Item 2.02 Results of Operations and Financial Condition.
On May 7, 2020, Teradata Corporation (the "Company" or "Teradata") issued a
press release setting forth its first-quarter 2020 operating results as well as
current recurring revenue and earnings per share outlook estimates for the
second quarter of 2020 (the "Earnings Release"), as set forth below in Item
7.01, and incorporated herein by reference. A copy of the Earnings Release is
attached hereto as Exhibit 99.1 and hereby incorporated by reference. Such
information, including Exhibit 99.1 attached hereto, shall not be deemed "filed"
for purposes of Section 18 of the Securities Exchange Act of 1934.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Election of Stephen McMillan as President and Chief Executive Officer and
Director
On May 5, 2020, Teradata's Board of Directors (the "Board") elected Stephen
McMillan as President and Chief Executive Officer ("CEO") of the Company,
effective as of June 8, 2020 (the "Effective Date"), succeeding Victor L. Lund,
who will depart as Interim President and CEO as of the Effective Date.
Mr. McMillan, age 49, has served as the Executive Vice President of Global
Services for F5 Networks, Inc., a transnational company that specializes in
application services and application delivery networking, since October 2017.
Prior to joining F5, from September 2015 until October 2017, he was Senior Vice
President, Customer Success and Managed Cloud Services at Oracle Corporation
("Oracle"). From May 2012 to September 2015, he served as Senior Vice President,
Managed Cloud Services at Oracle. Prior to joining Oracle, Mr. McMillan spent 19
years at International Business Machines Corporation, where he held a number of
leadership roles focused on global managed services, consulting, and information
technology.
In connection with his election as President and CEO, on May 5, 2020, Teradata
entered into an offer letter with Mr. McMillan (the "Offer Letter"). The Offer
Letter provides that Mr. McMillan will receive an initial annual base salary of
$800,000, a target annual incentive bonus opportunity of 125% of his base salary
under the Company's management incentive plan (pro-rated for 2020), and will be
eligible to participate in the other benefit plans generally made available to
the Company's senior executives, including the Company's Executive Severance
Plan ("ESP") and change in control plan.
The Offer Letter also provides that Mr. McMillan will be paid a signing bonus of
$500,000, which is subject to a repayment obligation of $250,000 of such amount
(net of taxes) if Mr. McMillan's employment is terminated with cause or he
resigns for any reason other than good reason during his first year of
employment, and $125,000 of such amount (net of taxes) if Mr. McMillan's
employment is terminated with cause or he resigns for any reason other than good
reason during his second year of employment. He will receive an allowance of
$15,000 per month to cover his commuting costs.
In addition, the Offer Letter provides that, on or about June 9, 2020, and
subject to his commencing employment with the Company, he will receive the
following equity awards: (i) a new hire grant (the "New Hire Award") of
service-based restricted share units ("RSUs"), intended to offset compensation
that Mr. McMillan is forfeiting from his prior employer, with a target value
equal to $4,662,327, which shall vest as follows: 45% on December 1, 2020, 42%
on the first anniversary of the date of grant, and 13% on the second anniversary
of the date of grant, in each case subject to continued employment; (ii) an
annual grant of service-based RSUs under Teradata's 2020 long-term equity
program (the "2020 RSU Award") with a target value of $3,400,000, which shall
vest in equal annual installments on the first, second and third anniversaries
of the grant date, in each case subject to continued employment; and (iii) an
annual grant of performance-based RSUs under Teradata's 2020 long-term equity
program (the "2020 PBRSU Award") with a target value of $5,100,000, subject to a
three-year performance period commencing January 1, 2020 and achievement of the
same performance goals applicable to other senior executives of Teradata. The
New Hire Award is subject to accelerated vesting in full, and each of the 2020
RSU Award and the 2020 PBRSU Award is subject to pro-rated vesting (subject to a
minimum of two years of vesting credit), upon a termination of Mr. McMillan's
employment by Teradata without cause or by McMillan with good reason (with the
2020 PBRSU Award vesting based on actual performance results for the entire
performance period).
With respect to Mr. McMillan's participation in the ESP, the Offer Letter
provides that Mr. McMillan will participate as a Level I participant under the
terms and conditions of the ESP, amended as follows: (i) he is entitled to
receive severance under the ESP in the event he resigns for good reason at any
time (and not just in connection with a change in control) upon giving the
Company notice and an opportunity to cure, and (ii) upon a qualified termination
under the ESP, he is entitled to enhanced vesting of any outstanding but
unvested service-based or performance-based restricted share units (other than
the New Hire Award, the 2020 RSU Award and the 2020 PBRSU Award), such that he
will be treated as receiving an additional year of vesting for both types of
awards (with payout of any performance awards subject to actual performance
results during the applicable performance period).
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Mr. McMillan will become subject to the Company's stock ownership guidelines
applicable to the chief executive officer position. He will also be entitled to
standard indemnification and insurance coverage available to the Company's other
executive officers.
On May 5, 2020, the Board also elected Mr. McMillan as a director, effective as
of the Effective Date. Mr. McMillan was elected to Class III, with a term
expiring at the Annual Meeting of Stockholders in 2022, or until such time as
his successor is duly elected and qualified or as is otherwise provided in
Teradata's Amended and Restated Certificate of Incorporation and Amended and
Restated Bylaws. Mr. McMillan was elected to serve as a member of the Executive
Committee of the Board, effective as of the Effective Date. Mr. McMillan will
not receive any additional compensation for his service as a director.
There are no arrangements or understandings between Mr. McMillan and any other
person pursuant to which he was elected as President and CEO or director, and
there are no family relationships between Mr. McMillan and any of the Company's
other directors or executive officers. There are no transactions in which
Mr. McMillan has a direct or indirect interest that would be required to be
disclosed under Item 404(a) of Regulation S-K.
Departure of Victor Lund as Interim President and Chief Executive Officer and
Director
In connection with Mr. McMillan's election as President and CEO, upon the
Board's request, Mr. Lund resigned as a director and as an employee of Teradata,
effective as of the Effective Date. In connection with Mr. Lund's departure,
under the terms of Mr. Lund's outstanding equity awards, his unvested
performance-based and service-based RSUs outstanding as of the Effective Date
shall vest in full (with payout of any performance awards subject to actual
performance results during the applicable performance period).
As of the Effective Date, Mr. Lund will provide CEO transition services as an
advisor to Mr. McMillan for the remainder of 2020 and shall receive a consulting
fee equal to the continuation of his current base salary of $83,333.33 per
month, pursuant to a consulting agreement entered into between the Company and
Mr. Lund (the "Consulting Agreement"). The Consulting Agreement enables
Mr. Lund, who possesses deep knowledge of the Company and its strategy as well
as experience as a chief executive officer of international public companies, to
be available to Mr. McMillan for consultation through completion of the current
fiscal year.
The foregoing is only a brief description of the above-specified compensatory
arrangements, does not purport to be a complete description of the rights and
obligations of the parties thereunder and is qualified in its entirety by
reference to the Offer Letter, award agreements, ESP participation agreement,
and Consulting Agreement that will be filed as exhibits to the Company's
Quarterly Report on Form 10-Q for the quarter ending June 30, 2020.
Item 7.01 Regulation FD Disclosure.
The information set forth above under Item 2.02 "Results of Operations and
Financial Condition" is furnished pursuant to this Item 7.01 and Exhibit 99.1 is
hereby incorporated by reference into this Item 7.01.
On May 7, 2020, Teradata issued a press release (the "Management Change Press
Release") with respect to the matters described under Item 5.02 "Departure of
Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers," a copy of which is
furnished pursuant to this Item 7.01, and is attached hereto as Exhibit 99.2 and
incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are attached with this Current Report on Form 8-K:
Exhibit
No. Description
99.1 Press Release dated May 7, 2020, issued by the Company (Earnings
Release).
99.2 Press Release dated May 7, 2020, issued by the Company (Management
Change Press Release).
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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