<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
UNISYS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[UNISYS LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1997
Unisys Corporation will hold its 1997 Annual Meeting of Stockholders at The
Park Hyatt Philadelphia at the Bellevue, Broad and Walnut Streets, Philadelphia,
Pennsylvania, on Thursday, April 24, 1997 at 9:30 a.m. to:
1. elect four directors;
2. ratify the selection of independent auditors for 1997;
3. consider and vote upon the two stockholder proposals set forth in the
attached Proxy Statement; and
4. transact any other business properly brought before the meeting.
Only holders of record of Unisys Common Stock at the close of business on
February 24, 1997 will be entitled to vote at the Annual Meeting.
A ticket is required for admission to the meeting. If you plan to attend
and you are a stockholder of record (or if you have shares of Unisys Common
Stock credited to your account in the Unisys Savings Plan), please mark the
appropriate oval on the enclosed proxy card, and we will send you a ticket. If
your shares are held in the name of a broker or other nominee, you must bring
proof of ownership (e.g., broker's statement) to be admitted to the meeting.
By Order of the Board of Directors,
/s/ Harold S. Barron
Harold S. Barron
Senior Vice President, General Counsel
and Secretary
Blue Bell, Pennsylvania
March 14, 1997
IMPORTANT
PLEASE COMPLETE AND MAIL THE ENCLOSED PROXY CARD PROMPTLY WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING. THE ENCLOSED RETURN ENVELOPE REQUIRES NO
POSTAGE IF MAILED IN THE U.S.A.
<PAGE> 3
UNISYS CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1997
The Board of Directors of Unisys Corporation ("Unisys" or the "Company")
solicits your proxy for use at the 1997 Annual Meeting of Stockholders to be
held on April 24, 1997 and at any adjournment(s) thereof (the "Annual Meeting").
At the Annual Meeting, stockholders will be asked to elect directors, ratify the
selection of independent auditors and consider and vote upon two stockholder
proposals.
The record date for the Annual Meeting is February 24, 1997. Only holders
of record of Unisys Common Stock as of the close of business on the record date
are entitled to vote at the meeting. On the record date, 174,849,472 shares of
Unisys Common Stock were outstanding. The presence, in person or by proxy, of a
majority of those shares will constitute a quorum at the meeting.
Each record holder of Unisys Common Stock as of the record date is entitled
to cast one vote per share on each matter to be voted upon. Directors will be
elected by a plurality of the votes cast. Each of the other matters scheduled to
come before the Annual Meeting will be approved if it receives the affirmative
vote of a majority of shares present, in person or by proxy, and entitled to
vote on the matter. For purposes of determining whether a matter has received a
majority vote, abstentions will be included in the vote totals, with the result
that an abstention has the same effect as a negative vote. Broker non-votes will
not be included in the vote totals and therefore will have no effect on the
vote.
If you properly execute and return the enclosed proxy/voting instruction
card, and do not revoke it, the proxy holders will vote the shares represented
by the proxy in accordance with your instructions. If a properly executed proxy
gives no instructions, the proxy holders will vote the shares represented
thereby FOR the election of directors, FOR the selection of independent
auditors, AGAINST the adoption of the stockholder proposals and in their
discretion on any other matters that properly come before the Annual Meeting.
You may revoke an executed proxy at any time prior to its exercise by giving
notice in writing to the Secretary of Unisys or by voting in person at the
meeting.
If you are a participant in the Unisys Savings Plan (the "Savings Plan"),
the enclosed proxy/voting instruction card will serve as voting instructions to
the Savings Plan trustee for any whole shares of Unisys Common Stock credited to
your account as of February 24, 1997. The trustee will vote those shares in
accordance with your instructions if it receives your signed proxy/voting
instruction card by April 18, 1997. If you do not sign and return the
proxy/voting instruction card in a timely manner, or if you give no instructions
with respect to a matter to be voted upon, the trustee will vote the shares
credited to your account in the same proportion as it votes those shares for
which it received proper instructions from other participants.
This Proxy Statement, the accompanying form of proxy/voting instruction
card and the annual report of Unisys, including 1996 financial statements, are
first being mailed on or about March 14, 1997.
The Company's principal executive offices are located at Township Line and
Union Meeting Roads, Blue Bell, Pennsylvania 19424.
<PAGE> 4
ELECTION OF DIRECTORS
The Board of Directors currently consists of ten members, divided into
three classes. One class of directors is elected each year to hold office for a
three-year term. Under the Company's Bylaws, no person may be elected a director
after having attained the age of 70. The four directors whose terms expire in
1997, Gail D. Fosler, Melvin R. Goodes, Edwin A. Huston and Robert McClements,
Jr., have been nominated for reelection. The remaining six directors will
continue to serve as set forth below. Each of the nominees has agreed to serve
as a director if elected, and Unisys believes that each nominee will be
available to serve. However, the proxy holders have discretionary authority to
cast votes for the election of a substitute should any nominee not be available
to serve as a director.
INFORMATION REGARDING NOMINEES AND DIRECTORS
The names and ages of the nominees and directors, their principal
occupations or employment during the past five years and other data regarding
them are set forth below.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
<TABLE>
<S> <C>
- ---------------- GAIL D. FOSLER
Ms. Fosler, 49, is Senior Vice President and Chief Economist of
The Conference Board, a business-sponsored, nonprofit research
organization. She previously served as the Chief Economist and
Deputy Staff Director for the Senate Budget Committee from 1978
to 1989. She is a Director of H. B. Fuller Company and a Trustee
of the John Hancock Mutual Funds. She has served as a Director of
Unisys since 1993 and is a member of the Audit Committee, the
Nominating Committee and the Pension Investment Committee of the
- ---------------- Board of Directors.
- ---------------- MELVIN R. GOODES
Mr. Goodes, 61, is a Director and Chairman and Chief Executive
Officer of Warner-Lambert Company, a diversified worldwide health
care, pharmaceutical and consumer products company. He has also
held the position of President and Chief Operating Officer of
that company. He is a Director of Ameritech Corporation and Chase
Manhattan Corporation. He has served as a Director of Unisys
since 1987 and is a member of the Compensation and Organization
Committee, the Committee for Equity-Based Compensation, the
Finance Committee and the Nominating Committee of the Board of
- ---------------- Directors.
- ---------------- EDWIN A. HUSTON
Mr. Huston, 58, is Senior Executive Vice President-Finance and
Chief Financial Officer of Ryder System, Inc., an international
highway transportation services company. He has served as a
Director of Unisys since 1993 and is a member of the Audit
Committee, the Nominating Committee and the Pension Investment
- ---------------- Committee of the Board of Directors.
</TABLE>
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<TABLE>
<S> <C>
- ---------------- ROBERT MCCLEMENTS, JR.
Mr. McClements, 68, is a retired Chairman of Sun Company, Inc., a
diversified energy company. He has also held the position of
President and Chief Executive Officer of that company. He is a
Director of Bethlehem Steel Corporation. He has served as a
Director of Unisys since 1991 and is a member of the Audit
Committee, the Corporate Responsibility Committee and the
- ---------------- Nominating Committee of the Board of Directors.
</TABLE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 1998
<TABLE>
<S> <C>
- ---------------- THEODORE E. MARTIN
Mr. Martin, 57, is a Director and President and Chief Executive
Officer of Barnes Group Inc., a manufacturer and distributor of
automotive and aircraft components and maintenance products. He
has also held the positions of Executive Vice
President-Operations of that company and President and Chief
Operating Officer and Group Vice President of one of that
company's principal business units. He is a Director of
Ingersoll-Rand Company. He has served as a Director of Unisys
since 1995 and is a member of the Audit Committee, the Corporate
Responsibility Committee and the Nominating Committee of the
- ---------------- Board of Directors.
- ---------------- ALAN E. SCHWARTZ
Mr. Schwartz, 71, is an attorney and a senior partner of the law
firm of Honigman Miller Schwartz and Cohn, Detroit, Michigan. He
is a Director of Core Industries, Inc., The Detroit Edison
Company, The DTE Energy Company, Handleman Company, Howell
Industries, Inc. and Pulte Corporation. He has served as a
Director of Unisys since 1971 and is a member of the Compensation
and Organization Committee, the Finance Committee and the
- ---------------- Nominating Committee of the Board of Directors.
- ---------------- JAMES A. UNRUH
Mr. Unruh, 55, is Chairman of the Board and Chief Executive
Officer of Unisys. He has also held the positions of President
and Chief Operating Officer, Executive Vice President, and Senior
Vice President and Chief Financial Officer. He is a Director of
Ameritech Corporation and The Prudential Insurance Company of
- ---------------- America. He has served as a Director of Unisys since 1986.
</TABLE>
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<PAGE> 6
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 1999
<TABLE>
<S> <C>
- ---------------- J. P. BOLDUC
Mr. Bolduc, 57, is Chairman and Chief Executive Officer of JPB
Enterprises, Inc., a highly diversified holding company with
interests in the food, beverage, real estate, retail and
manufacturing industries. He previously served in the positions
of Vice Chairman, Chief Operating Officer, President and Chief
Executive Officer of W. R. Grace & Co., a specialty chemicals and
health care company, from 1986 to 1995. He is a Director of
Brothers Gourmet Coffees, Inc., Marshall & Ilsley Corporation,
Newmont Gold and Mining Corporations, Proudfoot PLC and
Sundstrand Corporation. He has served as a Director of Unisys
since 1992 and is a member of the Corporate Responsibility
Committee, the Finance Committee and the Nominating Committee of
- ---------------- the Board of Directors.
- ---------------- JAMES J. DUDERSTADT
Dr. Duderstadt, 54, is President Emeritus of the University of
Michigan and University Professor of Science and Engineering at
that university. He is a Director of CMS Energy Corporation. He
has served as a Director of Unisys since 1990 and is a member of
the Audit Committee, the Corporate Responsibility Committee, the
Nominating Committee and the Pension Investment Committee of the
- ---------------- Board of Directors.
- ---------------- KENNETH A. MACKE
Mr. Macke, 58, is General Partner of Macke Partners, a venture
capital firm. He previously served as Chairman and Chief
Executive Officer of Dayton Hudson Corporation, a general
merchandise retailer, from 1984 to 1994. He is a Director of
Fingerhut Companies, Inc., First Bank System, Inc. and General
Mills, Inc. He has served as a Director of Unisys since 1989 and
is a member of the Compensation and Organization Committee, the
Committee for Equity-Based Compensation, the Finance Committee
- ---------------- and the Nominating Committee of the Board of Directors.
</TABLE>
BOARD MEETINGS
The Board of Directors held ten meetings in 1996. During 1996, all
directors attended at least 75 percent of the meetings of the Board of Directors
and standing Committees on which they served.
COMMITTEES
In 1996, the Board of Directors had a standing Audit Committee,
Compensation and Organization Committee, Committee for Equity-Based Compensation
and Nominating Committee, as well as certain other committees.
The Audit Committee held four meetings in 1996. Its principal functions
were to review compliance with Company policies, review internal control
procedures, recommend to the Board of Directors the firm of independent auditors
to serve the Company, review the scope, fees and
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results of the audit by the independent auditors and review the internal audit
organization and annual audit plan. The members of the Audit Committee were Ms.
Fosler and Messrs. Duderstadt, Huston, Martin and McClements.
The Compensation and Organization Committee held 11 meetings in 1996. Its
principal functions were to review and approve remuneration of the Company's
elected officers, evaluate performance, review and approve senior executive
compensation programs, administer remuneration plans, including the Company's
variable compensation plan, and review management succession and related
matters. The members of the Compensation and Organization Committee were Messrs.
Goodes, Macke and Schwartz.
The Committee for Equity-Based Compensation held two meetings in 1996. Its
principal functions were to review and approve equity-based compensation and to
administer the equity-based aspects of the Company's remuneration plans,
including the 1990 Unisys Long-Term Incentive Plan (the "1990 Plan"). The
members of the Committee for Equity-Based Compensation were Messrs. Goodes and
Macke.
The Nominating Committee held two meetings in 1996. All directors other
than Mr. Unruh were members of the Nominating Committee. The principal functions
of the Nominating Committee were to identify and review candidates and recommend
to the Board of Directors nominees for membership on the Board of Directors. In
fulfilling this responsibility, the Nominating Committee will consider
recommendations received from stockholders and other qualified sources.
Stockholder recommendations must be in writing and addressed to the Chairman of
the Nominating Committee, c/o Corporate Secretary, Unisys Corporation, Township
Line and Union Meeting Roads, Blue Bell, Pennsylvania 19424. If a stockholder
intends to make a nomination at an Annual Meeting, the Company's Bylaws require
that the stockholder deliver a notice to the Company not less than 90 days prior
to such Annual Meeting setting forth (i) the name, age, business and residence
addresses of each nominee, (ii) the principal occupation or employment of each
nominee, (iii) the number of shares of Unisys capital stock beneficially owned
by each nominee, (iv) a statement that the nominee is willing to be nominated
and (v) such other information concerning each nominee as would be required,
under the rules promulgated by the Securities and Exchange Commission, in a
proxy statement soliciting proxies for the election of such nominee.
The Board has also designated standing Corporate Responsibility, Finance
and Pension Investment Committees and may establish other committees from time
to time.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
selected the firm of Ernst & Young LLP as independent auditors to audit the
Company's books and accounts for the year ending December 31, 1997 and
recommends ratification of such selection by the stockholders. Ernst & Young LLP
has served as independent auditors for Unisys since the merger of Burroughs
Corporation and Sperry Corporation in 1986, having previously served in that
capacity for Sperry Corporation. Its representatives will be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so and to respond to appropriate questions asked by stockholders.
In connection with the year ended December 31, 1996, Ernst & Young LLP
furnished, or is furnishing, worldwide audit services and certain non-audit
services to Unisys. The Audit Committee of the Board of Directors has reviewed
and approved significant items. Fees incurred, or to be incurred, for the year
ended December 31, 1996 aggregated approximately $6.7 million.
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<PAGE> 8
The Board of Directors considers Ernst & Young LLP to be well qualified to
serve as the independent auditors for Unisys. If, however, stockholders do not
ratify the selection of Ernst & Young LLP, the Board will reconsider the
appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY THE
SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR 1997. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS
OTHERWISE SPECIFY IN THEIR PROXIES.
STOCKHOLDER PROPOSAL
(PROPOSAL 1)
The Central Pension Fund of the International Union of Operating Engineers
and Participating Employers, 4115 Chesapeake Street, N.W., Washington, D.C.
20016-4665, beneficial owner of 32,430 shares of Unisys Common Stock, has
proposed the adoption of the following resolution:
BE IT RESOLVED: That the stockholders of Unisys Corporation (or "Company")
urge that the Board of Directors take the necessary steps, in compliance
with Delaware state law, to declassify the Board of Directors for the
purpose of director elections. The Board declassification shall be done in
a manner that does not affect the unexpired terms of directors previously
elected.
SUPPORTING STATEMENT OF THE PROPONENT
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. It is our belief that the classification of the
Board of Directors is not in the best interests of the Company and its
shareholders. The elimination of the staggered board would require each director
to stand for election annually. This procedure would allow shareholders an
opportunity to annually register their views on the performance of the board
collectively and each director individually. Concerns that the annual election
of all directors would leave the Company without experienced board members in
the event that all incumbents are voted out is unfounded. If the owners should
choose to replace the entire board, it would be obvious that the incumbent
directors' contributions were not valued.
It is our belief that a company's corporate governance procedures and
practices, and the level of management accountability they impose, are related
to the financial performance of a company. We believe sound corporate governance
practices, such as the annual election of all directors, will impose the level
of management accountability necessary to help ensure that a good performance
record is attainable over the long-term. Regardless of whether a shareholder
believes the current Board or management team is performing satisfactorily or
not, we believe it is clearly in the best interest of the Company and its
shareholders to take definitive action as owners if they believe the Board is
failing to realize the full potential of the Company's assets.
A classified board of directors protects the incumbency of the Board of
Directors and current management which in turn limits accountability to
stockholders. In addition to a classified Board, we believe the Company has the
following measures in place which further protect incumbency and limit
accountability to shareholders: a "poison pill" shareholder rights plan, blank
check preferred stock, no cumulative voting, and change-in-control severance
agreements for certain executives. We believe that allowing shareholders to
annually register their views on the performance of the Board and each Director
is one of the best methods to
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ensure that our Company will be managed in the best interest of shareholders,
both now and in the long-term.
We urge your support for this proposal.
STATEMENT OF UNISYS IN OPPOSITION TO STOCKHOLDER PROPOSAL
In 1984, the stockholders of the Company approved provisions in its
Certificate of Incorporation and Bylaws that divided the Board of Directors into
three classes, with approximately one-third of the directors elected each year
for a three-year term. The Board continues to believe that a classified Board of
Directors provides important benefits to both the Company and its stockholders.
A classified Board helps provide continuity and consistency of business
strategy and policy. Because approximately two-thirds of the directors remain in
office each year, the classified system helps ensure that experienced
individuals, familiar with the Company's business and affairs, will be on the
Board at all times. At the same time, the annual election of one-third of the
Board of Directors gives stockholders the opportunity to review corporate
decision making, while avoiding the sudden and disruptive changes in corporate
policies that could arise if an entirely new group of directors were elected in
a single year.
The Board also believes that the staggered system of electing directors
affords the Company valuable protection against an unsolicited or unfriendly
proposal to take over the Company. A classified Board is intended to encourage a
person seeking to obtain control of the Company to negotiate with the Board.
Because at least two stockholders' meetings will generally be required to effect
a change in control of the Board, the classified system gives the incumbent
directors the time and leverage necessary to review any takeover proposal, to
negotiate a more favorable result, to consider alternative strategies and to
assure that stockholder value is maximized.
If approved by the stockholders, the proposal would not in itself
declassify the Board. Instead, it would serve as a recommendation to the Board
to take the necessary steps to end the staggered system of electing directors.
To declassify the Board, it would be necessary to amend the relevant provisions
of the Unisys Certificate of Incorporation and Bylaws. The affirmative vote of
80% of the outstanding shares of Unisys Common Stock would be required to
approve those amendments.
For the reasons set forth above, the Board of Directors opposes the
foregoing stockholder proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE ADOPTION OF THE
FOREGOING STOCKHOLDER PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL
BE SO VOTED UNLESS STOCKHOLDERS OTHERWISE SPECIFY IN THEIR PROXIES.
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<PAGE> 10
STOCKHOLDER PROPOSAL
(PROPOSAL 2)
Greenway Partners, L.P., 277 Park Avenue, New York, New York 10172,
beneficial owner of 2,550,000 shares of Unisys Common Stock, has proposed the
adoption of the following resolution:
RESOLVED, that the shareholders hereby recommend that the Board of
Directors authorize a transaction pursuant to which Unisys information
services group and customer services group be separated from its
traditional computer hardware and software businesses through either a sale
of the hardware/software businesses or a spin-off transaction.
SUPPORTING STATEMENT OF THE PROPONENT
The proponent and its affiliates own over 8,000,000 shares of Unisys,
making us the largest shareholder. At last year's Annual Meeting, our proposal
for a spin-off received the support of approximately one-third of the shares
voting, including a majority of the shares in the Unisys Savings Plan, the
participants in which are current and retired employees. We continue to believe
there is great underlying value in Unisys that can be realized through
separating out the faster growing services groups from the more mature computer
businesses.
Unisys should actively seek to sell its mature hardware/software
businesses, thereby leaving shareholders with a pure services company and the
proceeds from the sale. If no buyer is found, Unisys should create, through a
spin-off, a separate services company containing the existing information
services group and most - if not all - of the customer services group, including
the planning and installation of computer networks and maximization of desktop
systems. Unisys' maintenance business also would be placed in the new entity
with long-term contracts to service computers sold by the separate Unisys
hardware company.
Investors, potential capital sources and analysts will be able to price
more efficiently the separate businesses by taking into account their
independent prospects. With a spin-off, the individual managements can become
more accountable for their respective businesses and incentivized through
options on the stock of the separate companies, and existing Unisys shareholders
would own shares in each of two entities - the services company and the
hardware/software company.
Unisys ended 1995 by announcing another restructuring - the fifth in seven
years. There have been too many restructurings with too little to show. Indeed,
the proponent is not alone in its concern with Unisys. The Council of
Institutional Investors, whose members control approximately one trillion
dollars of pension funds, named Unisys to its 1996 "Focus List" consisting of
the 20 worst performing companies in the S&P 500. Unisys also made the 1992
"Focus List."
While the stock market has amply rewarded various technology
companies - including information services providers such as Electronic Data
Services (EDS) and Computer Sciences - with high stock multiples and prices, the
performance of Unisys has been abominable. As shown by the Stock Performance
Graph on page 22, Unisys has lagged far behind its peer group and the S&P 500
Index. Something dramatic must be done!
SEND MANAGEMENT A MESSAGE BY VOTING "FOR" PROPOSAL 2. Consistent with the
proxy rules, our proposal is couched as a recommendation to the Board and its
passage cannot compel action. However, a substantial shareholder vote in favor
should, we believe, be
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regarded as a mandate to the Board to develop a program to separate Unisys'
services businesses from its hardware/software businesses.
STATEMENT OF UNISYS IN OPPOSITION TO STOCKHOLDER PROPOSAL
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE ADOPTION OF THE
FOREGOING PROPOSAL.
Unisys is always open to suggestions that may enhance stockholder value.
Company representatives have therefore met on several occasions with the
proponents to discuss the proposal. However, after carefully considering the
proposal, the Board believes that the risks of separating the Company's computer
business from its services businesses greatly outweigh any potential benefits
and that the Company's strategy of being a full-service information management
company will better serve to maximize stockholder value over time.
The separation of the computer systems group from the two services groups
would jeopardize customer relationships dependent upon the combined capabilities
of the three business units. Given the breadth of solutions required for their
businesses, the Company's clients increasingly expect to receive products and
services in a fully coordinated manner. The Company's "three businesses - one
company" structure allows it to meet this growing need in the marketplace for a
source of "one-stop shopping" for information management solutions. Separating
the computer business from the services units would eliminate this market
differentiator at a time when more than 80% of the Company's revenue is derived
from customers doing business with at least two of the business units and more
than 70% is attributable to customers doing business with all three.
Separation would also destroy the synergy among the units, risking lower
sales for all three. Under the integrated structure, each of the business units
is able to capitalize on the Company's worldwide marketing presence and its
extensive customer base. As a result, the Company has market opportunities that
would not be available if the services and computer businesses were separate.
During the last 18 months, the computer systems and information services groups
teamed to win a $70 million contract for a national voting system in Brazil; the
customer services and computer systems groups teamed to implement a network of
personal computers and related services in a statewide public school system
valued at more than $50 million; and all three units collaborated on a more than
$35 million project for information technology and services at a major United
Kingdom restaurant enterprise.
Adoption of the proposal would also adversely affect the services units'
position as the preeminent services providers in the Unisys environment. The
services businesses benefit not only from their understanding of Unisys core
technologies but also from their visibility into new and emerging technologies
from Unisys. Separation from the computer unit would undermine that advantage in
winning contracts from clients to apply and service Unisys technologies and
would weaken both their business and that of the computer systems group.
The Board also believes it would be disruptive to dismantle the Company's
"three businesses - one company" structure at a time when Unisys is making clear
financial progress. In January 1996, when the Company was realigned into three
interdependent business units, the Company expected the new structure to bring
the focus and accountability necessary to improve its financial performance. The
Company made quarter-to-quarter progress in 1996 under the new structure. Net
income improved each quarter, culminating in a return to profitability on a
per-share basis in the fourth quarter of the year. The Company also made major
progress in significantly reducing its expenses as planned under the
realignment. This resulted
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<PAGE> 12
in increased operating income each quarter during the year and a fourth quarter
operating income margin that was the highest in three years. Adoption of the
proposal would disrupt that progress and jeopardize it going forward. It would
also require a costly restructuring of the Company's capital structure since
most of the Company's long-term debt is non-assignable and would need to be
refinanced if the business units were separated.
The Board therefore continues to believe that the "three businesses - one
company" structure is the best means to maximize stockholder value at this time.
It does not consider the separation of the technology business from the services
businesses to be prudent at a time when customers are increasingly demanding a
single source for their information management needs and when the Company is
making demonstrable progress under the integrated structure. The Board believes
that the best strategy for the Company is to continue to improve fundamental
performance and to continue to build a premier information management company
where customers can obtain the integrated solutions that they require.
Regardless of the outcome of the vote on the proposal, the Board has and
will continue to consider all reasonable avenues to increase stockholder value.
However, the Board urges stockholders to reject the proposal for all the reasons
set out above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE ADOPTION OF THE
FOREGOING STOCKHOLDER PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL
BE SO VOTED UNLESS STOCKHOLDERS OTHERWISE SPECIFY IN THEIR PROXIES.
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<PAGE> 13
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
FMR Corp., Edward C. Johnson 3d, Abigail P. Johnson and Fidelity Management
& Research Company, 82 Devonshire Street, Boston, Massachusetts 02109, have
jointly filed a Schedule 13G with the Securities and Exchange Commission dated
February 14, 1997 reporting beneficial ownership of 10,317,172 shares (or 5.61%)
of Unisys Common Stock. Of such shares, 9,074,430 represent shares issuable upon
conversion of the Company's convertible debt securities and preferred stock.
Sole dispositive power has been reported for 10,317,172 shares. Sole voting
power has been reported for 822,467 shares.
Shown below are the number of shares of Unisys Common Stock (or Stock
Units) beneficially owned as of March 1, 1997, by all directors and nominees,
each of the executive officers named on page 12, and all directors and executive
officers of Unisys as a group. No director or named executive officer
beneficially owns more than one percent of the outstanding shares of Unisys
Common Stock. All directors and executive officers as a group beneficially own
1.8% of the shares of Unisys Common Stock deemed outstanding.
<TABLE>
<CAPTION>
ADDITIONAL SHARES OF
NUMBER OF SHARES COMMON STOCK DEEMED
BENEFICIAL OWNER OF COMMON STOCK(1)(2) BENEFICIALLY OWNED(1)(3)
- --------------------------------------- --------------------- ------------------------
<S> <C> <C>
Harold S. Barron....................... 68,295 174,750
J. P. Bolduc........................... 7,955 --
James J. Duderstadt.................... 7,118 --
Gail D. Fosler......................... 11,505 --
Gerald A. Gagliardi.................... 80,631 82,459
Melvin R. Goodes....................... 6,655 --
Edwin A. Huston........................ 7,406 --
Kenneth A. Macke....................... 24,806 --
Theodore E. Martin..................... 10,922 --
Robert McClements, Jr.................. 11,871 --
Dewaine L. Osman....................... 68,523 102,000
Lawrence C. Russell.................... 108,339 15,000
Alan E. Schwartz....................... 22,795 --
James A. Unruh......................... 343,489 1,245,299
All directors and executive officers as
a group.............................. 996,204 2,281,522
</TABLE>
- ---------------
(1) Includes shares reported by directors and executive officers as held
directly or in the names of spouses, children or trusts as to which
beneficial ownership may have been disclaimed.
(2) Includes 1,387 shares for Mr. Unruh, 606 shares for Mr. Gagliardi and 8,977
shares for executive officers as a group, all held under the Savings Plan, a
qualified plan under Sections 401(a) and 401(k) of the Internal Revenue
Code. With respect to such shares, plan participants have authority to
direct voting. Also includes restricted shares, as described on page 14, as
follows: Mr. Barron, 66,695; Mr. Gagliardi, 80,000; Mr. Osman, 64,842; Mr.
Russell, 108,339; Mr. Unruh, 269,474; executive officers as a group,
770,900. Also includes Stock Units, as described on page 18, for directors
as follows: Mr. Bolduc, 4,955; Dr. Duderstadt, 6,068, Ms. Fosler, 4,655; Mr.
Goodes, 6,455; Mr. Huston, 6,406; Mr. Macke, 23,606; Mr. Martin, 10,922; Mr.
McClements, 10,871 and Mr. Schwartz, 13,795.
(3) Shares shown are shares subject to options exercisable within 60 days
following March 1, 1997.
11
<PAGE> 14
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation paid to (i) the chief executive officer and (ii) the
other four most highly compensated executive officers of Unisys in 1996 (the
"Named Officers"), for services rendered in all capacities to Unisys for 1996,
1995 and 1994.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- ------------------------------------------------------------------ ----------------------- -------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
COMPEN- AWARD(S) OPTIONS/ PAYOUTS COMPEN-
NAME AND SALARY(1) BONUS(1) SATION(2) (3) SARS(4) (4) SATION(5)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ------------------------- ----- --------- -------- --------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James A. Unruh........... 1996 824,004 585,000 4,642 2,021,055 180,000 -- 15,999
Chairman and Chief 1995 800,004 -- 2,025 -- 180,000 -- 15,999
Executive Officer 1994 793,336 420,000 65,259 -- 180,000 -- 73,849
Gerald A. Gagliardi...... 1996 397,504 205,000 8,198 594,000 60,000 -- 25,140
Executive Vice
President 1995 257,086 75,000 11,921 -- 30,000 -- 12,881
1994 194,564 90,000 1,017 -- 14,000 -- 16,051
Lawrence C. Russell (6).. 1996 450,000 270,000 163,575 682,103 60,000 -- --
Executive Vice
President 1995 75,000 50,000 16,747 104,352 250,000 -- 200,000
Harold S. Barron......... 1996 362,500 145,000 5,266 500,213 35,000 -- 48,230
Senior Vice President, 1995 351,250 30,000 -- -- 34,000 -- 43,710
General Counsel and 1994 340,000 85,000 12,855 -- 40,000 -- 67,670
Secretary
Dewaine L. Osman......... 1996 352,504 190,200 3,804 486,315 35,000 -- --
Senior Vice President 1995 317,923 60,000 2,978 -- 34,000 -- --
1994 282,500 80,000 -- -- 35,000 -- 15,250
</TABLE>
- ---------------
(1) Amounts shown include compensation deferred under the Savings Plan or the
Deferred Compensation Plan for Executives of Unisys Corporation.
(2) Amounts shown for Mr. Unruh for 1994 are tax reimbursements and personal
benefits. Amounts shown for Mr. Russell for 1996 are tax reimbursements and
personal benefits, including $87,658 in respect of relocation benefits;
amounts shown for Mr. Russell for 1995 are personal benefits. All other
amounts shown for the Named Officers are tax reimbursements. No amounts are
otherwise shown in respect of personal benefits for the Named Officers
because the aggregate amount of such personal benefits did not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus of such
officer as reported in the above table.
(3) Amounts shown are the dollar value, as of the date of grant, of restricted
stock awards described on page 14. At December 31, 1996, the number and
value of restricted share holdings for each of the Named Officers were as
follows: Mr. Unruh - 269,474 shares, $1,818,950; Mr. Gagliardi - 80,000
shares, $540,000; Mr. Russell - 108,339 shares, $731,288; Mr.
Barron - 66,695 shares, $450,191; Mr. Osman - 64,842 shares, $437,684.
(4) Although the 1990 Plan permits grants of free-standing stock appreciation
rights and the payment of performance awards, no such grants or payments
were made to any of the Named Officers during the years presented.
(5) Amounts shown for 1996 are the full amount of premiums paid by Unisys for
life insurance under split-dollar arrangements.
(6) Mr. Russell became an executive of Unisys in November 1995.
12
<PAGE> 15
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth further information on grants of stock
options during 1996 to the Named Officers pursuant to the 1990 Plan. No stock
appreciation rights were granted during 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERMS(1)
- ---------------------------------------------------------------------- -----------------------------
NUMBER OF % OF
SECURITIES TOTAL
UNDERLYING OPTIONS EXERCISE
OPTIONS GRANTED OR BASE
GRANTED TO PRICE
(2) EMPLOYEES (3) EXPIRATION
NAME (#) IN 1996 ($/SH) DATE (4) 0% ($) 5% ($) 10% ($)
- ---------------------- ---------- --------- -------- ---------- ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
James A. Unruh........ 180,000 4.0 6.25 4/24/06 -- 708,750 1,788,750
Gerald A. Gagliardi... 60,000 1.3 6.25 4/24/06 -- 236,250 596,250
Lawrence C. Russell... 60,000 1.3 6.25 4/24/06 -- 236,250 596,250
Harold S. Barron...... 35,000 0.8 6.25 4/24/06 -- 137,813 347,813
Dewaine L. Osman...... 35,000 0.8 6.25 4/24/06 -- 137,813 347,813
</TABLE>
- ---------------
(1) Illustrates value that might be realized upon exercise of options
immediately prior to the expiration of their term, assuming specified
compounded rates of appreciation on Unisys Common Stock over the term of the
options. Assumed rates of appreciation are not necessarily indicative of
future stock performance.
(2) Options granted to the Named Officers in 1996 were granted on April 24,
1996. Options become exercisable in four equal annual installments,
beginning one year after the date of grant. Options become immediately
exercisable in the event of a change in control (as defined in the 1990
Plan).
(3) The exercise price per share is the fair market value (calculated as the
average of the high and low sales prices reported on the Composite Tape for
New York Stock Exchange Listed Companies) of a share of Unisys Common Stock
on the date of grant. Options may be exercised with cash and/or with other
shares of Unisys Common Stock or with any other form of consideration
permitted by the Compensation and Organization Committee.
(4) The options were granted for a term of ten years, subject to earlier
termination in certain events related to termination of employment.
13
<PAGE> 16
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to unexercised
stock options held by the Named Officers at December 31, 1996. None of the Named
Officers exercised any stock options during 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 1996 DECEMBER 31, 1996(1)
ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED -------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James A. Unruh.......... -- -- 1,060,299 455,000 896,875 90,000
Gerald A. Gagliardi..... -- -- 53,209 92,750 -- 30,000
Lawrence C. Russell..... -- -- -- 310,000 -- 280,000
Harold S. Barron........ -- -- 136,250 91,750 87,125 17,500
Dewaine L. Osman........ -- -- 73,500 80,500 -- 17,500
</TABLE>
- ---------------
(1) Difference between the closing price reported on the Composite Tape for New
York Stock Exchange Listed Companies for Unisys Common Stock at December 31,
1996 and the exercise price.
LONG-TERM INCENTIVE PLAN AWARDS
The following table sets forth information with respect to awards of
restricted stock to the Named Officers in 1996.
<TABLE>
<CAPTION>
PERFORMANCE OR
OTHER PERIOD
NUMBER OF SHARES, UNTIL
UNITS OR OTHER MATURATION
NAME RIGHTS(#) OR PAYOUT
- ----------------------------------------------------------- ----------------- --------------
<S> <C> <C>
James A. Unruh............................................. 269,474 March 1, 1999
Gerald A. Gagliardi........................................ 80,000 March 1, 1999
Lawrence C. Russell........................................ 90,947 March 1, 1999
Harold S. Barron........................................... 66,695 March 1, 1999
Dewaine L. Osman........................................... 64,842 March 1, 1999
</TABLE>
All of the above awards were made under the 1990 Plan in the form of
restricted shares of Unisys Common Stock. Restricted shares may not be sold or
pledged until March 1, 1999. On that date, all restrictions will lapse, provided
the executive remains in the employ of Unisys. During the restriction period,
holders may vote restricted shares and will receive dividends if and to the
extent that dividends are paid on unrestricted shares of Unisys Common Stock.
All of the above awards were made as of February 1, 1996, except that Mr.
Gagliardi received an award of 70,400 restricted shares as of February 1, 1996
and an additional award of 9,600 restricted shares as of December 12, 1996.
14
<PAGE> 17
PENSION PLANS
The table below shows the aggregate annual amounts at age 65 that would be
received from the Unisys Pension Plan (the "Pension Plan"), the Supplemental
Executive Retirement Plan (the "Supplemental Plan") and the Elected Officer
Pension Plan (the "Officer Plan").
<TABLE>
<CAPTION>
YEARS OF SERVICE
ASSUMED FINAL -----------------------------------------------------------------
AVERAGE COMPENSATION 5 10 15 20 25 30 OR MORE
-------------------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 40,000 $ 80,000 $ 90,000 $100,000 $110,000 $ 120,000
300,000 60,000 120,000 135,000 150,000 165,000 180,000
400,000 80,000 160,000 180,000 200,000 220,000 240,000
500,000 100,000 200,000 225,000 250,000 275,000 300,000
600,000 120,000 240,000 270,000 300,000 330,000 360,000
700,000 140,000 280,000 315,000 350,000 385,000 420,000
800,000 160,000 320,000 360,000 400,000 440,000 480,000
900,000 180,000 360,000 405,000 450,000 495,000 540,000
1,000,000 200,000 400,000 450,000 500,000 550,000 600,000
1,100,000 220,000 440,000 495,000 550,000 605,000 660,000
1,200,000 240,000 480,000 540,000 600,000 660,000 720,000
1,300,000 260,000 520,000 585,000 650,000 715,000 780,000
1,400,000 280,000 560,000 630,000 700,000 770,000 840,000
1,500,000 300,000 600,000 675,000 750,000 825,000 900,000
1,600,000 320,000 640,000 720,000 800,000 880,000 960,000
1,700,000 340,000 680,000 765,000 850,000 935,000 1,020,000
</TABLE>
Final Average Compensation generally corresponds to the amounts shown in
the Summary Compensation Table under the headings Salary and Bonus. However,
Final Average Compensation is calculated using the individual's highest 60
consecutive months of compensation out of the final 120 months of employment and
thus will differ somewhat from the amounts shown in the Summary Compensation
Table. Final Average Compensation for the eligible Named Officers as of March 1,
1997 is as follows: J. A. Unruh - $1,365,336; G. A. Gagliardi - $355,834; L. C.
Russell - $690,000; H. S. Barron - $462,250; D. L. Osman - $403,758. Full years
of credited service under the pension plans for the eligible Named Officers as
of March 1, 1997 are as follows: J. A. Unruh - 15 years; G. A. Gagliardi - 25
years; L. C. Russell - one year; H. S. Barron - six years; D. L. Osman - 31
years.
The Pension Plan and Supplemental Plan generally are available to all
employees located in the United States. The Officer Plan is available to
officers, including the Named Officers, who satisfy certain minimum service
requirements. The aggregate pension amount payable under the Officer Plan is
offset by benefits paid under the Pension Plan, the Supplemental Plan and any
applicable subsidiary plan. The amounts shown in the table are computed on a
single life annuity basis and are subject to a reduction equal to 50% of the
participant's primary social security benefit.
EMPLOYMENT AGREEMENTS
Effective July 1, 1994, the Company entered into a three-year employment
agreement with James A. Unruh, covering the terms and conditions of Mr. Unruh's
employment as Chairman of the Board and Chief Executive Officer. The agreement
provides for a minimum base salary of $800,000, subject to periodic review by
the Compensation and Organization Committee, and eligibility for an annual bonus
award at a target bonus level of not less than 100% of base salary.
15
<PAGE> 18
The actual bonus payable, if any, is to be determined by the Compensation and
Organization Committee in its sole discretion. Mr. Unruh is eligible to
participate in the benefit programs generally made available to executive
officers and is eligible to receive stock option and other long-term incentive
awards under the 1990 Plan. If Mr. Unruh's employment is terminated under
certain circumstances, Mr. Unruh will be entitled to receive continued payment
of his base salary and bonus (based on the average percentage of his last three
annual bonus payments) for the remainder of the term of the agreement (with a
minimum of one year's salary plus bonus). He will also be entitled to full
vesting in his pension benefit under the Officer Plan, any post-retirement
medical and life insurance coverage as is then generally available to officers,
full vesting in outstanding awards under the 1990 Plan and an extension of the
repayment period on his home mortgage loan. The agreement provides that under
certain circumstances that constitute a "change in control" (generally, the
acquisition by any person of the beneficial ownership of 20% or more of Unisys
voting securities or a change in the composition of a majority of the Board of
Directors), the term of the agreement will be automatically extended for a
period of three years from the date of the change in control. Further, under
certain circumstances that constitute a "potential change in control"
(generally, the acquisition by any person of the beneficial ownership of 9.9% or
more of Unisys voting securities or certain agreements or actions which, if
consummated, would result in a change in control), the Compensation and
Organization Committee, in its discretion, may elect to fund Mr. Unruh's pension
benefit through a grantor trust. If an actual change in control occurs, the
funding of the trust, if any, will become irrevocable. If an actual change in
control occurs and all or any portion of Mr. Unruh's pension benefit has not
been funded through the grantor trust, the Company will pay to Mr. Unruh a
single sum cash payment in an amount equal to the present value of that portion
of his pension benefit that has not been so funded. Mr. Unruh is also party to a
change in control agreement with the Company, as described on page 17. Under no
circumstances will Mr. Unruh receive duplicate payments under the change in
control agreement and his employment agreement.
Effective November 1995, the Company entered into a three-year employment
agreement with Lawrence C. Russell, covering the terms and conditions of his
employment as Executive Vice President of Unisys and President of the
Information Services Group. The agreement provides for an annual base salary of
$450,000, subject to annual review, and eligibility for an annual bonus under
the Unisys Executive Variable Compensation Plan at a target of not less than 60%
of base salary. The agreement provides that the actual bonus amount can vary
from zero to 150% of target, except that a minimum payout of 100% of target was
guaranteed for 1996. Mr. Russell is eligible to participate in the benefit
programs generally made available to executive officers and is eligible to
receive stock option and other long-term incentive awards under the 1990 Plan.
Pursuant to the agreement, Mr. Russell was also granted the long-term incentive
award more fully described on page 14. The agreement provides that, if Mr.
Russell remains employed with the Company on the applicable payment date, the
Company will make periodic payments, totaling $700,000, through the year 2000,
to compensate Mr. Russell for the value of incentives forfeited from his
previous employment. If the Company terminates Mr. Russell's employment other
than for cause, he will be entitled to receive continued payment of his base
salary and bonus for the remainder of the term of the agreement (with a minimum
of one year's salary plus bonus). He will also be entitled to immediate vesting
of outstanding stock options, immediate lapse of restrictions on outstanding
restricted stock grants, a lump-sum payment of any remaining incentive
forfeiture installments and continued medical and dental coverage through the
remaining agreement term. Mr. Russell is also party to a change in control
16
<PAGE> 19
agreement. He is not entitled to receive duplicate payments under the change in
control agreement and his employment agreement.
CHANGE IN CONTROL EMPLOYMENT AGREEMENTS
The Company has entered into change in control employment agreements with
its executive officers including the Named Officers. The agreements are intended
to retain the services of these executives and provide for continuity of
management in the event of any actual or threatened change in control. A change
in control is generally defined as (i) the acquisition of 20% or more of Unisys
Common Stock, (ii) a change in the majority of the Board of Directors unless
approved by the incumbent directors (other than as a result of a contested
election) and (iii) certain reorganizations, mergers, consolidations,
liquidations or dissolutions. Each agreement has a term ending on the third
anniversary of the date of the change in control. These agreements, which are
the same in substance for each executive, provide that in the event of a change
in control each executive will have specific rights and receive certain
benefits. Those benefits include the right to continue in the Company's employ
during the term, performing comparable duties to those being performed
immediately prior to the change in control and at compensation and benefit
levels that are at least equal to the compensation and benefit levels in effect
immediately prior to the change in control. Upon a termination of employment
under certain circumstances following a change in control, the terminated
executive will be entitled to receive special termination benefits, including a
lump sum payment equal to three years base salary and bonus and the actuarial
value of the pension benefit the executive would have accrued had the executive
remained employed for three years following the termination date. The special
termination benefits are payable if the Company terminates the executive without
cause, the executive terminates employment for certain enumerated reasons
(including a reduction in the executive's compensation or responsibilities or a
change in the executive's job location), or the executive voluntarily terminates
employment for any reason during the 30-day period following the first
anniversary of the date of the change in control. If any payment or distribution
by the Company to the executive is determined to be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code, the executive is entitled
to receive a payment on an after-tax basis equal to the excise tax imposed. The
executive is under no obligation to mitigate amounts payable under these
agreements, and to the extent the executive has a separate employment agreement
with the Company with conflicting rights, the executive is allowed the greater
entitlement.
INDEBTEDNESS OF MANAGEMENT
The Company has made no-interest loans to certain of its executive
officers. The loans, which were made in connection with the officer's purchase
of a principal residence upon relocation, are generally for a 20-year term
(assuming continued employment with the Company), are evidenced by promissory
notes and are secured by second mortgages. Mr. Russell has a four-year,
interest-free loan secured by a first mortgage. The maximum amounts outstanding
during the period between January 1, 1996 and March 14, 1997 for each of the
following were: J.F. McHale, $127,500; L.C. Russell, $283,000; J.A. Unruh,
$245,000. The principal amount of Messrs. McHale's and Unruh's loans as of March
14, 1997 were $122,500 and $130,000, respectively.
17
<PAGE> 20
COMPENSATION OF DIRECTORS
In 1996, the Company's non-employee directors received a monthly director's
fee of $1,250 plus an attendance fee of $750 for each Board of Directors and
Board Committee meeting attended. A director could elect to have these fees paid
in the form of common stock equivalent units ("Stock Units") rather than in
cash. Each non-employee director also received a monthly retainer in the form of
Stock Units having a value of $1,000. The value of each Stock Unit at any point
in time is equal to the value of one share of Unisys Common Stock. Stock Units
are recorded in a memorandum account maintained for each director. Dividend
equivalents, if any, are also credited to the account. A director's Stock Unit
account is payable upon termination of service or at any date at least five
years after the Stock Units are awarded in either cash or common stock at the
election of the director. Directors do not have the right to vote with respect
to any Stock Units. Directors also have the opportunity to defer until
termination of service or until any date at least five years after the deferral
all or a portion of their cash fees. Any deferred cash amounts, and earnings or
losses thereon, are recorded in a memorandum account maintained for each
director. The right to receive future payments of Stock Unit accounts and
deferred cash accounts is an unsecured claim against the Company's general
assets. Directors who are employees of the Company do not receive any cash or
Stock Unit fees for their services as directors.
JOINT REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE
AND THE COMMITTEE FOR EQUITY-BASED COMPENSATION
COMPENSATION PROGRAM AND POLICIES
In 1996, the Company's executive compensation program was administered by
the Compensation and Organization Committee (the "Compensation Committee") and
the Committee for Equity-Based Compensation (the "Equity Compensation
Committee"). The Compensation Committee reviewed compensation levels of elected
officers, evaluated performance and considered management succession and related
matters. It also administered the Company's incentive plans, including the
Executive Variable Compensation Plan (the "EVC Plan"). The Equity Compensation
Committee administered the equity-based aspects of the Company's executive
compensation plans, including the 1990 Plan.
The Company's executive compensation program is designed to attract and
retain executives who will contribute to the Company's long-term success, to
reward executives for achieving both financial and strategic company goals, to
link executive and stockholder interests through equity-based plans and to
provide a compensation package that recognizes individual contributions as well
as overall business results. As a result, a substantial portion of each
executive's total compensation is intended to be variable and to be tied closely
to the performance of Unisys and the executive's business unit, as well as the
attainment of the executive's individual goals.
Periodically the Compensation Committee conducts a review of the Company's
executive compensation program, during which the Compensation Committee analyzes
the elements of the executive compensation program in comparison to executive
compensation programs maintained by public corporations that represent the
Company's most direct competitors for executive talent. These companies (the
"peer companies") include the principal companies included in the peer group
indices in the Performance Graph on page 22 of this Proxy
18
<PAGE> 21
Statement and additional companies in various industries. In 1996, this review
included an analysis by an independent compensation consultant.
The three key components of the Company's executive compensation program
for 1996 were base salary, short-term incentive payments and long-term incentive
awards in the form of stock options. Target levels for each of these three
elements of compensation were determined with reference to the competitive
marketplace, with overall compensation target levels intended to be at
approximately the 50th percentile for comparable positions at the peer
companies. In addition, in 1996 the Company made restricted stock awards to a
limited number of executives as more fully described below.
For tax years beginning on or after January 1, 1994, the Internal Revenue
Code limits the ability of a publicly held corporation to deduct compensation in
excess of $1 million paid to the executives named in the Summary Compensation
Table for that year. Compensation paid under short-term and long-term incentive
plans may be exempt from the deductibility limitations if the plans meet certain
criteria. Under transition rules that expire in 1997 for certain plans
previously approved by stockholders, stock option grants under the 1990 Plan,
and amounts received on exercise of such options, are not considered
compensation subject to the limitations. As permitted by the transition rules,
the Compensation Committee established, as more particularly described below, a
performance threshold and a maximum payment amount for Mr. Unruh's 1996 bonus
under the EVC Plan to qualify that component of Mr. Unruh's compensation for
exemption from the deductibility limitations.
The Company's policies with respect to each of the elements of its
executive compensation program, as well as the basis for the compensation
awarded to Mr. Unruh, are discussed below.
BASE SALARY
Each executive officer position is assigned a salary range based upon
salaries for comparable positions at the peer companies. The midpoint of the
range for each position is targeted at the 50th percentile for the comparable
positions. Individual salaries within the range are determined primarily by
individual performance, level of responsibility and experience. As a result, the
base salary of any executive officer may be set at, above or below the 50th
percentile, depending upon individual circumstances.
SHORT-TERM INCENTIVE PAYMENTS
In 1993, the Company's stockholders approved the EVC Plan. This plan's
stated purpose is to motivate and reward elected officers and other key
executives for the attainment of individual and/or corporate performance goals.
Under the plan, the Compensation Committee has the discretion to determine the
conditions (including performance objectives) applicable to annual award
payments and the amounts of such awards. For 1996, all of the Company's
executive officers participated in the plan. With respect to executives other
than Mr. Unruh and Mr. Russell, awards under the plan for 1996 were generally
determined as follows.
Early in 1996, executives participating in the EVC Plan were assigned
target award amounts for the year, which were typically stated as a percentage
of salary paid during the year (ranging, in the case of elected officers other
than Mr. Unruh, from 35% to 60%). Target amounts were designed to be at
approximately the 60th percentile for the peer companies in order to place a
greater emphasis on the variable, short-term component of total compensation.
Performance goals were also established for participating executives based upon
the financial performance of Unisys and, in the case of certain executives, the
executive's business unit
19
<PAGE> 22
(specifically, achievement of pre-established revenue, profit and cash flow
objectives) and upon individual performance objectives. Actual award amounts
were not determined by formula and could range from zero to 150% of target,
depending upon the Compensation Committee's evaluation of individual and
corporate/business unit performance. For the Named Officers other than Mr. Unruh
and Mr. Russell, the Compensation Committee primarily considered individual and
business unit performance in making awards for 1996. Mr. Russell's award was
determined in accordance with the terms of the employment agreement described on
page 16. Under the employment agreement, Mr. Russell was guaranteed a minimum
payout of 100% of target for 1996.
LONG-TERM INCENTIVE AWARDS
Under the 1990 Plan, stock options may be granted to the Company's
executive officers and other key employees. The size of stock option awards is
based primarily on the individual's responsibilities and position with Unisys.
The Equity Compensation Committee does not determine the size of such awards by
reference to the amount or value of stock options currently held by an executive
officer. For 1996, the value of stock option grants was in the lowest quartile
for comparable positions at the peer companies.
Stock options are designed to align the interests of executives with those
of stockholders. Stock options are granted with an exercise price equal to the
market price of Unisys Common Stock on the date of grant, and current grants
vest over four years. This approach is designed to encourage the creation of
stockholder value over the long term since no benefit is realized unless the
price of the Common Stock rises over a number of years.
During 1996, grants of restricted shares of Unisys Common Stock were made
to selected executives, including the Named Officers, under the 1990 Plan.
Restricted shares may not be sold or pledged until March 1, 1999. On that date,
all restrictions will lapse, provided the executive is still employed by Unisys.
The restricted share grants were intended to encourage the enhancement of
stockholder value and to aid in the retention of key employees.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In 1996, the principal elements of Mr. Unruh's compensation were salary,
bonus and long-term incentive awards in the form of stock options and restricted
shares. This aggregate compensation (assuming a bonus award at 100% of target)
was at approximately the 35th percentile for chief executive officers of
companies in the computer industry.
Mr. Unruh's base salary was determined in accordance with the employment
agreement described at page 15. The agreement provides for a minimum base salary
of $800,000, subject to periodic review by the Compensation Committee. In 1996,
Mr. Unruh's base salary was increased to $836,000. This amount is approximately
10% higher than the average for chief executive officers of companies in the
computer industry.
Under his employment agreement, Mr. Unruh is eligible for an annual bonus
award at a target of not less than 100% of salary paid during the year. The
target bonus amount is at approximately the 60th percentile for companies in the
computer industry and reflects the Compensation Committee's decision to
emphasize short-term performance as a component of Mr. Unruh's total
compensation. Under the employment agreement, the actual bonus amount payable to
Mr. Unruh, if any, is to be determined by the Compensation Committee, based upon
such factors as it deems appropriate. No minimum bonus is guaranteed.
20
<PAGE> 23
In the first quarter of 1996, the Compensation Committee established a
performance threshold for Mr. Unruh's bonus based on the Company's net income
and set a maximum payment amount of three million dollars. Net income in 1996
satisfied the performance threshold. Subject to the maximum referred to above,
the Compensation Committee retained the discretion to determine the amount of
bonus actually paid to Mr. Unruh. In making its determination, the Compensation
Committee evaluated Mr. Unruh's achievement of other goals set at the beginning
of 1996. These goals consisted of corporate performance objectives
(predetermined levels of revenue, profit and cash flow), objectives regarding
the Company's debt maturity profile and various non-financial personal and
organizational goals. Specific weights were not assigned to the various goals or
to the components of corporate financial objectives. Based on its overall
assessment, the Compensation Committee awarded Mr. Unruh a bonus of $585,000 or
70% of target for 1996.
In 1996, Mr. Unruh received options to purchase 180,000 shares of Common
Stock at an exercise price of $6.25 per share. The size of this grant was at
approximately the 20th percentile for chief executives of computer companies. In
1996, Mr. Unruh also received a grant of 269,474 restricted shares as more fully
discussed above.
<TABLE>
<S> <C>
Compensation and Organization Committee Committee for Equity-Based Compensation
Melvin R. Goodes Melvin R. Goodes
Alan E. Schwartz Kenneth A. Macke
Kenneth A. Macke
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Organization Committee were Melvin R.
Goodes, Kenneth A. Macke and Alan E. Schwartz. During 1996, the law firm of
Honigman Miller Schwartz and Cohn, of which Alan E. Schwartz is a member,
provided legal services to Unisys.
21
<PAGE> 24
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total stockholder return on Unisys Common Stock during the five fiscal years
ended December 31, 1996 with the cumulative total return on the Standard &
Poor's 500 Stock Index, the Standard & Poor's Computers (Hardware) Index and the
Standard & Poor's Computers (Software and Services) Index. The comparison
assumes $100 was invested on December 31, 1991 in Unisys Common Stock and in
each of such indices and assumes reinvestment of dividends.
Both the Computers (Hardware) and the Computers (Software and Services)
Indices are presented below because Standard & Poor's has reclassified Unisys
from the Computers (Hardware) Index to the Computers (Software and Services)
Index.
S & P
S & P Computers
Unisys S & P Computers (Software &
Corporation 500 (Hardware) Services)
----------- ----- ---------- -----------
<TABLE>
<S> <C> <C> <C> <C>
Dec-91 100 100 100 100
Dec-92 245 108 73 118
Dec-93 306 118 76 151
Dec-94 209 120 98 179
Dec-95 133 165 131 251
Dec-96 164 203 175 390
</TABLE>
22
<PAGE> 25
GENERAL AND OTHER MATTERS
POLICY ON CONFIDENTIAL VOTING
It is the Company's policy that all stockholder proxies, ballots and voting
materials that identify the vote of a specific stockholder shall, if requested
by that stockholder on such proxy, ballot or materials, be kept permanently
confidential and shall not be disclosed to the Company, its affiliates,
directors, officers and employees or to any third parties, except as may be
required by law, to pursue or defend legal proceedings or to carry out the
purpose of, or as permitted by, the policy. Under the policy, vote tabulators
and inspectors of election are to be independent parties who are unaffiliated
with and are not employees of the Company. The policy provides that it may,
under certain circumstances, be suspended in the event of a proxy solicitation
in opposition to a solicitation of management. The Company may at any time be
informed whether or not a particular stockholder has voted. Comments written on
proxies or ballots, together with the name and address of the commenting
stockholder, will also be made available to the Company.
STOCKHOLDER PROPOSALS
Any stockholder who intends to submit a proposal for inclusion in the proxy
materials for the 1998 Annual Meeting of Stockholders must submit such proposal
so that it is received by the Company no later than November 14, 1997.
OTHER MATTERS
At the date of this Proxy Statement, the Board of Directors knows of no
matter other than the matters described herein that will be presented for
consideration at the Annual Meeting. However, if any other matter shall properly
come before the Annual Meeting, the shares represented by proxies that are
signed and returned by stockholders will, unless stockholders otherwise specify,
be voted thereon in the discretion of the persons voting such shares.
The Company will bear the cost of soliciting proxies. Such cost will
include charges by brokers and other custodians, nominees and fiduciaries for
forwarding proxies and proxy material to the beneficial owners of Unisys Common
Stock. Solicitation may also be made personally, or by telephone or telegraph,
by the Company's directors, officers and regular employees without additional
compensation. In addition, the Company has retained Georgeson & Company Inc. to
assist in the solicitation of proxies for a fee of approximately $12,000, plus
expenses.
By Order of the Board of Directors,
/s/ Harold S. Barron
Harold S. Barron
Senior Vice President,
General Counsel and Secretary
Dated: March 14, 1997
23
<PAGE> 26
UNISYS CORPORATION
PROXY FOR ANNUAL MEETING TO BE HELD APRIL 24, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY APPOINTS KENNETH A. MACKE, ALAN E. SCHWARTZ AND JAMES A.
UNRUH, AND EACH OF THEM, PROXIES, WITH POWER OF SUBSTITUTION, TO VOTE ALL
SHARES OF COMMON STOCK WHICH THE UNDERSIGNED IS ENTITLED TO VOTE AT THE 1997
ANNUAL MEETING OF STOCKHOLDERS OF UNISYS CORPORATION, AND AT ANY ADJOURNMENT
THEREOF, AS DIRECTED ON THE REVERSE SIDE HEREOF WITH RESPECT TO THE ITEMS SET
FORTH IN THE ACCOMPANYING PROXY STATEMENT AND IN THEIR DISCRETION UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THIS CARD ALSO PROVIDES
VOTING INSTRUCTIONS (FOR SHARES CREDITED TO THE ACCOUNT OF THE UNDERSIGNED, IF
ANY) TO THE TRUSTEE FOR THE UNISYS SAVINGS PLAN (THE "SAVINGS PLAN") AS MORE
FULLY DESCRIBED ON PAGE 1 OF THE PROXY STATEMENT.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY/VOTING INSTRUCTION CARD IN THE
ENCLOSED ENVELOPE
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
UNISYS CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE WITHHELD FOR
FOR ITEMS 1 AND 2. FOR all from all except nominee(s) listed below:
<S> <C>
1. Election of Directors-Nominees: Gail D. Fosler, [ ] [ ] [ ]
Melvin R. Goodes, Edwin A. Huston, Robert
McClements, Jr.
FOR AGAINST ABSTAIN
2. Ratification of Selection of Independent Auditors [ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST ITEMS 3 AND 4. FOR AGAINST ABSTAIN
3. Stockholder Proposal [ ] [ ] [ ]
(Board declassification)
FOR AGAINST ABSTAIN
4. Stockholder Proposal [ ] [ ] [ ]
(split-up of the Company)
Mark Here to
Receive an
Admission Ticket [ ]
Mark Here to Have
Your Vote Remain
Confidential [ ]
Date _______________, 1997
</TABLE>
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATIONS MADE. IF NO CHOICES
ARE INDICATED, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2 AND AGAINST ITEMS 3
AND 4 AND THE TRUSTEE FOR THE SAVINGS PLAN WILL VOTE AS DESCRIBED ON PAGE 1 OF
THE PROXY STATEMENT.
- ---------------------------------------- ------------------------------------
Signature: Signature:
NOTE: Please sign exactly as name appears hereon. For joint accounts both
owners should sign. When signing as executor, administrator, attorney, trustee,
guardian, corporate officer, etc., please give your full title.
