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Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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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).