<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission File Number 001-00395
NCR CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 31-0387920
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1700 South Patterson Blvd.
Dayton, Ohio 45479
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (937) 445-5000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
---
Number of shares of common stock, $.01 par value per share, outstanding as of
July 31, 1999 was 98,216,391.
<PAGE>
TABLE OF CONTENTS
PART I. Financial Information
<TABLE>
<CAPTION>
Description Page
----------- ----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited)
Three and Six Months Ended June 30, 1999 and 1998 3
Condensed Consolidated Balance Sheets
June 30, 1999 (Unaudited) and December 31, 1998 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II. Other Information
Description Page
----------- ----
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 16
Signature 17
</TABLE>
<PAGE>
Part I. Financial Information
Item 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
In millions, except per share amounts
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Products $ 852 $ 868 $ 1,517 $ 1,543
Services 720 706 1,388 1,340
------- ------- ------- -------
Total Revenue 1,572 1,574 2,905 2,883
------- ------- ------- -------
Operating Expenses
Cost of products 531 568 972 1,032
Cost of services 544 534 1,053 1,025
Selling, general and administrative expenses 352 358 663 665
Research and development expenses 84 91 164 172
------- ------- ------- -------
Total Operating Expenses 1,511 1,551 2,852 2,894
------- ------- ------- -------
Income (Loss) from Operations 61 23 53 (11)
Interest (expense) (2) (4) (5) (7)
Other income, net 15 73 31 110
Income Before Income Taxes 74 92 79 92
Income tax expense 28 44 30 44
------- ------- ------- -------
Net Income $ 46 $ 48 $ 49 $ 48
======= ======= ======= =======
Net Income per Common Share
Basic $ .47 $ .47 $ .50 $ .47
Diluted $ .45 $ .46 $ .48 $ .46
Weighted Average Common Shares Outstanding
Basic 98.3 102.6 98.7 102.9
Diluted 102.1 104.1 102.5 104.0
</TABLE>
See accompanying notes.
3
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions, except per share amounts
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
---------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and short-term investments $ 576 $ 514
Accounts receivable, net 1,354 1,556
Inventories 394 384
Other current assets 145 178
---------- -----------
Total Current Assets 2,469 2,632
Reworkable service parts, net 221 232
Property, plant and equipment, net 844 872
Other assets 1,186 1,156
---------- -----------
Total Assets $ 4,720 $ 4,892
========== ===========
Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings $ 78 $ 50
Accounts payable 327 376
Payroll and benefits liabilities 260 303
Customers' deposits and deferred service revenue 401 352
Other current liabilities 587 619
---------- -----------
Total Current Liabilities 1,653 1,700
Long-term debt 32 33
Pension and indemnity liabilities 400 420
Postretirement and postemployment benefits liabilities 607 655
Other long-term liabilities 583 593
Minority interests 43 44
---------- -----------
Total Liabilities 3,318 3,445
---------- -----------
Commitments and contingencies
Stockholders' Equity
Preferred stock: par value $.01 per share, 100.0 shares
authorized, no shares issued or outstanding - -
Common stock: par value $.01 per share, 500.0 shares
authorized; 104.8 and 105.0 shares issued at June 30, 1999
and December 31, 1998, respectively; 97.4 and 98.7 shares
outstanding at June 30, 1999 and December 31, 1998, respectively 1 1
Retained earnings and paid-in capital 1,420 1,429
Other (19) 17
---------- -----------
Total Stockholders' Equity 1,402 1,447
---------- -----------
Total Liabilities and Stockholders' Equity $ 4,720 $ 4,892
========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
In millions
<TABLE>
<CAPTION>
Six Months Ended June 30
------------------------
1999 1998
----- -----
<S> <C> <C>
Operating Activities
Net income $ 49 $ 48
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 185 184
Net gain on sales of assets (8) (55)
Changes in operating assets and liabilities:
Receivables 202 7
Inventories (11) (49)
Current payables (80) (71)
Deferred revenue and customer deposits 49 97
Timing of disbursements for employee severance and
pension (101) (57)
Other assets and liabilities (70) (185)
----- -----
Net Cash Provided by (Used in) Operating Activities 215 (81)
----- -----
Investing Activities
Short-term investments, net (109) 66
Expenditures for service parts and property, plant
and equipment (170) (160)
Acquisition of minority interest in subsidiary - (271)
Proceeds from sales of facilities and other assets 40 230
Other investing activities (24) (33)
----- -----
Net Cash Used in Investing Activities (263) (168)
----- -----
Financing Activities
Purchase of Company common stock (62) (78)
Short-term borrowings, net 28 10
Long-term debt - (2)
Other financing activities 50 39
----- -----
Net Cash Provided by (Used in) Financing Activities 16 (31)
----- -----
Effect of exchange rate changes on cash and cash equivalents (15) (13)
----- -----
Decrease in Cash and Cash Equivalents (47) (293)
Cash and Cash Equivalents at Beginning of Period 488 886
----- -----
Cash and Cash Equivalents at End of Period $ 441 $ 593
===== =====
</TABLE>
See accompanying notes.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared
by NCR Corporation (NCR or the Company) without audit pursuant to the rules and
regulations of the Securities and Exchange Commission and, in the opinion of
management, include all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the consolidated results of operations,
financial position, and cash flows for each period presented. The consolidated
results for interim periods are not necessarily indicative of results to be
expected for the full year. These financial statements should be read in
conjunction with NCR's 1998 Annual Report to Stockholders, Form 10-K for the
year ended December 31, 1998 and Form 10-Q for the quarter ended March 31, 1999.
Certain prior years amounts have been reclassified to conform to the 1999
presentation.
2. SUPPLEMENTAL FINANCIAL INFORMATION (in millions)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
Comprehensive Income 1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $ 46 $ 48 $ 49 $ 48
Other comprehensive (loss) income, net of tax:
Additional minimum pension liability and other (1) 16 8 15
Currency translation adjustments (26) (33) (45) (40)
---------- ---------- ---------- ----------
Total comprehensive income $ 19 $ 31 $ 12 $ 23
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
---------- -----------
<S> <C> <C>
Cash and Short-Term Investments
Cash and cash equivalents $ 441 $ 488
Short-term investments 135 26
---------- -----------
Total cash and short-term investments $ 576 $ 514
========== ===========
Inventories
Finished goods $ 334 $ 324
Work in process and raw materials 60 60
---------- -----------
Total inventories $ 394 $ 384
========== ===========
</TABLE>
3. SEGMENT INFORMATION
NCR assesses performance and allocates resources based principally on the
customers served and the industries in which such customers operate.
Accordingly, NCR categorizes its operations into four strategic segments:
Retail, Financial, National Accounts and Systemedia.
The following tables present data for revenue and operating income by industry
operating segments (in millions):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------------------- ------------------------
1999 1998 1999 1998
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Revenue
Retail $ 408 $ 354 $ 731 $ 622
Financial 647 696 1,205 1,256
National Accounts 381 365 681 673
Systemedia 119 128 232 238
All other segments 17 31 56 94
---------- ---------- ------------ ---------
Consolidated revenue $ 1,572 $ 1,574 $ 2,905 $ 2,883
========== ========== ============ =========
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
-------------------------- ----------------------------
1999 1998 1999 1998
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Operating Income
Retail $ 45 $ 10 $ 55 $ (3)
Financial 72 58 110 93
National Accounts 38 21 44 10
Systemedia 8 10 17 19
Unallocated corporate
expenses and other segments (102) (76) (173) (130)
---------- ---------- ----------- -----------
Consolidated operating income $ 61 $ 23 $ 53 $ (11)
========== ========== =========== ===========
</TABLE>
4. CONTINGENCIES
In the normal course of business, NCR is subject to various regulations,
proceedings, lawsuits, claims and other matters, including actions under laws
and regulations related to the environment and health and safety, among others.
NCR believes the amounts provided in its consolidated financial statements, as
prescribed by generally accepted accounting principles, are adequate in light of
the probable and estimable liabilities. However, there can be no assurances that
the actual amounts required to discharge alleged liabilities from various
lawsuits, claims, legal proceedings and other matters, including the Fox River
matter discussed below, and to comply with applicable laws and regulations, will
not exceed the amounts reflected in NCR's consolidated financial statements or
will not have a material adverse effect on its consolidated results of
operations, financial condition or cash flows. Any amounts of costs that may be
incurred in excess of those amounts provided as of June 30, 1999 cannot
currently be determined.
Environmental Matters
NCR's facilities and operations are subject to a wide range of environmental
protection laws and has investigatory and remedial activities underway at a
number of facilities that it currently owns or operates, or formerly owned or
operated, to comply, or to determine compliance, with such laws. NCR has been
identified, either by a government agency or by a private party seeking
contribution to site cleanup costs, as a potentially responsible party (PRP) at
a number of sites pursuant to various state and federal laws, including the
Federal Water Pollution Control Act (FWPCA) and comparable state statutes, and
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (CERCLA), and comparable state statutes.
Various federal agencies, Native American tribes and the State of Wisconsin
("Claimants") consider NCR to be a PRP under the FWPCA and CERCLA for alleged
natural resource damages ("NRD") and remediation liability with respect to the
Fox River and related Green Bay environment ("Fox River System") due to, among
other things, sediment contamination in the Fox River System allegedly resulting
in part from NCR's former carbonless paper manufacturing in Wisconsin. Claimants
have also notified a number of other paper manufacturing companies of their
status as PRPs resulting from their ongoing or former paper manufacturing
operations in the Fox River Valley, and Claimants have entered into a Memorandum
of Agreement among themselves to coordinate their actions, including the
assertion of claims against the PRPs. Additionally, the federal NRD Claimants
have notified NCR and the other PRPs of their intent to commence a NRD lawsuit,
but have not as yet instituted litigation. In addition, one of the Claimants,
the United States Environmental Protection Agency ("USEPA"), has formally
proposed the Fox River for inclusion on the CERCLA National Priorities List. In
February 1999, the State of Wisconsin made available for public review a draft
remedial investigation and feasibility study ("RI/FS"), which outlines a variety
of alternatives for addressing the Fox River sediments. While the draft RI/FS
did not advocate any specific alternative or combination of alternatives, the
estimated total costs provided in the draft RI/FS ranged from $0 for no action
(which appears to be an unlikely choice) to between $143 and $721 million
depending on the alternative selected. NCR, in conjunction with the other PRPs,
has developed a substantial body of evidence which it believes should
demonstrate that selection of alternatives involving river-wide
restoration/remediation, particularly massive dredging, would be inappropriate
and unnecessary. However, because there is ongoing debate within the scientific,
regulatory, legal, public policy and legislative communities over how to manage
properly large areas of contaminated sediments, NCR believes there is a high
degree of uncertainty about the appropriate scope of alternatives that may
ultimately be required by the Claimants. An accurate estimate of NCR's ultimate
share of restoration/remediation and damages liability cannot be made at this
time due to uncertainties with respect to: the scope and cost of the potential
alternatives; the outcome of the federal and state NRD assessments; the amount
of NCR's share of such restoration/remediation expenses; the timing of any
restoration/remediation; the evolving nature of restoration/remediation
technologies and governmental policies; the contributions from other parties;
and the recoveries from insurance carriers and other indemnitors. NCR believes
the other currently named PRPs would be required and able to pay substantial
shares toward restoration and remediation, and that there are additional
parties, some of which have substantial resources, that may also be liable.
Further, in 1978 NCR sold the business to which the claims apply, and NCR and
the buyer have reached an interim settlement agreement under which the parties
are sharing both defense and liability costs.
7
<PAGE>
It is difficult to estimate the future financial impact of environmental laws,
including potential liabilities. NCR accrues environmental provisions when it is
probable that a liability has been incurred and the amount or range of the
liability is reasonably estimable. Provisions for estimated losses from
environmental restoration and remediation are, depending on the site, based
primarily on internal and third-party environmental studies, estimates as to the
number and participation level of any other PRPs, the extent of the
contamination, and the nature of required remedial and restoration actions.
Accruals are adjusted as further information develops or circumstances change.
Management expects that the amounts accrued from time to time will be paid out
over the period of investigation, negotiation, remediation and restoration for
the applicable sites, which may as to the Fox River site be 10 to 20 years or
more. The amounts provided for environmental matters in NCR's consolidated
financial statements are the estimated gross undiscounted amount of such
liabilities, without deductions for insurance or third-party indemnity claims.
Except for the sharing arrangement described above with respect to the Fox
River, in those cases where insurance carriers or third-party indemnitors have
agreed to pay any amounts and management believes that collectibility of such
amounts is probable, the amounts are reflected as receivables in the
consolidated financial statements.
Legal Proceedings
NCR was named as one of the defendants in a purported class-action suit filed in
November 1996 in Florida alleging liability based on state antitrust and common-
law claims of unlawful restraints of trade, monopolization, and unfair business
practices related to a purported agreement between Siemens-Nixdorf and NCR. In
January 1999, NCR agreed to settle this suit with plaintiffs for an undisclosed
and non-material amount. This settlement is expected to be approved by the court
in the near future.
5. STOCK REPURCHASE PROGRAM
As of June 30, 1999, the Company has committed $106 million of $250 million
authorized for share repurchases. As a result of the reverse/forward stock split
initiative, approximately 2.4 million shares were repurchased at a cost of
$42.30 per share. An additional 120,000 shares were repurchased on the open
market, at a cost of $38.88 per share. Both of these stock repurchase programs
are pursuant to the share repurchase program authorized by the Board of
Directors on April 15, 1999.
6. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income by the weighted
average number of shares outstanding during the reported period. The calculation
of diluted earnings per share is similar to basic, except that the weighted
average number of shares outstanding include the additional dilution from
potential common stock such as stock options and restricted stock awards.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
- -----------------------------------------------------------------------------
Results of Operations
Revenue: Revenue for the three months ended June 30, 1999 was $1,572 million,
essentially flat from the second quarter of 1998. Foreign currency exchange
rates had no material impact on revenue compared with the second quarter of
1998.
Product revenue decreased 2% to $852 million in the second quarter of 1999
compared to the second quarter of 1998. Revenue gains in the quarter occurred
in Retail products at 29% and Enterprise Servers at 26% offset in part by
anticipated revenue declines in Other Computer products at 29%. The downward
pressure on revenue is expected to continue within Other Computer products. The
Other Computer product group includes many products that NCR once sold in
volume, but now sells largely as a solution component. In addition, Financial
products and Systemedia revenues were down slightly in the quarter. Services
revenue increased 2% to $720 million in the second quarter of 1999 compared to
the second quarter of 1998, due to revenue gains in both Customer Support
Services and Professional Services.
Revenue in the second quarter of 1999 compared with the second quarter of 1998
increased 4% in the Americas and 22% in the Asia Pacific region, excluding
Japan, with a decrease of 17% in Japan and 3% in Europe/Middle East/Africa. The
revenue declines experienced in Japan reflect market challenges in that area as
well as NCR's decision to exit the Super ATM business in Japan. NCR continues to
take steps to strengthen its operations in Japan including changes in
management, and expects improvements in future operating results. When adjusted
for the impact of changes in foreign currency exchange rates, revenue on a local
currency basis increased 1% in Europe/Middle East/Africa, 19% in the Asia
Pacific region, excluding Japan, and decreased 26% in Japan. The Americas
region comprised 54% of NCR's total revenue in the second quarter of 1999,
Europe/Middle East/Africa region comprised 30%, Japan comprised 9% and the Asia
Pacific region, excluding Japan, comprised 7%.
Gross Margin and Operating Expenses: Gross margin as a percentage of revenue
increased 1.6 percentage points to 31.6% in the second quarter of 1999 from
30.0% in the second quarter of 1998. Products gross margin increased 3.1
percentage points to 37.7% in the second quarter of 1999. This increase is
attributable to improved product mix and margin rate improvement in most product
lines. Services gross margin remained unchanged at 24.4% in the second quarter
of 1999.
Selling, general and administrative expenses decreased $6 million, or 2%, in the
second quarter of 1999 from the second quarter of 1998. As a percentage of
revenue, selling, general and administrative expenses were 22.4% in the second
quarter of 1999 and 22.7% in the second quarter of 1998. Research and
development expenses decreased $7 million to $84 million in the second quarter
of 1999. As a percentage of revenue, research and development expenses were
5.3% in the second quarter of 1999 versus 5.8% in the second quarter of 1998.
The second quarter research and development expenses continue to reflect the
changing revenue base, and the investment continues to move toward software and
solutions development efforts, with less emphasis on hardware, operating systems
and middleware. While total R&D spending declined in the quarter, continued
year over year declines are not expected.
Income Before Income Taxes: NCR reported operating income of $61 million in the
second quarter of 1999 compared to operating income of $23 million in the second
quarter of 1998. Other income, net of expenses, was $13 million in the second
quarter of 1999 compared to $69 million in the second quarter of 1998. Other
income in 1998 includes a non-recurring gain of $55 million on the sale of NCR's
TOPEND(R) ("TOPEND") middleware technology and product family to BEA Systems,
Inc. ("BEA"). Income before income taxes was $74 million in the second quarter
of 1999 compared to $92 million in the second quarter of 1998.
Provision for Income Taxes: Income tax provisions for interim periods are based
on estimated annual income tax rates. The provision for income taxes was $28
million in the second quarter of 1999 compared to $44 million in the second
quarter of 1998. The second quarter 1999 tax provision compared to the 1998
periods reflects a return to more normalized tax rate levels. The normalization
of tax rates is primarily due to improved profitability in certain tax
jurisdictions, mainly the United States.
9
<PAGE>
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
- -------------------------------------------------------------------------
Results of Operations
Revenue: Revenue for the six months ended June 30, 1999 was $2,905 million, an
increase of 1% from the first six months of 1998. When adjusted for the impact
of changes in currency exchange rates, revenue was flat compared with the first
six months of 1998.
Product revenue decreased 2% to $1,517 million in the first six months of 1999
compared to the same period of 1998. Revenue gains in the first six months of
1999 in Retail products of 36% were partly offset by anticipated revenue
declines in Other Computer products of 22%. The Other Computer product group
includes many products that NCR once sold in volume, but now sells largely as a
solution component. In addition, Enterprise Servers, Customer Services and
Professional Services recorded revenue growth in the first six months of 1999
between 2% and 9%. Financial products were flat in the first six months of 1999
while Systemedia decreased slightly compared to the first six months of 1998.
Services revenue increased 4% to $1,388 million in the first six months of 1999
compared to the same period of 1998, due to revenue gains in both Customer
Support Services and Professional Services.
Revenue in the first six months of 1999 compared with the first six months of
1998 increased 4% in the Americas, 1% in Europe/Middle East/Africa and 13% in
the Asia Pacific region, excluding Japan, with a decrease of 16% in Japan. The
revenue declines experienced in Japan reflect market challenges in that area as
well as NCR's decision to exit the Super ATM business in Japan. When adjusted
for the impact of changes in foreign currency exchange rates, revenue on a local
currency basis increased 2% in Europe/Middle East/Africa, 11% in the Asia
Pacific region, excluding Japan, and decreased 24% in Japan. The Americas
region comprised 53% of NCR's total revenue in the first six months of 1999,
Europe/Middle East/Africa region comprised 31%, Japan comprised 9% and the Asia
Pacific region, excluding Japan, comprised 7%.
Gross Margin and Operating Expenses: Gross margin as a percentage of revenue
increased 1.6 percentage points to 30.3% in the first six months of 1999 from
28.7% in the same period of 1998. Products gross margin increased 2.8 points to
35.9% in the first six months of 1999. This increase is attributable to
improved product mix and margin rate improvement in most product lines.
Services gross margin increased 0.6 points to 24.1% in the first six months of
1999 due primarily to improvements in customer support and professional services
margins.
Selling, general and administrative expenses decreased $2 million in the first
six months of 1999 from the first six months of 1998. As a percentage of
revenue, selling, general and administrative expenses were 22.8% in the first
six months of 1999 and 23.1% in the first six months of 1998. Research and
development expenses decreased $8 million to $164 million in the first six
months of 1999. As a percentage of revenue, research and development expenses
were 5.6% in the first six months of 1999 versus 6.0% in the first six months of
1998. The trend in research and development expenses continues to reflect the
changing revenue base.
Income Before Income Taxes: NCR reported operating income of $53 million in the
first six months of 1999 compared to an operating loss of $11 million in the
same period of 1998. Other income, net of expenses, was $26 million in the first
six months of 1999 compared to $103 million in the first six months of 1998.
Other income in 1998 includes a non-recurring gain of $55 million on the sale of
TOPEND to BEA. Other declines year over year are due to reductions in interest
income, attributable to lower average short term investment balances, and 1998
foreign exchange contract gains that did not recur in 1999. Income before income
taxes was $79 million in the first six months of 1999 compared to $92 million in
the same period of 1998.
Provision for Income Taxes: Income tax provisions for interim periods are based
on estimated annual income tax rates. The provision for income taxes was $30
million in the first six months of 1999 compared to $44 million in the first six
months of 1998. The first six months 1999 tax provision compared to the 1998
periods primarily reflects a return to more normalized tax rate levels. The
normalization of tax rates is primarily due to improved profitability in certain
tax jurisdictions, mainly the United States.
Financial Condition, Liquidity, and Capital Resources
NCR's cash, cash equivalents, and short-term investments totaled $576 million at
June 30, 1999, compared to $514 million at December 31, 1998.
Operating Activities: NCR generated cash flows from operations of $215 million
in the first six months of 1999 while net cash flows used in operations were $81
million in the first six months of 1998. The cash generated in operations in
the first six months of 1999 was driven primarily by improved asset management.
Receivable balances decreased $202 million in the first six months of 1999
compared to a decrease of $7 million in the same period in 1998. The
improvement in 1999 reflects a strong focus on collections. Inventory balances
increased $11 million in the first six months of 1999 compared to an increase of
$49 million in the first six months of 1998. 1998 operating activities included
a $55 million gain in the sale of TOPEND to BEA.
10
<PAGE>
Investing Activities: Net cash flows used in investing activities were $263
million in the first six months of 1999 and $168 million in the same period of
1998. In 1999, NCR purchased short-term investments of $109 million compared
with an investment reduction of $66 million in 1998. The increase in 1999
reflects the improvement in operating results. Capital expenditures were $170
million for the first six months of 1999 and $160 million for the comparable
period in 1998. Capital expenditures generally relate to Expenditures for
reworkable parts used to service customer equipment, expenditures for equipment
and facilities used in manufacturing and research and development, and
expenditures for facilities to support sales and marketing activities. 1998
proceeds from the sale of facilities and other assets includes the sale of NCR's
TOP END middleware technology to BEA and the sale of NCR's retail and computer
systems manufacturing operations to Solectron Corp. ("Solectron").
Financing Activities: Net cash provided by financing activities was $16 million
in the first six months of 1999 and net cash used for financing was $31 million
in the first six months of 1998. As of June 30, 1999, $62 million of cash was
used in the repurchase of Company stock pursuant to the stock repurchase program
included in Note 5 of the Notes to Consolidated Financial Statements; $78
million of cash was used in the same period of 1998 to repurchase Company stock.
In the first six months of 1999, NCR reported cash flows of $50 million from
other financing activities compared to $39 million in the same period of 1998.
Other financing cash flows primarily relate to share activity under NCR's
employee stock purchase plan.
NCR believes that cash flows from operations, the credit facility, and other
short- and long-term financings, if any, will be sufficient to satisfy its
future working capital, research and development, capital expenditure, and other
financing requirements for the foreseeable future.
Factors That May Affect Future Results
Year 2000
- ---------
Please note that the following is a Year 2000 Readiness Disclosure, as that term
is defined in the Year 2000 Information and Readiness Disclosure Act (105
P.L.271).
Year 2000 issues concern the inability of certain computerized information
systems to properly process date-sensitive information as the year 2000
approaches. Systems that do not process such information may require
modification or replacement prior to the year 2000. NCR accords a significant
priority to Year 2000 issues, and in early 1996 established a task force to
coordinate its global efforts to develop and implement its plans to address such
issues.
NCR's Year 2000 plans include, without limitation: (1) replacing or upgrading
NCR's affected internal information technology (IT) systems and non-IT systems
(those which include embedded microprocessors such as security systems or
factory production equipment), (2) developing Year 2000 Qualified products as
part of its offerings to customers, (3) designating products that will not be
rendered Year 2000 Qualified, (4) making Year 2000 upgrades available for
certain products and (5) identifying options for customers to migrate from non-
Qualified products to Year 2000 Qualified products. ''Year 2000 Qualification''
means that a particular NCR product has been reviewed to confirm that it stores,
processes (including sorting and performing mathematical operations), inputs and
outputs data containing date information correctly, regardless of whether the
data contains dates before, on, or after January 1, 2000. NCR products that do
not perform date manipulation, and that do not alter any date information that
flows through them, are also considered Year 2000 Qualified.
State of Readiness: In assessing the Year 2000 readiness of its products, IT
systems and non-IT systems, the Company employs a process consisting of five
phases: (1) inventory; (2) assessment; (3) remediation; (4) testing; and (5)
deployment (including making Year 2000 Qualified products available to customers
and, for the Company's internal systems, replacing or modifying designated IT
and non-IT systems).
The Company has completed inventory, assessment, remediation and testing of all
of the products it presently develops and provides to customers. Installation
of Year 2000 Qualified products at customer sites is largely dependent upon,
among other things, the customers' schedules, the availability of personnel for
installations and the presence or absence of Year 2000 plans on the customers'
part. NCR expects that installation of Year 2000 Qualified products or upgrades
will continue to take place at customer sites throughout 1999. Many such
installations occurred in 1998. NCR is encouraging its customers to plan such
installations promptly, because if a large number of customers delay their plans
until late in the year, the demand for installation and related services may
exceed their availability. NCR has designated the Year 2000 Qualification
status of several thousand of its current and former products, and has made that
directly available to past and present customers through links on its Year 2000
website. Through that website, direct contacts to customers with formal account
teams assigned to them, its "800" call center, mailings to customers, and other
means, NCR has sought to convey information on the status of its products, to
advise on the availability or discontinuation of maintenance services for older
products, and to provide information on upgrades or migration paths. There can
be no assurance, however, that all owners of NCR products, particularly if they
are not current maintenance customers, or otherwise have no current NCR
relationship, can be identified or contacted.
11
<PAGE>
The Company previously offered highly specialized products specifically targeted
for niche markets, often unique to a single country (''local products''). The
Company has completed its assessment of these local products, typically sold
prior to 1995 under the Company's previous business model, and has determined
that the majority of them are not Year 2000 Qualified. Where practical, NCR is
communicating with purchasers of these products and is offering to assist them
in identifying replacement NCR products, if available.
The Company has completed its inventory, assessment, remediation and testing of
the Year 2000 issues associated with its critical global IT systems (e.g.,
manufacturing, financial management, incident management, payroll and statutory,
and order processing systems). At the end of the second quarter of 1999,
deployment (including retirement of legacy systems) was complete for
approximately 89% of these critical IT systems, which are supported by the
Company's Information Technology Services group, with the balance of those
systems expected to be completed in the third quarter of 1999. The Company has
also completed its inventory, assessment, remediation and testing of Year 2000
issues associated with its non-critical global internal information systems
supported by the Information Technology Services group, and deployment
(including retirement of legacy systems) was complete for approximately 92% of
such systems as of the end of the second quarter of 1999. Other, typically
localized IT systems, applications or tools are directly supported by various
business units of the Company around the world; most of these are characterized
as non-critical to the locations and business units that utilize them, and none
are categorized as critical to the Company and its subsidiaries taken as a
whole. The Company's Year 2000 analysis and related deployment for these
systems, applications and tools was substantially complete at the end of the
second quarter of 1999, with the remainder of such activities expected to be
completed in the third and fourth quarters of 1999. In addition, the Company
has completed its inventory and assessment of the Year 2000 issues associated
with its non-IT systems, including telecommunication equipment, security systems
and embedded microprocessors, at its manufacturing, distribution and office
facilities around the world. The Company did not identify any significant
business impact as a result of Year 2000 issues in connection with such systems.
NCR has requested information from substantially all of its key suppliers
concerning their Year 2000 readiness to assess the suppliers' ability to
continue to deliver products and services to NCR, as well as the Year 2000
readiness of those products and services themselves. Suppliers are categorized
as critical (meaning their failure to deliver products or services could have a
critical impact on some phase or phases of NCR's business) or non-critical
(typically designating a supplier that is NCR's primary source of a significant
product or service, but for which one or more alternate sources also exist). At
this time, approximately 240 and 550 suppliers are identified in those
respective categories (other suppliers, such as those utilized on a spot basis,
in very low volume, or for generic commodity purchases not critical to the
Company's business, are excluded). NCR has conducted reviews and completed its
initial assessment of its critical suppliers in accordance with its Year 2000
Qualification guidelines. All of the critical suppliers that the Company has
assessed either have completed their Year 2000 internal compliance activities or
have presented plans or statements that, at present, meet NCR's expectations.
NCR will continue to monitor these suppliers and expects to be prepared to
implement prepared contingency plans should the Company determine that any of
its critical suppliers will not complete their plans on schedule. In addition,
NCR continues to assess its non-critical suppliers. As of the end of the second
quarter of 1999, NCR had assessed approximately 95% of its non-critical
suppliers. The Company expects that its assessment of the remaining non-
critical suppliers will be completed during the third quarter of 1999. New
suppliers are also evaluated for Year 2000 readiness.
NCR's assessment of its suppliers is dependent upon its ability to obtain
accurate and complete information from them, and on their willingness to provide
such information. Moreover, there can be no assurances that all of NCR's
suppliers, including its critical suppliers, will be able to effectively achieve
Year 2000 readiness. NCR has developed contingency plans to address such
situations with respect to both its critical and non-critical suppliers. The
Company relies on Solectron to provide essential hardware components of NCR's
product offerings. Any major Year 2000 failures by Solectron or any other
critical suppliers could materially and adversely impact the Company. Because
of Solectron's particular significance to the Company's manufacturing
operations, NCR has conducted multiple on-site reviews of Solectron's facilities
to ascertain the status of those facilities' Year 2000 readiness. No material
Year 2000 issues have been identified in those reviews. Solectron facilities,
including all those utilized by NCR, were also subject to an external audit for
Year 2000 readiness arranged for by Solectron.
NCR believes that no single customer represents so significant a portion of the
Company's revenues that failure on the part of such a customer to plan
effectively for Year 2000 would materially impact NCR's consolidated results of
operations, financial condition or cash flows. In addition, NCR believes that
the diversity of its customer base should minimize the potential financial
impact of such an event. Some commentators have predicted that information
technology buying trends could be reduced due to Year 2000 issues. While some
NCR customers have postponed or have indicated that they may postpone purchasing
decisions in order to stabilize their information technology systems to
facilitate Year 2000 testing and readiness, others have indicated that Year 2000
readiness should not affect the timing of their purchases, and some have made
new purchases to enhance their Year 2000 readiness. The impact of such buying
patterns on NCR's financial results is difficult to quantify and may affect the
Company's revenue, consolidated results of operations, financial condition or
cash flows in upcoming quarters.
12
<PAGE>
Costs to Address Year 2000 Issues: Due to a number of factors, it is difficult
to calculate the total cost of addressing the Company's Year 2000 issues with
precision. These factors include, without limitation, the large number of NCR
employees and contractors devoting a portion of their time and efforts to Year
2000 issues, and the inability to separately identify Year 2000 costs due to the
concurrent remediation of both Year 2000 and non-Year 2000 issues associated
with NCR's products, IT systems and non-IT systems. The Company estimates the
total cost to address its Year 2000 issues, including costs already incurred in
1997 and 1998, to be approximately $205 million. These costs include (1) in
connection with the products offered by the Company, personnel expenses, product
upgrades, and other modifications, including the replacement of legacy systems,
and (2) in connection with the
Company's infrastructure, the internal IT and non-IT systems being addressed in
the Company's Year 2000 plans as discussed above. Approximately $85 million of
such total costs were incurred in fiscal 1998; the Company estimates it incurred
approximately $20 million of such costs in 1997. NCR intends to capitalize or
expense its Year 2000 costs as required by generally accepted accounting
principles. In addition, the Company expects to fund these costs through
operating cash flows. Because these Year 2000 costs will be funded through a
reallocation of NCR's overall research and development, information technology
and administrative spending, Year 2000 costs are not expected to result in
significant increases in such expenditures. These cost estimates do not include
potential increased service, customer satisfaction, warranty or litigation costs
that may arise from Year 2000 issues affecting the Company's products or from
unanticipated failures of the Company's IT and non-IT systems, nor do they
include any increased costs, such as those associated with execution of
contingency plans, that may result from supplier or customer disruptions related
to a lack of readiness for Year 2000 issues. Although NCR believes its cost
estimates are reasonable, there can be no assurance, for the reasons stated
below, that the costs of implementing the Company's Year 2000 plans will not
differ materially from its estimates.
Risks of Year 2000 Issues: Year 2000 problems can be difficult to identify or
predict for a number of reasons. These include, among others, the complexity of
testing (whether by NCR or by a customer) inter-connected products, operating
environments, networks and applications, including those developed and/or sold
by third parties; the difficulty of simulating and testing for all possible
variables and outcomes associated with critical dates in 1999 and 2000; and the
reliability of test results obtained in a laboratory environment against actual
occurrences in a live production environment. As a result of such difficulties
and the risks described below, there can be no assurances that Year 2000 issues
will not materially adversely impact NCR's consolidated results of operations,
financial condition or cash flows.
Despite the Company's substantive Year 2000 plans and efforts, the Company could
face significant risks associated with its business-critical operations,
including, without limitation, the possible malfunction of NCR's IT and non-IT
systems due to unidentified components or applications, undetected errors or
defects, and the potential impacts of Year 2000 difficulties experienced by
third parties (e.g., suppliers, customers, utilities, governmental units and
financial institutions). In particular, risks associated with non-U.S. third
parties may be greater than those located domestically, as it is widely reported
that many non-U.S. businesses and governments are not addressing their Year 2000
issues on a timely basis.
In addition, despite the Company's Year 2000 Qualification and testing
processes, NCR could face significant Year 2000 risks as a vendor of technology
products and services. Such risks include, but are not limited to, the
following uncertainties: NCR's products may contain undetected errors or defects
associated with Year 2000 issues; NCR may be unable to identify and notify
affected customers of local or other products that are not Year 2000 Qualified;
installation schedules of Year 2000 Qualified products may be delayed; and
demand for installation services may exceed the ability of NCR and other service
providers to meet that demand. In addition, NCR has provided a range of
services, including software code development, as contracted and specified by
its customers. Typically, such services and products have been accepted by the
customers and warranties for them have expired; however, there is some risk that
customers will claim that NCR bears responsibility for Year 2000 issues
involving their systems. The Company also has provided Year 2000 code
remediation services to a small number of its customers. Some commentators have
noted that the complexity of identifying and testing Year 2000 issues in
connection with such services raises prospects of liability. NCR's contractual
arrangements typically contain limited warranties and limitations on liability,
but there can be no assurance that these limitations will be upheld in all
instances. Any of these or other unforeseen Year 2000 risks could increase
service, customer satisfaction, warranty and litigation costs. While no
litigation has been initiated against NCR in connection with Year 2000 issues,
suits have been brought against other technology vendors and such claims may be
advanced against NCR in the future.
The anticipated costs and risks described above are based on management's best
estimates using information currently available and numerous assumptions of
future events. There can be no assurances that these estimates will not change
or that there will not be delays in implementing the Company's Year 2000 plans.
In addition, the continued availability of personnel to address Year 2000 issues
cannot be assured, which could result in increased costs or delays in
implementing NCR's Year 2000 plans.
Contingency Plans: NCR believes it has developed effective Year 2000 plans for
the critical areas of its business. However, the Company recognizes that it is
not possible to identify and test all potential variables and outcomes relative
to Year 2000 issues. Accordingly, the Company has developed over 400 business
continuity and contingency plans (BCCPs) for its critical processes. NCR's
BCCPs address, among other things, the potential for Year 2000 failures of third
parties, including suppliers. BCCPs have
13
<PAGE>
also been developed for such areas as customer support services, services
delivery, order management, help desks, incident-based services, manufacturing
systems, accounting and payroll, networks and processing centers. These plans
were completed in the second quarter of 1999. The Company is also, developing or
updating, as the case may be complementary disaster recovery plans for
approximately 86 a process expects to complete in the third quarter of 1999.
Disaster recovery plans are not limited to Year 2000 concerns, and address
potential failures of utilities or building services, as well as occurrences
such as floods and fires. Both the BCCPs and the disaster recovery plans are
expected to be adjusted and coordinated in the third and fourth quarters of 1999
as information and circumstances change.
Environmental
- -------------
The Company has been identified as a potentially responsible party in connection
with the Fox River matter as further described in "Environmental Matters" under
Note 4 of the Notes to Consolidated Financial Statements on page 7 of this
quarterly report and such discussion is incorporated in this Item 2 by reference
and made a part hereof.
Forward Looking Statements
- --------------------------
This Management's Discussion and Analysis of Financial Condition and Results of
Operations, and other sections of this Form 10-Q contain forward-looking
statements that are based on current expectations, estimates and projections
about the industry in which the Company operates, management's beliefs and
assumptions made by management. Any Form 10-K, Annual Report to Shareholders,
Form 10-Q or Form 8-K of the Company may include forward-looking statements. In
addition, other written or oral statements, which constitute forward-looking
statements, may be made by or on behalf of the Company. Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates,"
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions
("Factors"), which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise. Factors include price and product/services
competition by foreign and domestic competitors, including new entrants; the
Company's ability to identify, complete and successfully integrate other
businesses through mergers, acquisitions, joint ventures and other business
combinations; the ability to identify and expand into new and emerging markets;
the ability to continue to introduce competitive new products, services and
solutions on a timely, cost effective basis; the ability to achieve and improve
profitable gross margins through, among other things, a competitive mix of
products/services; the achievement of lower costs and expenses; the pace of
market growth for the Company's offerings, such as data warehousing; the
Company's ability to execute its strategies for its offerings in various
markets; management changes in Japan; protection and validity of patent and
other intellectual property rights; reliance on third party and single source or
exclusive suppliers, such as Solectron; reliance on alliances with companies
that provide products and services that are integrated into NCR's solution
offerings; the seasonal nature of the Company's business; risks of operating
abroad; and the outcome of pending and future litigation and governmental
proceedings, including those related to the environment, health and safety.
These foregoing are representative, but do not constitute a complete list, of
the Factors that could affect the outcome of the forward-looking statements. In
addition, such statements could be affected by general industry and market
conditions and growth rates, NCR's performance in these markets, retention of
personnel, general domestic and international political or economic conditions,
including interest rate and currency exchange rate fluctuations, Euro changeover
and other Factors.
For a further description of Factors that could cause actual results to differ
materially from such forward-looking statements, see Footnote 4 of the Notes to
Consolidated Financial Statements in Item 1 hereof, Item 3. Quantitative and
Qualitative Disclosure About Market Risk, the discussion above captioned Year
2000 and also see the discussion of such Factors in Form 10-Q for the quarter
ended March 31, 1999, the Company's Form 10-K for the Fiscal Year ended December
31, 1998 and in the Company's other securities filings.
14
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
NCR is exposed to market risk, including changes in foreign currency exchange
rates and interest rates. NCR uses a variety of measures to monitor and manage
these risks, including derivative financial instruments. Because a substantial
portion of NCR's operations and revenue occur outside the United States, NCR's
results can be significantly impacted by changes in foreign currency exchange
rates. To manage the exposures to changes in currency exchange rates, NCR
enters into various derivative financial instruments such as forward contracts,
swaps and options. These instruments generally mature within twelve months. At
inception, the derivative instruments are designated as hedges of inventory
purchases and sales and certain financing transactions that are firmly committed
or forecasted. Gains and losses on qualifying hedged transactions are deferred
and recognized in the determination of income when the underlying transactions
are realized, canceled or otherwise terminated. When hedging certain foreign
currency transactions of a long-term investment nature, gains and losses are
recorded in the currency translation adjustment component of stockholders'
equity. Gains and losses on other foreign exchange contracts are generally
recognized currently in other income or expense as exchange rates change. NCR
does not hold or enter into derivative financial instruments for trading
purposes.
For purposes of specific risk analysis, NCR uses sensitivity analysis to
determine the impacts that market risk exposures may have on the fair values of
the Company's hedge portfolio. The foreign currency exchange risk is computed
based on the market value of future cash flows as impacted by the changes in the
rates attributable to the market risk being measured. The sensitivity analysis
represents the hypothetical changes in value of the hedge position and does not
reflect the opposite gain or loss on the underlying transaction. A 10%
strengthening of the U.S. Dollar from levels present at June 30, 1999 results in
an increase of 1 million U.S. Dollars to the current fair value of derivatives
protecting anticipated exposures. A 10% weakening in U.S. Dollar exchange rates
would increase the same fair value of derivatives by 16 million U.S. Dollars.
The interest rate risk associated with NCR's borrowing and investing activities
at June 30, 1999 is not material in relation to NCR's consolidated financial
position, results of operations or cash flows. NCR does not generally use
derivative financial instruments to alter the interest rate characteristics of
its investment holdings or debt instruments.
15
<PAGE>
Part II. Other Information
ITEM 1. LEGAL PROCEEDINGS
The information required by this item is included in the material under Note 4
of the Notes to Consolidated Financial Statements on page 8 of this quarterly
report and is incorporated in this Item 1 as by reference and made a part
hereof.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Amendment and Restatement and Articles Supplementary
of NCR Corporation, as amended May 14, 1999.
3.2 Bylaws of NCR Corporation, as amended and restated on February 19,
1998 (incorporated by reference to Exhibit 3.2 to the NCR
Corporation Annual Report on Form 10-K for the year ended December
31, 1997).
4.1 Common Stock Certificate of NCR Corporation (incorporated by
reference to Exhibit 4.1 to the NCR Corporation Annual Report on
Form 10-K for the year ended December 31, 1996).
4.2 Preferred Share Purchase Rights Plan of NCR Corporation, dated as
of December 31, 1996, by and between NCR Corporation and The First
National Bank of Boston (incorporated by reference to Exhibit 4.2
to the NCR Corporation Annual Report on Form 10-K for the year
ended December 31, 1996).
10.1 Termination Agreement dated May 26, 1999.
27 Financial Data Schedule.
(b) Reports on Form 8-K
NCR filed a Current Report on Form 8-K dated May 17, 1999, reporting under Item
5 of such form the news release addressing NCR's cash out of record stockholders
with small holdings.
UNIX is a registered trademark in the United States and other countries,
exclusively licensed through X/OPEN Company Limited.
Windows NT is a registered trademark of Microsoft Corporation.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NCR CORPORATION
Date: August 12, 1999 By: /s/ David Bearman
-------------------------------------
David Bearman, Senior Vice-President
and Chief Financial Officer
17
<PAGE>
Exhibit 3.1
NCR CORPORATION
ARTICLES OF AMENDMENT
NCR CORPORATION, a Maryland corporation, having its principal office in
Montgomery County, Maryland (which is hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Corporation hereby effects a forward stock split by changing and
reclassifying each 1 share of Common Stock, par value $.01 per share, of the
Corporation, which is issued and outstanding at 6:01 p.m. on the effective date
of this amendment, into ten shares of such Common Stock, par value $.01 per
share.
SECOND: The amendment does not increase the authorized stock of the
Corporation.
THIRD: The foregoing amendment to the Charter and increase in the stated
capital of the Corporation has been advised by the Board of Directors and
approved by the stockholders of the Corporation.
FOURTH: The foregoing amendment to the Charter will become effective at 6:01
p.m. on May 14, 1999.
IN WITNESS WHEREOF, NCR Corporation has caused these presents to be signed in
its name and on its behalf by its Senior Vice President and General Counsel and
witnessed by its Assistant Secretary on May 11, 1999.
WITNESS: NCR CORPORATION
/s/ M. Louise Turilli By: /s/ Jon S. Hoak
- ----------------------------- --------------------------------------
Assistant Secretary Senior Vice President and General Counsel
<PAGE>
THE UNDERSIGNED, Senior Vice President and General Counsel of NCR Corporation,
who executed on behalf of the Corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Amendment to be the
corporate act of said Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ Jon S. Hoak
-----------------------------------------
Senior Vice President and General Counsel
<PAGE>
NCR CORPORATION
ARTICLES OF AMENDMENT
NCR CORPORATION, a Maryland corporation, having its principal office in
Montgomery County, Maryland (which is hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Corporation hereby effects a reverse stock split by changing and
reclassifying each 10 shares of Common Stock, par value $.01 per share, of the
Corporation, which is issued and outstanding at 6:00 p.m. on the effective date
of this amendment, into one share of such Common Stock, par value $.01 per
share.
Fractional shares held by record stockholders who as a result of the reverse
split hold less than one share will be converted into the right to receive the
fair value of such fractional interests as determined by the Board of Directors
of the Corporation.
SECOND: The amendment does not increase the authorized stock of the
Corporation.
THIRD: The foregoing amendment to the Charter and reduction in the stated
capital of the Corporation has been advised by the Board of Directors and
approved by the stockholders of the Corporation.
FOURTH: The foregoing amendment to the Charter will become effective at 6:00
p.m. on May 14, 1999.
IN WITNESS WHEREOF, NCR Corporation has caused these presents to be signed in
its name and on its behalf by its Senior Vice President and General Counsel and
witnessed by its Assistant Secretary on May 11, 1999.
WITNESS: NCR CORPORATION
/s/ M. Louise Turilli By: /s/ Jon S. Hoak
- ------------------------- --------------------------------------
Assistant Secretary Senior Vice President and General Counsel
<PAGE>
THE UNDERSIGNED, Senior Vice President and General Counsel of NCR Corporation,
who executed on behalf of the Corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Amendment to be the
corporate act of said Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ Jon S. Hoak
-----------------------------------------
Senior Vice President and General Counsel
<PAGE>
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
NCR CORPORATION
NCR Corporation, a Maryland corporation having its principal business office in
Dayton, Ohio, and its principal office in the City of Rockville, State of
Maryland, desires to amend and restate its charter as currently in effect, and
hereby certifies to the State Department of Assessment and Taxation of Maryland
that:
FIRST: The Charter of the Corporation is hereby amended by:
Changing and reclassifying each of the shares of Common Stock (par value $5.00
per share) of the Corporation which is issued as of the close of business on the
effective date of this amendment into one share of Common Stock (par value $.01
per share) and by transferring from the account designated "Common Stock" to the
account designated "Capital Surplus" $4.99 for each share of Common Stock issued
immediately after the change and reclassification, or $359,280,000 in the
aggregate.
Changing and reclassifying the 72,000,000 shares of Common Stock (par value $.01
per share) of the Corporation which are issued as of the close of business on
the effective date of this amendment into 101,437,174.688 shares of Common Stock
(par value $.01 per share) and by transferring from the account designated
"Capital Surplus" to the account designated "Common Stock" $294,371.74688, such
change and reclassification to be made as a 1.408849648444-for-one split of the
issued shares and not as a stock dividend, and in connection therewith there
shall be issued 29,437,174.688 additional shares of Common Stock (par value $.01
per share).
SECOND: The following provisions are all of the provisions of the Charter
currently in effect and as hereinafter amended:
ARTICLE I
Name
----
Section 1.1. The name of the Corporation (the "Corporation") is: NCR
Corporation.
<PAGE>
ARTICLE II
Principal Office, Registered Office, and Agent
----------------------------------------------
Section 2.1. The address of the Corporation's principal office in the State of
Maryland is 2 Choke Cherry Road, Rockville, Maryland 20815. The resident agent
of the Corporation in the State of Maryland is Mallon Snyder. The address of
the resident agent is 99 South Washington Street, Rockville, Maryland 20850.
Such resident agent is a Maryland resident.
ARTICLE III
Purposes
--------
Section 3.1. The purpose of the Corporation is to engage in any lawful act,
activity or business for which corporations may be organized under the General
Laws of the State of Maryland as now or hereafter in force. The Corporation
shall have all the general powers granted by law to Maryland corporations and
all other powers not inconsistent with law which are appropriate to promote and
attain its purpose.
ARTICLE IV
Capital Stock
-------------
Section 4.1. The Corporation shall be authorized to issue 600,000,000 shares of
capital stock, of which 500,000,000 shares shall be classified as "Common
Stock", $.01 par value per share ("Common Stock") (having an aggregate par value
of $5,000,000.00), and 100,000,000 shares shall be classified as "Preferred
Stock", $.01 par value per share ("Preferred Stock") (having an aggregate par
value of $1,000,000.00). The aggregate par value of all authorized shares is
$6,000,000.00. The Board of Directors may classify and reclassify any unissued
shares of capital stock by setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of redemption
of such shares of stock.
Section 4.2. The Common Stock shall be subject to the express terms of the
Preferred Stock and any series thereof. The holders of shares of Common Stock
shall be entitled to one vote for each such share upon all proposals presented
to the stockholders on which the holders of Common Stock are entitled to vote,
except for proposals on which only the holders of another specified class or
series of capital stock are entitled to vote. Subject to the provisions of law
and any preference rights with respect to the payment of dividends attaching to
the Preferred Stock or any series thereof, the holders of Common Stock shall be
entitled to receive, as and when declared by the Board of Directors, dividends
and other distributions authorized by the Board of Directors in accordance with
Maryland General Corporation Law, as in effect from time to time (the "MGCL")
and to all other rights of a stockholder pursuant thereto. Except as otherwise
provided by law or in the Charter of the Corporation (including in any Articles
Supplementary (as defined below)) (the "Charter"), the Common Stock shall have
the exclusive right to vote for the election of directors and for all other
purposes, and holders of Preferred Stock shall not be entitled to receive notice
of any meeting of stockholders at which they are not entitled to vote. In the
event of a liquidation, dissolution or winding up of the Corporation or other
distribution of the Corporation's assets among stockholders for the purpose of
winding up the Corporation's affairs, whether voluntary or involuntary, after
payment or provision for payment of the debts and other liabilities of the
Corporation and subject to the rights, privileges, conditions and restrictions
attaching to the Preferred Stock or any series thereof, the Common Stock shall
entitle the holders thereof, together with the holders of any other class of
stock hereafter classified or reclassified not having a preference on
distributions in the liquidation, dissolution or winding up of the Corporation
or other distribution of the Corporation's assets among stockholders for the
purpose of winding up the Corporation's affairs, whether voluntary or
involuntary, to share ratably in the remaining net assets of the Corporation.
Section 4.3. The Preferred Stock may be issued from time to time in one or more
series as authorized by the Board of Directors. The Board of Directors shall
have the power from time to time to the maximum extent permitted by the MGCL to
classify or reclassify, in one or more series, any unissued shares of Preferred
Stock, and to reclassify any unissued shares of any series of Preferred Stock,
in any such case, by setting or changing the number of shares constituting such
series and the designation, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of the stock. In any such event, the Corporation shall
file for record with the State Department of Assessments and Taxation of
Maryland (or other appropriate entity) articles supplementary in form and
substance prescribed by the MGCL (each, an "Articles Supplementary"). Subject
to the express terms of any series of Preferred Stock outstanding at the time,
the Board of Directors may increase or decrease the number or alter the
designation or classify or reclassify any unissued shares of a particular
<PAGE>
series of Preferred Stock by fixing or altering in one or more respects, from
time to time before issuing the shares, any terms, rights, restrictions and
qualifications of the shares, including any preference, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of the shares of the series.
Section 4.4 Subject to the foregoing, the power of the Board of Directors to
classify and reclassify any of the shares of capital stock shall include,
without limitation, subject to the provisions of the Charter, authority to
classify or reclassify any unissued shares of such stock into a class or classes
of preferred stock, preference stock, special stock or other stock, and to
divide and classify shares of any class into one or more series of such class,
by determining, fixing or altering one or more of the following:
(a) the designation of such class or series, which may be by
distinguishing number, letter or title;
(b) the number of shares of such class or series, which number the Board
of Directors may thereafter (except where otherwise provided in the
Articles Supplementary) increase or decrease (but not below the number of
shares thereof then outstanding) and any shares of any class or series
which have been redeemed, purchased, otherwise acquired or converted into
shares of Common Stock or any other class or series shall become part of
the authorized capital stock and be subject to classification and
reclassification as provided in this Section;
(c) whether dividends, if any, shall be cumulative or noncumulative, and,
in the case of shares of any class or series having cumulative dividend
rights, the date or dates or method of determining the date or dates from
which dividends on the shares of such class or series shall be cumulative;
(d) the rate of any dividends (or method of determining such dividends)
payable to the holders of the shares of such class or series, any
conditions upon which such dividends shall be paid and the date or dates or
the method for determining the date or dates upon which such dividends
shall be payable, and whether any such dividends shall rank senior or
junior to or on a parity with the dividends payable on any other class or
series of stock;
(e) the price or prices (or method of determining such price or prices) at
which, the form of payment of such price or prices (which may be cash,
property or rights, including securities of the same or another corporation
or other entity) for which, the period or periods within which and the
terms and conditions upon which the shares of such class or series may be
redeemed, in whole or in part, at the option of the Corporation or at the
option of the holder or holders thereof or upon the happening of a
specified event or events, if any;
(f) the obligation, if any, of the Corporation to purchase or redeem
shares of such class or series pursuant to a sinking fund or otherwise and
the price or prices at which, the form of payment of such price or prices
(which may be cash, property or rights, including securities of the same or
another corporation or other entity) for which, the period or periods
within which and the terms and conditions upon which the shares of such
class or series shall be redeemed or purchased, in whole or in part,
pursuant to such obligation;
(g) the rights of the holders of shares of such class or series upon the
liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation, which rights may vary
depending upon whether such liquidation, dissolution or winding up is
voluntary or involuntary and, if voluntary, may vary at different dates,
and whether such rights shall rank senior or junior to or on a parity with
such rights of any other class or series of stock;
(h) provisions, if any, for the conversion or exchange of the shares of
such class or series, at any time or times at the option of the holder or
holders thereof or at the option of the Corporation or upon the happening
of a specified event or events, into shares of any other class or classes
or any other series of the same or any other class or classes of stock, or
any other security, of the Corporation, or any other corporation or other
entity, and the price or prices or rate or rates of conversion or exchange
and any adjustments applicable thereto, and all other terms and conditions
upon which such conversion or exchange may be made;
(i) restrictions on the issuance of shares of the same series or of any
other class or series, if any;
(j) the voting rights, if any, of the holders of shares of such class or
series in addition to any voting rights required by law;
(k) whether or not there shall be any limitations applicable, while shares
of such class or series are outstanding, upon the payment of dividends or
making of distributions on, or the acquisition of, or the use of moneys for
purchase or redemption of, any stock of the Corporation, or upon any other
action of the Corporation, including action under this Section, and, if so,
the terms and conditions thereof; and
<PAGE>
(l) any other preferences, rights, restrictions, including restrictions on
transferability, and qualifications of shares of such class or series, not
inconsistent with law and the Charter.
Section 4.5 For the purposes hereof and of any Articles Supplementary to the
Charter providing for the classification or reclassification of any shares of
capital stock or of any other charter document of the Corporation (unless
otherwise provided in any such article or document), any class or series of
stock of the Corporation shall be deemed to rank:
(a) prior to another class or series either as to dividends or upon
liquidation, if the holders of such class or series shall be entitled to
the receipt of dividends or of amounts distributable on liquidation,
dissolution or winding up, as the case may be, in preference or priority to
holders of such other class or series;
(b) on a parity with another class or series either as to dividends or
upon liquidation, whether or not the dividend rates, dividend payment dates
or redemption or liquidation price per share thereof be different from
those of such others, if the holders of such class or series of stock shall
be entitled to receipt of dividends or amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion
to their respective dividend rates or redemption or liquidation prices,
without preference or priority over the holders of such other class or
series; and
(c) junior to another class or series either as to dividends or upon
liquidation, if the rights of the holders of such class or series shall be
subject or subordinate to the rights of the holders of such other class or
series in respect of the receipt of dividends or the amounts distributable
upon liquidation, dissolution or winding up, as the case may be.
Section 4.6.
(a) In determining whether a distribution (other than upon voluntary or
involuntary liquidation), by dividend, redemption or other acquisition of
shares or otherwise, is permitted under the MGCL, no effect shall be given
to amounts that would be needed, if the Corporation were to be dissolved at
the time of the distribution, to satisfy the preferential rights upon
dissolution of stockholders whose preferential rights upon dissolution are
junior to those receiving the distribution.
(b) The Corporation shall be entitled to treat the person in whose name
any share of its stock is registered as the owner thereof for all purposes
and shall not be bound to recognize any equitable or other claim to, or
interest in, such share on the part of any other person, whether or not the
Corporation shall have notice thereof, except as expressly provided by
applicable law.
(c) Except as may be set forth in any Articles Supplementary, the Board of
Directors is hereby expressly authorized pursuant to Section 2-309(b)(5) of
the MGCL (or any successor similar or comparable provision) to declare or
pay a dividend payable in shares of one class of the Corporation's stock to
the holders of shares of such class of the Corporation's stock or to the
holders of shares of any other class of stock of the Corporation.
ARTICLE V
Stockholder Action
------------------
Section 5.1. Except as may be provided in any Articles Supplementary, any
corporate action upon which a vote of stockholders is required or permitted may
be taken without a meeting or vote of stockholders only with the unanimous
written consent of stockholders entitled to vote thereon.
Section 5.2. Except as otherwise required by the MGCL or as provided elsewhere
in the Charter or in the Bylaws, special meetings of stockholders of the
Corporation for any purpose or purposes may be called only by the Board of
Directors or by the President of the Corporation. No business other than that
stated in the notice of the special meeting shall be transacted at such special
meeting. Each of the Board of Directors, the President and Secretary of the
Corporation shall have the maximum power and authority permitted by the MGCL
with respect to the establishment of the date of any special meeting of
stockholders, the establishment of the record date for stockholders entitled to
vote thereat, the imposition of conditions on the conduct of any special meeting
of stockholders and all other matters relating to the call, conduct, adjournment
or postponement of any special meeting, regardless of whether the meeting was
convened by the Board of Directors, the President, the stockholders of the
Corporation or otherwise.
<PAGE>
ARTICLE VI
Provisions Defining, Limiting
-----------------------------
and Regulating Powers
---------------------
Section 6.1. The following provisions are hereby adopted for the purposes of
defining, limiting and regulating the powers of the Corporation and the
directors and stockholders, subject, however, to any provisions, conditions and
restrictions hereafter authorized pursuant to Article IV hereof:
(a) The Board of Directors of the Corporation is empowered to authorize
the issuance from time to time of shares of its stock of any class, whether
now or hereafter authorized, and securities convertible into shares of its
stock of any class, whether now or hereafter authorized, for such
consideration as the Board of Directors may deem advisable, and without any
action by the stockholders.
(b) No holder of any stock or any other securities of the Corporation,
whether now or hereafter authorized, shall have any preemptive right to
subscribe for or purchase any stock or any other securities of the
Corporation other than such, if any, as the Board of Directors, in its sole
discretion, may determine and at such price or prices and upon such other
terms as the Board of Directors, in its sole discretion, may fix; and any
stock or other securities which the Board of Directors may determine to
offer for subscription may, as the Board of Directors in its sole
discretion shall determine, be offered to the holders of any class, series
or type of stock or other securities at the time outstanding to the
exclusion of the holders of any or all other classes, series or types of
stock or other securities at the time outstanding.
(c) The Board of Directors of the Corporation shall, consistent with
applicable law, have power in its sole discretion to determine from time to
time in accordance with sound accounting practice or other reasonable
valuation methods what constitutes annual or other net profits, earnings,
surplus, or net assets in excess of capital; to fix and vary from time to
time the amount to be reserved as working capital, or determine that
retained earnings or surplus shall remain in the hands of the Corporation;
to set apart out of any funds of the Corporation such reserve or reserves
in such amount or amounts and for such proper purpose or purposes as it
shall determine and to abolish any such reserve or any part thereof; to
distribute and pay distributions or dividends in stock, cash or other
securities or property, out of surplus or any other funds or amounts
legally available therefor, at such times and to the stockholders of record
on such dates as it may, from time to time, determine.
Section 6.2. Unless provided to the contrary in the MGCL or other applicable
law, the Charter or the Bylaws, the affirmative vote of a majority of the voting
power of the shares present in person or represented by proxy at the meeting and
entitled to vote on the matter shall be the act of the stockholders.
Section 6.3. No directors shall be disqualified from voting or acting on behalf
of the Corporation in contracting with any other corporation in which he may be
a director, officer or stockholder, nor shall any director of the Corporation be
disqualified from voting or acting in its behalf by reason of any personal
interest.
Section 6.4. The Board of Directors shall have power to determine from time to
time whether and to what extent and at what times and places and under what
conditions and regulations the books, records, accounts and documents of the
Corporation, or any of them, shall be open to inspection by stockholders, except
as otherwise provided by law or by the Bylaws; and except as so provided no
stockholder shall have any right to inspect any book, record, account or
document of the Corporation unless authorized to do so by resolution of the
Board of Directors.
Section 6.5. The enumeration and definition of particular powers of the Board
of Directors included in the foregoing shall in no way be limited or restricted
by reference to or inference from the terms of any other clause of this or any
other Article of the Charter of the Corporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the General Laws of the State of Maryland now
or hereafter in force.
<PAGE>
ARTICLE VII
Board of Directors
------------------
Section 7.1.
(a) The Corporation shall have three directors, which number may be
increased or decreased from time to time in such lawful manner as the
Bylaws of the Corporation shall provide, but shall never be less than the
minimum number permitted by the General Laws of the State of Maryland, as
now or hereafter in force.
(b) The directors, other than those who may be elected in accordance with
the terms of any Articles Supplementary, shall be divided into three
classes. Each such class shall consist, as nearly as may be possible, of
one-third of the total number of directors, and any remaining directors
shall be included with such group or groups as the Board of Directors shall
designate. At the annual meeting of the stockholders of the Corporation
for 1996, a class of directors shall be elected for a one-year term, a
class of directors shall be elected for a two-year term, and a class of
directors shall be elected for a three-year term. At each succeeding
annual meeting of stockholders, beginning with 1997, successors to the
class of directors whose term expires at that annual meeting shall be
elected for a three-year term. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible,
but in no case shall a decrease in the number of directors shorten the term
of any incumbent director.
(c) Except as provided by law with respect to directors elected by
stockholders of a class or series, any director or the entire Board of
Directors may be removed for cause, by the affirmative vote of the holders
of not less than 80% of the voting power of all Voting Stock (as defined
below) then outstanding, voting together as a single class. Subject to
such removal, or the death, resignation or retirement of a director, a
director shall hold office until the annual meeting of the stockholders for
the year in which such director's term expires and until a successor shall
be elected and qualified, except as provided in Section 7.1(d) hereof.
(d) Except as provided by law with respect to directors elected by
stockholders of a class or series, a vacancy on the Board of Directors
which results from the removal of a director may be filled by the
affirmative vote of the holders of not less than 80% of the voting power of
the then outstanding Voting Stock, voting together as a single class, and a
vacancy which results from any such removal or from any other cause may be
filled by a majority of the remaining directors, whether or not sufficient
to constitute a quorum. Any director so elected by the Board of Directors
shall hold office until the next annual meeting of stockholders and until
his successor is elected and qualifies and any director so elected by the
stockholders shall hold office for the remainder of the term of the removed
director. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
(e) Except to the extent prohibited by law or limited by the Charter or
the Bylaws, the Board of Directors shall have the power (which, to the
extent exercised, shall be exclusive) to fix the number of directors and to
establish the rules and procedures that govern the internal affairs of the
Board of Directors and nominations for director, including without
limitation the vote required for any action by the Board of Directors, and
that from time to time shall affect the directors' power to manage the
business and affairs of the Corporation and no Bylaw shall be adopted by
the stockholders which shall modify the foregoing.
Section 7.2. Advance notice of stockholder nominations for the election of
directors and of the proposal of business by stockholders shall be given in the
manner provided in the Bylaws of the Corporation, as amended and in effect from
time to time. Unless and except to the extent that the Bylaws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
ARTICLE VIII
Bylaws
------
Section 8.1. The Bylaws may contain any provision for the regulation and
management of the affairs of the Corporation not inconsistent with law or the
provisions of the Charter. Without limiting the foregoing, to the maximum
extent permitted by the MGCL from time to time, the Corporation may in its
Bylaws confer upon the Board of Directors powers and authorities in addition to
those set forth in the Charter and in addition to those expressly conferred upon
the Board of Directors by statute as long as such powers and authorities are not
inconsistent with the provisions of the Charter.
<PAGE>
Section 8.2. Except as provided in the Charter, the Bylaws may be altered or
repealed and new Bylaws may be adopted (a) subject to Section 7.1(e), at any
annual or special meeting of stockholders, by the affirmative vote of the
holders of a majority of the voting power of all shares of the Corporation
entitled to vote generally in the election of directors (the "Voting Stock")
then outstanding, voting together as a single class; provided, however, that any
proposed alteration or repeal of, or the adoption of any Bylaw inconsistent
with, Sections 2, 8 or 11 of Article I of the Bylaws, with Section 1, 2 or 3 of
Article II of the Bylaws, or Article X of the Bylaws or this sentence, by the
stockholders shall require the affirmative vote of the holders of at least 80%
of the voting power of all Voting Stock then outstanding, voting together as a
single class; and provided, further, however, that in the case of any such
stockholder action at a special meeting of stockholders, notice of the proposed
alteration, repeal or adoption of the new Bylaw or Bylaws must be contained in
the notice of such special meeting, or (b) by the affirmative vote of a majority
of the total number of directors which the Corporation would have if there were
no vacancies on the Board.
ARTICLE IX
Amendment of Charter
--------------------
Section 9.1. The Corporation reserves the right to adopt, repeal, rescind,
alter or otherwise amend in any respect any provision contained in this Charter,
including but not limited to, any amendments changing the terms or contract
rights of any class of its stock by classification, reclassification or
otherwise, and all rights now or hereafter conferred on stockholders are granted
subject to this reservation. Any amendment of the Charter shall be valid and
effective if such amendment shall have been authorized by the affirmative vote
at a meeting of the stockholders duly called for such purpose of a majority of
the total number of shares outstanding and entitled to vote thereon, except that
the affirmative vote of the holders of at least 80% of the Voting Stock then
outstanding, voting together as a single class, at a meeting of the stockholders
duly called for such purpose shall be required to alter, amend, adopt any
provision inconsistent with or repeal Article V, Article VII, Section 8.2 of
Article VIII, or this Article IX of the Charter.
ARTICLE X
Limited Liability; Indemnification
----------------------------------
Section 10.1. To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no director or officer of the
Corporation shall be personally liable to the Corporation or its stockholders
for money damages. No amendment of the Charter of the Corporation or repeal of
any of its provisions shall limit or eliminate the benefits provided to
directors and officers under this provision with respect to any act or omission
which occurred prior to such amendment or repeal or with respect to any cause of
action, suit or claim that, but for this Section 10.1 of this Article X, would
accrue or arise, prior to such amendment or repeal.
Section 10.2. The Corporation shall indemnify (a) its directors and officers,
whether serving the Corporation or, at its request, any other entity, to the
fullest extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under the
procedures and to the fullest extent permitted by law and (b) other employees
and agents to such extent as shall be authorized by the Board of Directors or
the Corporation's Bylaws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such bylaws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of the
Charter, or of any such bylaw, resolution or contract, or repeal of any of their
provisions shall limit or eliminate the right to indemnification provided
hereunder or thereunder with respect to acts or omissions occurring prior to
such amendment or repeal.
ARTICLE XI
Duration
--------
Section 11.1. The duration of the Corporation shall be perpetual.
THIRD:
(i) As of immediately before the amendment the total number of shares of
stock of all classes which the Corporation had authority to issue was
285,000,000 shares, par value $5.00 per share, having an aggregate par
value of $1,425,000,000, of which 10,000,000 shares having an aggregate par
value of $50,000,000 are Cumulative Preferred Stock and 275,000,000 shares
having an aggregate par value of $1,375,000,000 are Common Stock.
<PAGE>
(ii) As amended the total number of shares of stock of all classes which
the Corporation has authority to issue is 600,000,000 shares, of which
100,000,000 shares are Preferred Stock, with a par value of $.01 per share,
and 500,000,000 shares are Common Stock, with a par value of $.01 share,
for an aggregate par value of $6,000,000.
(iii) The shares of stock of the Corporation are divided into classes, and
the description, as amended, of each class, including the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption are
contained in Article IV of these Articles of Amendment and Restatement.
FOURTH: The amendment to and restatement of the Charter of the Corporation as
hereinabove set forth have been declared advisable by the Board of Directors of
the Corporation and approved by the sole stockholder of the Corporation as
required by law.
FIFTH: The current address of the principal office of the Corporation in
Maryland and the name and address of the Corporation's current resident agent
are as set forth in Article II of the amended and restated Charter of the
Corporation. There are three directors currently in office, whose names are as
follows:
Lars Nyberg
John L. Giering
Jonathan S. Hoak
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in
its name and on its behalf by its President and witnessed by its Secretary on
this 20th day of December, 1996.
NCR CORPORATION
By: /s/ Lars Nyberg
------------------------
Name: Lars Nyberg
Title: President
ATTEST:
/s/ Laura K. Nyquist
- --------------------------
Name: Laura K. Nyquist
Title: Secretary
THE UNDERSIGNED, the President of NCR Corporation who executed on behalf of the
Corporation the foregoing Articles of Amendment and Restatement of which this
certificate is made a part, hereby acknowledges in the name and on behalf of the
Corporation the foregoing Articles of Amendment and Restatement to be the
corporate act of the Corporation and hereby certifies to the best of his
knowledge, information and belief the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ Lars Nyberg
------------------------
Name: Lars Nyberg
Title: President
<PAGE>
ARTICLES SUPPLEMENTARY
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
NCR CORPORATION
(Pursuant to Section 2-208 of the
Maryland General Corporation Law)
-----------------------------
NCR Corporation, a Maryland corporation having its principal business office in
Dayton, Ohio, and its principal office in the City of Rockville, State of
Maryland (hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that the following resolution
was adopted by the Board of Directors of the Corporation by unanimous written
consent on December 20, 1996 and that these Articles do not increase the
authorized capital stock of the Corporation:
RESOLVED, that pursuant to the authority granted to and vested in the Board of
Directors of this Corporation (hereinafter called the "Board of Directors" or
the "Board") in accordance with the provisions of the Articles of Amendment and
Restatement of the Charter of the Corporation, the Board of Directors hereby
creates a series of Preferred Stock, par value $.01 per share (the "Preferred
Stock"), of the Corporation and hereby states the designation and number of
shares, and fixes the relative rights, preferences, and limitations thereof as
follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 1,500,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares
of Series A Preferred Stock, in preference to the holders of Common Stock,
par value $.01 per share (the "Common Stock"), of the Corporation, and of
any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject
to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding immediately
prior to such event.
<PAGE>
(B) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) of this Section immediately
after it declares a dividend or distribution on the Common Stock (other
than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $1 per share
on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series
A Preferred Stock in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be allocated pro rata
on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall be
not more than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other Articles
Supplementary creating a series of Preferred Stock or any similar stock, or
by law, the holders of shares of Series A Preferred Stock and the holders
of shares of Common Stock and any other capital stock of the Corporation
having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law, holders
of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series A Preferred Stock; or
<PAGE>
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on
a parity with the Series A Preferred Stock, except in accordance with
a purchase offer made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares upon such terms
as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to
the conditions and restrictions on issuance set forth herein, in the Charter of
the Corporation, or in any other Articles Supplementary creating a series of
Preferred Stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $100 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(1) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or change of shares of
Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall not be
redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Corporation's Preferred Stock.
Section 10. Amendment. The Charter of the Corporation shall not be amended in
any manner which would materially alter or change the powers, preferences or
special rights of the Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Series A Preferred Stock, voting together as a single
class.
<PAGE>
IN WITNESS WHEREOF, NCR Corporation has caused these presents to be signed in
its name and on its behalf by its Senior Vice President and witnessed by its
Assistant Secretary this 26th day of December, 1996.
NCR CORPORATION
By: /s/ Jonathan S. Hoak
-------------------------
Jonathan S. Hoak
Senior Vice President
Witness:
/s/ Julie D. Gallagher
- -----------------------
Name: Julie D. Gallagher
Title: Assistant Secretary
THE UNDERSIGNED, Senior Vice President of NCR Corporation, who executed on
behalf of the Corporation Articles Supplementary of which this Certificate is
made a part, hereby acknowledges in the name and on behalf of said Corporation
the foregoing Articles Supplementary to be the corporate act of said Corporation
and hereby certifies that the matters and facts set forth herein with respect to
the authorization and approval thereof are true in all material respects under
the penalties of perjury.
/s/ Jonathan S. Hoak
--------------------------
Jonathan S. Hoak
Senior Vice President
<PAGE>
Without Prejudice Exhibit 10.1
Subject to Contract
May 26, 1999
NCR CORPORATION
and
PER-OLOF LOOF
----------------------------------------
TERMINATION AGREEMENT
----------------------------------------
<PAGE>
THIS AGREEMENT is made the 26th day of May 1999.
BETWEEN:
(1) NCR CORPORATION whose registered office is at 1700 South Patterson
Avenue, Dayton Ohio 45479 (the "Company"); and
(2) PER-OLOF LOOF (the "Executive").
RECITALS:
(A) The Company has employed the Executive since October 1995.
(B) The employment will terminate on 9 June, 1999.
THIS AGREEMENT provides:
1. INTERPRETATION
1.1 In this Agreement and the Schedules the following expressions, unless
otherwise expressly stated, have the following respective meanings:
1.1.1 "Group" means the Company and any subsidiary or subsidiaries for the time
being of the Company; and any affiliate of the Company. "Subsidiary" has
the meaning assigned to it by Section 736 of the UK Companies Act 1985 as
amended by the UK Companies Act 1989. The expressions "GroupCompany" and
"Group Companies" shall be construed accordingly;
1.1.2 "Board" means for the time being directors of the Company present at a
duly convened quorum meeting of the directors or a committee of the
directors duly appointed for the purpose in question;
1.1.3 "European Union Right" means any right which the Executive may have under
any treaty to which the United Kingdom is a party in connection with or
arising out of its membership of the European Union or under any
Directive, Regulation, Recommendation or Decision of any body directly or
indirectly made pursuant to any such treaty;
1.1.4 "Prior Period" means the period of six months immediately preceding the
Termination Date;
1.1.5 "Recognized Investment Exchange" means a body which is a recognized
investment exchange for the purposes of the United Kingdom Financial
Services Act 1986;
1.1.6 "Scheme" means any applicable Pension plan in which the Executive
participates;
1.1.7 "Termination Date" means 9 June, 1999; and
1.1.8 "Financial Business" means the business of NCR's Financial Solutions
Group, in which the Executive was materially engaged.
2. OBLIGATIONS OF EXECUTIVE
2.1 In consideration of the payments to be made and other benefits to be
provided by the Company in accordance with the provisions of this
Agreement, the Executive will:
2.1.1 immediately resign from all offices and positions he holds with the
Company Group and Companies which he holds by virtue of his employment;
2.1.2 immediately return all property of the Company and any Group Company and
assign to the Company all rights, title and interest in such property and
any other inventions, discoveries, or works of authorship created by the
Executive during his employment;
<PAGE>
2.1.3 subject to Clause 7, waive any claims he has or may have under the
following UK Statutes: Equal Pay Act 1970, Sex Discrimination Act 1975,
Race Relations Act 1976, Trade Union and Labour Relations (Consolidation)
Act 1992, Employment Rights Act 1996, Disability Discrimination Act 1996
and any other breach of any contractual or statutory right or any
directly enforceable European Union Right.
2.2 Except for (i) the rights and obligations of the Company, any Group
Company and the Executive stated in this letter agreement, (ii) the
Company's obligation to the Executive under any benefit program in which
the Executive has vested rights, and (iii) any rights to indemnification
and related rights in accordance with Maryland corporate law to which the
Executive may be entitled by reason of his having served as an officer of
the Company, the Executive and the Company hereby forever release,
discharge and hold harmless each other, and their respective heirs,
subsidiaries, affiliates, officers, directors, successors and assigns,
from any claim or cause of action whatsoever which either may have
against the other resulting from or arising out of or related to the
employment of the Executive by the Company, or the termination of that
employment, including any claims or causes of action the Executive has or
may have pursuant to Title VII of the Civil Rights Act of 1964 as
amended, 42 U.S.C. Sec. 2000 et seq.; the Age Discrimination in
Employment Act, 29 U.S.C. Sec. 621 et seq.; the Americans with
Disabilities Act, 42 U.S.C. Sec. 12101; the Employee Retirement Income
Security Act, as amended 29 U.S.C. Sec. 1001 et seq., and 42 U.S.C. Sec.
1981, and other state and local human or civil rights law as well as all
other statues in the U.S. which regulate employment; and the common law
of contracts and torts. The Company and the Executive agree not to make
any claim whatsoever against the other (or, in the case of the Executive,
against any of the Company's direct or indirect subsidiaries) with any
governmental agency or in any court of law at any time concerning matters
relating to the employment arising from acts or failures to act which
occurred prior to the Termination Date.
2.3 Assuming that mutually agreeable terms are established, assist the
Company as a non-employee consultant for two months after the termination
Date to develop a business plan relating to NCR's "microwave bank"
initiative.
3. CONFIDENTIALITY and RESTRICTION
3.1 CONFIDENTIALITY
The Executive acknowledges and agrees that he will not, save as is
required by law, without the consent of the Company divulge to any
person, or use for his own benefit or the benefit of any person, any
information of a confidential nature concerning the business of the
Company or of any Group Company or of any client or customer of the
Company or of any Group Company which has come to his knowledge during
the course of his employment with the Company or any Group Company.
Confidential information for this purpose includes details of
transactions he has undertaken on behalf of the Company and details of
the business strategy and financial position of the Company and any Group
Company. This restriction shall cease to apply to any trade secret, or
confidential information which comes into the public domain (otherwise
than through unauthorized disclosure by the Executive).
3.2 In consideration of the Company paying to the Executive not later than 10
days after the date on which the Executive returns this Agreement fully
executed to the Company the sum of (Pounds)10,000 less tax and National
Insurance thereon the Executive agrees as set out in Clauses 3.3 and 3.4
below:
3.3 RESTRICTION: FINANCIAL BUSINESS
3.3.1 The Executive understands and acknowledges that his senior position with
the Financial Business has given him access to and the benefit of
confidential information vital to the continued success of the Financial
Business and influence over and connection with the customers, suppliers,
distributors, agents, employees and directors of the Financial Business
and those of the Group and hereby acknowledges and confirms that he
agrees that the provisions appearing in this Clause 3.3 are reasonable in
their application to him and necessary but no more than sufficient to
protect the interests of the Financial Business.
3.3.2 In the event that any restriction contained in this Clause 3.3 shall be
found to be void, but would be valid if some part of the relevant
restriction were deleted, the relevant restriction shall apply with such
modifications as may be necessary to make it valid and effective.
<PAGE>
3.3.3 The Executive shall not without the prior written consent of the Chief
Executive Officer of the Company, during the period of one year starting
on the Termination Date, either alone or jointly with or as principal,
partner, agent, director, employee or consultant of any other person,
firm or corporation, and whether directly or indirectly, in competition
with the Financial Business:
A entice or endeavor to entice away from the Financial Business or
employ any employee who, immediately prior to the Termination Date,
(i) reported to the Executive or (ii) reported to an employee of the
Company or a Group Company who reported to the Executive or (iii) was
in direct regular contact with the Executive during the Prior Period;
or any other sales, development or managerial employee;
B accept employment with and/or provide services to, either as
independent contractor or otherwise and/or serve as a director whether
as an executive director or a non-executive director on the boards of
any of the following companies being companies which the Company and
the Executive hereby agree are major and direct competitors of the
Financial Business: IBM, Unisys, Oracle, Diebold and Siemens Nixdorf.
3.3.4 Nothing in this Clause 3.3 shall prevent the Executive from holding
securities in a company listed on a Recognized Stock Exchange where his
holding does not exceed five per cent of the class of securities
concerned.
3.4 RESTRICTION RELATING TO BUSINESSES OF THE COMPANY OTHER THAN THE
FINANCIAL BUSINESS
The Executive was engaged in businesses of the Company other than the
Financial Business during the employment and the Executive agrees that in
the period to and including June 9, 2000, he will not without the prior
written consent of the Chief Executive Officer of the Company, (a) hire,
attempt to hire or assist any other person or entity in hiring or
attempting to hire any sales, development or managerial employee of the
Company or any person who held such positions during the Prior Period, or
(b) accept employment, either as an employee or independent contractor,
with, or serve as a director of, any of the Company's direct, major
competitors, or their subsidiaries or affiliates, namely: IBM, Unisys,
Oracle, Diebold or Siemens Nixdorf.
4. OBLIGATIONS OF COMPANY
The Company shall:
4.1 pay to the Executive his basic salary and the Executive will continue to
receive his other contractual benefits up to and including the
Termination Date less tax, National Insurance and pension contributions;
4.2 pay to the Executive a gross compensation for loss of employment gross
severance payment of (Pounds)470,000 ("Global Severance") subject to
deduction of the tax and National Insurance on the balance in excess of
(Pounds)30,000 in accordance with the PAYE regulations and will account
for the same to the Inland Revenue, or otherwise as required by law.
(Pounds)235,000 of the Global Severance will be paid less deductions
therefrom to the Executive not later than 10 days after receipt by the
Company of this Agreement fully executed by the Executive and his
solicitor-if this initial payment is not made, this Agreement will be
null and void. (Pounds)235,000 of the Global Settlement less deductions
therefrom will be paid to the Executive not later than six months after
receipt by the Company of this Agreement fully executed by the Executive
and his solicitor PROVIDED ALWAYS that if the Executive fails to comply
with his obligations pursuant to this Agreement he shall refund to the
Company forthwith upon notification to him by the Company of such non-
compliance one-half of any payment made to him pursuant to this Clause
and shall forfeit entitlement to any further payment under this Clause;
4.3 determine, in January 2000, a Management Incentive Plan award that would
have been payable to the Executive had his employment continued for the
whole of the year to 31 December 1999 and will, not later than 31 March
2000 pay to the Executive the MIP award so determined and pro-rated to
the Termination Date;
<PAGE>
4.4 pay the Executive 20 days base salary in lieu of vacation days accrued by
him but untaken at the Termination Date;
4.5 permit the Executive to continue to participate in the Executive
Financial Counseling Project until 31 December 1999;
4.6 provide the Executive the outplacement services of Right Associates;
4.7 reimburse the Executive's legal fees incurred in connection with this
Agreement, upon receipt of relevant invoices subject to a maximum of
(Pounds)1,000 plus VAT.
5. ANNOUNCEMENTS
5.1 Subject to Clause 5.2 the Executive confirms that he will not without the
prior written consent of the Chief Executive Officer of the Company make
any statements, oral or written, touching upon or concerning his
relationship with the Company or any Group Company, his appointment as a
director of the Company or any Group Company or his resignation from
office which would or might involve the disclosure of secret or
confidential information about the Company or any Group Company, or which
might be detrimental to the interests of the Company or any Group
Company.
5.2 If the Executive is required to make any such statement to comply with
his legal and/or regulatory obligations he may do so without the written
consent described at Clause 5.1 above and will not be deemed thereby to
be in breach of this Clause.
6. WARRANTY
The Executive warrants that there are no matters of which he is aware
relating to any acts or omissions of the Executive or any other director,
employee or agent of the Company or any Group Company which if disclosed
to the Company would or might affect the decision of the Company to make
payments in accordance with Clauses 3 and 4 or provide any other benefits
under this Agreement. The Executive also warrants that he has not
presented an originating application to an office of the Employment
Tribunals in the United Kingdom or commenced proceedings in any Court or
tribunal anywhere in the world in connection with his employment or its
termination.
7. PENSION AND OPTIONS
This Agreement shall not prejudice or affect any rights, which the
Executive may have accrued under any applicable pension plan or option
agreements. His rights to benefits under such plans will be determined
solely by the terms of the plans except as set out in the next two
sentences. Notwithstanding that the Executive is not vested in his
benefits under the Mid-Career Hire Supplemental Plan until 1 August 1999,
the Company will, for vesting purposes to that Plan only, treat the
Executive as employed until the vesting date. Subject to the approval
(which the Company will seek) of the Compensation Committee of the Board
of Directors, the Executive will be permitted to exercise vested options
until September 15, 1999.
8. NOTICES
Any notice will be duly served under this Agreement if in the case of the
Company it is delivered to NCR's Senior Vice President, Law, and if, in
the case of the Executive it is handed to the Executive or sent by
recorded or first class post to the Executive at such address as he may
direct the Company. A notice sent by recorded or first class post will be
deemed served on the working day next following posting.
9. COUNTERPARTS
This Agreement may be entered into in any number of counterparts and by
the parties to it on separate counterparts, each of which when so
executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same agreement.
<PAGE>
10. GOVERNING LAW AND JURISDICTION
10.1 Subject to Clauses 10.3 and 10.4 this Agreement shall be governed by the
laws of the State of Ohio and for the benefit of the Company, the
Executive hereby submits to the jurisdiction of the Ohio Courts.
10.2 If any part of this Agreement is held to be unenforceable, the parties
intend for the remaining portion of this Agreement to be given full force
and effect. In particular, the parties intend for the provisions
contained in Clauses 3 and 5 to be given maximum effect permissible under
the law, in order to protect the Company's trade secrets and confidential
and proprietary information.
10.3 The restrictions contained at Clause 3.3 shall be governed by English law
and for the benefit of the Company the Executive hereby agrees to submit
to the jurisdiction of the English courts in connection with any issue
arising out of Clause 3.3.
11. ARBITRATION
Subject to the Company's rights pursuant to this Agreement to seek
injunctive relief or equitable remedies in a court action in any
jurisdiction any controversy or claim related in any way to this
Agreement, or to the Executive's employment relationship with the Company
(including, but not limited to, any claim of fraud or misrepresentation),
shall be resolved by arbitration pursuant to this paragraph and the then
current rules and supervision of the American Arbitration Association.
The arbitration shall be held in Dayton, Ohio, before an arbitrator who
is an attorney knowledgeable of employment law. The arbitrator's decision
and award shall be final and binding and may be entered in any court
having jurisdiction thereof. The arbitrator shall not have the power to
award punitive or exemplary damages. Issues of arbitrability shall be
determined in accordance with the Federal substantive and procedural laws
relating to arbitration; all other aspects shall be interpreted in
accordance with the laws of the State of Ohio. Each party shall bear its
own attorney's (and any other) fees associated with the arbitration and
other costs and expenses of the arbitration shall be borne as provided by
the rules of the American Arbitration Association. If any portion of this
paragraph is held to be unenforceable, it shall be severed and shall not
affect either the duty to arbitrate or any other part of this paragraph.
12. BINDING AGREEMENT
12.1 This offer will remain open until May 26, 1999.
12.2 Upon execution of this Agreement by both parties, the Agreement will,
notwithstanding that it is marked without prejudice and subject to
contract, be on the open record and shall be binding on both parties.
12.3 This Agreement is the entire agreement between the Company and the
Executive regarding the termination of the Executive's employment and
supersedes all prior written or oral undertakings, statements or
agreements relating in any way to the terms and conditions of the
employment of the Executive by the Company. The Executive acknowledges
and agrees by his signature hereto that he has not relied on any
representation or statement not set forth herein made by the Company or
its agents, representatives or attorneys with regard to the subject
matter of this Agreement. This Agreement may not be varied other than in
writing signed by the Executive and signed for and on behalf of the
Company.
AS WITNESS the hands of the parties hereto or their duly authorized
representatives the day and year first before written. The Executive by his
signature (or that of his duly authorized representative) acknowledges and
agrees that:
. he has read this Agreement and had sufficient time to consider its terms;
. he is giving up important rights;
. he agrees with everything in the Agreement;
. he has been advised of and is aware of his rights to consult an attorney
before signing the Agreement in addition to the requirement that he
consult an English qualified lawyer; and
<PAGE>
. he has signed the Agreement knowingly and voluntarily.
SIGNED by /s/ Wilbert J.M. Buiter
---------------------------
for and on behalf of
NCR CORPORATION
in the presence of: Jim Huelsman
SIGNED by /s/ Per-Olof Loof
------------------------
PER-OLOF LOOF
in the presence of:
<PAGE>
ENDORSEMENT
I confirm:
13. that the within-written agreement (the "Agreement") relates to my right
to complain that I have been unfairly dismissed and/or that I am entitled
to a statutory redundancy payment and/or that I have suffered an unlawful
deduction under the Employment Rights Act 1996 and/or have been
discriminated against on grounds of sex race or disability contrary to
the Sex Discrimination Act 1975, the Race Relations Act 1976 and the
Disability Discrimination Act 1995 (the "Relevant Statutes");
13. I received prior to the signature of the Agreement independent legal
advice from
Name of solicitor: David Hards (the "Adviser")
Firm of solicitors: ACS Hards & Co.
Business Address of solicitor:
2 High Street
New Malden
Surrey KT3 4DA
as to the terms and effect of the Agreement and in particular its effect
on my ability to pursue my rights before an Employment Tribunal; and
13. I have been advised that the conditions regulating compromise agreements
pursuant to Sections 203, 77, 72 and 9 of the Relevant Statutes are
satisfied and I have received the confirmation referred to below.
Signed: /s/ Per-Olof Loof
----------------------
PER-OLOF LOOF
Date: 26/5/99
I confirm the matters of fact referred to above are accurate.
I further confirm that I am a solicitor holding a current practicing certificate
and that my firm has an insurance policy in force covering the risk of a claim
by me in respect of any loss arising in consequence of the advice that I have
given.
Signed: /s/ David Hards , Solicitor
----------------------
Date: 26/5/99
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR NCR
CORPORATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AT JUNE 30, 1999 AND
THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED JUNE
30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 441
<SECURITIES> 135
<RECEIVABLES> 1,354
<ALLOWANCES> 0
<INVENTORY> 394
<CURRENT-ASSETS> 2,469
<PP&E> 2,166
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<TOTAL-ASSETS> 4,720
<CURRENT-LIABILITIES> 1,653
<BONDS> 32
0
0
<COMMON> 1
<OTHER-SE> 1,402
<TOTAL-LIABILITY-AND-EQUITY> 4,720
<SALES> 852
<TOTAL-REVENUES> 1,572
<CGS> 531
<TOTAL-COSTS> 1,075
<OTHER-EXPENSES> 436
<LOSS-PROVISION> 0
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</TABLE>
