors, the purpose of which may be tax avoidance and the tax treatment of which is not supported in applicable tax law.
Pre-approval fee levels for all services to be provided by the independent registered public accounting firm will be established annually by the Audit Committee, and updated on a quarterly basis by the Audit Committee at its regularly scheduled meetings. Any proposed services significantly exceeding these levels will require separate pre-approval by the Audit Committee.
The Corporate Controller will report to the Audit Committee on a quarterly basis regarding the status of all pre-approvedaudit,pre-approved audit, audit-related, tax and all other non-audit services provided by the Company’s independent registered public accounting firm or its affiliates to NCR or its consolidated subsidiaries.
Back-up documentation will be provided to the Audit Committee by management and/or the independent registered public accounting firm when requesting pre-approval of services by the Company’s independent registered public accounting firm. At the request of the Audit Committee, additional detailed documentation regarding the specific services will be provided.
Requests or applications to provide services that require separate approval by the Audit Committee will be submitted to the Audit Committee by the Chief Financial Officer, with the support of the independent registered public accounting firm, and must include a joint statement as to whether, in the view of management and the independent registered public accounting firm, the request or application is consistent with the SEC’s rules on auditor independence.
Under the Pre-Approval Policy, the Audit Committee has delegated to its Chair limited authority to grant pre-approvals for audit, audit-related, tax and other non-audit services in the event that immediate approval of a service is needed. The Chair shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting for its review and approval. The Audit Committee has not delegated to management its responsibilities to pre-approve services performed by the independent registered public accounting firm.
The audit, non-audit, tax and all other non-audit services provided by PwC to the Company, and the fees charged for such services, are actively monitored by the Audit Committee as set forth in the Pre-Approval Policy on a quarterly basis to maintain the appropriate level of objectivity and independence in the firm’s audit work for NCR. Part of the Audit Committee’s ongoing monitoring includes a review of any de minimis exceptions as provided in the applicable SEC rules for non-audit services that were not pre-approved by the Audit Committee. In 20062007 and 2005,2006, of those total amounts reported above, all activities were pre-approved by the Audit Committee prior to commencement, thus no de minimis activity was reported.
5266
BOARD AUDIT COMMITTEE REPORT
The Audit Committee consists of fourthree directors, each of whom is independent as determined by the Board of Directors under the standards set forth in the Board’s Corporate Governance Guidelines, which are based on the requirements of the listing standards of the New York Stock Exchange (“NYSE”) and the applicable rules of the U.S. Securities and Exchange Commission (“SEC”). In accordance with NYSE and SEC rules, all members are “financially literate.” In addition, twoone of its members areis an “audit committee financial experts”expert” as defined under applicable SEC rules. A brief description of the responsibilities of the Audit Committee is set forth above under the caption “Committees of the Board.” The Audit Committee acts under a charter adopted by the Board of Directors, which is periodically reviewed and revised as appropriate. The Audit Committee charter was revised and approved by the Board of Directors in October 2006,2007, and is available on the Company’s corporate governance website athttp://www.ncr.com/corpgovernance/corpgov_board_charters.htm.corpgov_board_charters.htm.
In general, NCR’s management is responsible for the preparation, presentation and integrity of the Company’s financial statements, accounting and financial reporting principles, internal controls, and procedures designed to ensure compliance with accounting standards, applicable laws, and regulations. PricewaterhouseCoopers, NCR’s independent registered public accounting firm, is responsible for performing an independent audit of the Company’s consolidated financial statements and expressing an opinion on the conformity of those financial statements with generally accepted accounting principles, as well as an independent audit of the Company’s internal control over financial reporting.
In the course of fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed with NCR management the Company’s audited financial statements for fiscal year 2006,2007, as well as its quarterly public earnings releases and its quarterly reports on Form 10-Q, and, together with the Board, has reviewed and discussed the Company’s annual report on Form 10-K and proxy statement. In addition, the Audit Committee met with management frequently during the year to considertheconsider the adequacy of the Company’s internal control over financial reporting and spent considerable time and effort overseeing the Company’s compliance efforts in connection with Section 404 of the Sarbanes-Oxley Act of 2002. The Audit Committee also discussed with NCR’s senior management and independent registered public accounting firm the process used for certifications by the Company’s Chief Executive and Chief Financial Officers for certain of the Company’s filings with the SEC, as well as the clarity and completeness of the Company’s financial disclosures. Further, the Audit Committee discussed with PricewaterhouseCoopers, the Company’s independent registered public accounting firm, the matters required to be discussed by SAS 61 (Codification of Statements on Auditing Standards). The Audit Committee also has received the written disclosures and the letter from PricewaterhouseCoopers required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees,” and has discussed with PricewaterhouseCoopers its independence. In connection with its discussions concerning the independence of its independent registered public accounting firm, the Audit Committee adopted its annual policy requiring that the Audit Committee pre-approve all audit, audit-related, tax and other non-audit services provided by the Company’s independent registered public accounting firm or its affiliates to NCR or its consolidated subsidiaries. The committee also reviewed its procedures for processing and addressing complaints regarding accounting, internal controls, or auditing matters, and the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters. Finally, the Audit Committee has reviewed NCR’s critical accounting policies and alternative policies if any, with management and the Company’s independent registered public accounting firm to determine that both are in agreement that the policies currently being used are appropriate.
The Audit Committee met in executive session at its regular meetings periodically throughout the year with both PricewaterhouseCoopers and the internal auditors. It also met privately on occasion with the Chief Financial Officer and Corporate
53
Controller of the Company, each of whom has unrestricted access to the committee.
67
Based on the reviews and the discussions referred to above, the Audit Committee recommended to the Board that the Company’s audited consolidated financial statements be includedinincluded in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20062007 for filing with the SEC.
Dated: February 26, 20072008
The Audit Committee:
Edward P. Boykin, Chair
Gary Daichendt
Victor L. Lund
C.K. Prahalad
5468
DIRECTORS’ PROPOSAL TO RATIFY THE APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 20072008
(Item 2 on Proxy Card)
The Board’s Audit Committee, which is composed entirely of independent directors, appointed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as the Company’s independent registered public accounting firm for 20072008 to audit NCR’s consolidated financial statements. The Board has approved this selection and, as a matter of good corporate governance, is asking you to ratify this appointment.
Based on its “Pre-Approval Policy” (as defined above on page 51)65) and applicable SEC rules and guidance, the Audit Committee has considered whether the provision of the tax and other non-audit services described above under the caption “Fees Paid to Independent Registered Public Accounting Firm” was compatible with maintaining PricewaterhouseCoopers’ independence and concluded that it was.
PricewaterhouseCoopers has been the Company’s independent registered public accounting firm for many years and is a leader in providing audit services to the high-technology industry. The Board believes that PricewaterhouseCoopers is well qualified to serveasserve as NCR’s independent registered public accounting firm given its experience, global presence with offices or affiliates in or near most locations where NCR does business, and quality audit work in serving the Company. PricewaterhouseCoopers rotates its audit partners assigned to audit NCR at least once every five years and the Audit Committee has placed restrictions on the Company’s ability to hire any employees or former employees of PricewaterhouseCoopers or its affiliates.
PricewaterhouseCoopers representatives will be at the annual meeting to answer questions, and they may also make any statement they wish at the meeting.
The Board and Audit Committee recommend that you vote FOR this proposal. If the stockholders do not approve this proposal, the Audit Committee and the Board of Directors will reconsider the appointment, but may decide to maintain its appointment of PricewaterhouseCoopers. Proxies solicited by the Board of Directors will be voted FOR this proposal, unless you specify otherwise in your proxy.
5569
OTHER MATTERS
The Board of Directors does not know of any matters that will be brought before the annual meeting other than those listed in the notice of meeting. If any other matters are properly introduced at the meeting for consideration, including consideration of a motion to adjourn the meeting to another time or place, the individuals named on the enclosed form of proxy will have authority to vote on such matters in their discretion.
ADDITIONAL INFORMATION
Cost of Proxy Solicitation
We will pay the expenses of soliciting proxies in connection with the annual meeting. Proxies may be solicited on our behalf through the mail, in person, by telephone, electronic transmission, or facsimile transmission. We have hired Georgeson Shareholder Communications Inc., to assist in the solicitation of proxies, at an estimated cost of $15,000,$16,000, plus reimbursement of reasonable out-of-pocket expenses. In accordance with the SEC and the New York Stock ExchangeNYSE rules, NCR will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their expenses of sending proxies and proxy materials to the beneficial owners of NCR common stock.
Procedures for Stockholder Proposals and Nominations
Under NCR’s Bylaws, nominations for election of directors at an annual meeting may be made only by (1) the Board of Directors or a committee of the Board, or (2) a stockholder entitled to vote who has delivered notice to the Company within 90 tono earlier than 150 days nor later than 5:00 p.m., Eastern Time, 120 days before the first anniversary of the date of the mailing of the notice for the preceding year’s annual meeting.
Our Bylaws also provide that other business may not be brought before an annual meeting unless it is (1) specified in the notice of meeting (which includes stockholder proposals that the Company is required to include in its proxy statement under SEC Rule 14a-8), (2) brought before the meeting by or at the direction of the Board, or (3) brought by a stockholder entitled to vote who has delivered notice to the Company (containing certain information specified in the Bylaws) within 90 tono earlier than 150 days nor later than 5:00 p.m., Eastern Time, 120 days before the first anniversary of the date of the mailing of the notice forthefor the preceding year’s annual meeting. In addition, you must comply with SEC Rule 14a-8 to have your proposal included in the Company’s proxy statement.
A copy of the full text of the Company’s Bylaws may be obtained upon written request to the Corporate Secretary at the address provided on page 312 of this proxy statement.
Stockholder Proposals for 20082009 Annual Meeting
Stockholders interested in presenting a proposal for consideration at NCR’s annual meeting of stockholders in 20082009 must follow the procedures found in SEC Rule 14a-8 and the Company’s Bylaws. To be eligible for possible inclusion in the Company’s 20082009 proxy materials, all qualified proposals must be received by NCR’s Corporate Secretary no earlier than October 12, 2008, nor later than 5:00 p.m., Eastern Time, on November 20, 2007. Stockholder proposals submitted after that date but before December 20, 2007, will be presented at the annual meeting if such proposal complies with the Company’s Bylaws, but will not be included in the Company’s proxy materials. If a stockholder proposal is received after December 20, 2007, and is properly brought before the meeting, the persons named on the proxy card may vote in their discretion regarding such proposal all of the shares for which we have received proxies for the annual meeting.11, 2008.
The above notice and proxy statement are sent by order of the Board of Directors.
��
Peter M. Lieb
Senior Vice President,
General Counsel and Secretary
Dated: March 1, 200711, 2008
5670
Detach Here
....................................................................................................................................................................................
20072008 ANNUAL STOCKHOLDERS’ MEETING
RESERVATION REQUEST FORM
If you plan to attend the 20072008 Annual Stockholders’ Meeting of NCR Corporation, please complete the following information and return to Peter M. Lieb, Senior Vice President, General Counsel and Secretary, NCR Corporation, 1700 South Patterson Blvd., Dayton, Ohio 45479.
Your name and address: |
| |
| ||
| ||
Number of shares of NCR common stock you hold: |
|
If the shares listed above are not registered in your name, identify the name of the registered stockholder belowand include evidence that you beneficially own the shares.
Registered stockholder: |
| |
(name of your bank, broker, or other nominee) |
THIS IS NOT A PROXY CARD |
1700 S. PATTERSON BOULEVARD DAYTON, OH 45479 | Your Internet or telephone authorization authorizes the named proxies to vote the shares in the same manner as if you marked, signed and returned your proxy card.
AUTHORIZE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:
AUTHORIZE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:
VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to NCR Corporation, c/o
ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by NCR in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to authorize your vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: NCRCP1 | KEEP THIS PORTION FOR YOUR RECORDS | |||||
| ||||||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
| ||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||
NCR’S BOARD OF DIRECTORS RECOMMENDS A | ||||||||||||||||||||||||||||||||||||||
VOTE “FOR” PROPOSALS 1 and 2. | ||||||||||||||||||||||||||||||||||||||
For | Withhold | For All | To | |||||||||||||||||||||||||||||||||||
| All | All | Except | |||||||||||||||||||||||||||||||||||
1. Election of Directors. |
| |||||||||||||||||||||||||||||||||||||
| Class C Nominees: | |||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||
| ¨ | ¨ | ¨ | |||||||||||||||||||||||||||||||||||
Vote On Proposal | For Against Abstain | |||||||||||||||||||||||||||||||||||||
2. Ratification of the appointment of independent registered public accounting firm for 2008. | ¨¨ | ¨ | ||||||||||||||||||||||||||||||||||||
| For address changes and/or comments, please check this box and write them on the back where indicated. | ¨ | ||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||
a corporation or partnership or as an agent, attorney or fiduciary, indicate the capacity in which you are signing. | ||||||||||||||||||||||||||||||||||||||
| | |||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
Annual Meeting of Stockholders
NCR’s Annual Meeting of Stockholders will be held at 9:00 a.m. on April |
Important notice regarding internet availability of proxy materials for the Annual Meeting: |
The Notice of 2008 Annual Meeting of Stockholders and Proxy Statement, and 2007 Annual Report, are available at www.proxyvote.com. |
q FOLD AND DETACH HERE q
__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ ___ __ __ __ __ __ _
NCR CORPORATION | ||||||||
Proxy/Voting Instruction Card | ||||||||
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR NCR’S ANNUAL MEETING OF STOCKHOLDERS ON APRIL | ||||||||
The undersigned stockholder of NCR Corporation, a Maryland corporation (“NCR” or the “Company”), hereby appoints William Nuti, Peter Lieb and | ||||||||
THE PROXIES OR THE TRUSTEES AND ADMINISTRATORS OF THE PLANS, AS THE CASE MAY BE, WILL VOTE THE SHARES IN ACCORDANCE WITH THE DIRECTIONS ON THIS CARD. IF YOU DO NOT INDICATE YOUR CHOICES ON THIS CARD, THE PROXIES WILL VOTE THE SHARES “FOR” EACH OF THE NOMINEES FOR DIRECTORS, “FOR” EACH OF THE OTHER PROPOSALS DESCRIBED IN THE PROXY STATEMENT AND IN THE DISCRETION OF THE
| ||||||||
Address Changes/Comments: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ | ||||||||
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ | ||||||||
| ||||||||
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) | ||||||||
(Continued and to be signed on the reverse side.)
|