Executive & Director Compensation

This information was originally provided in   Unisys 2007 Proxy.

Compensation Discussion & Analysis

Compensation Philosophy

The Company's executive compensation program is based upon the following objectives:

• attract and retain executives responsible for the Company's long-term success;
• reward executives for achieving both financial and strategic company goals;
• align executive and stockholder interests through long-term, equity-based plans; and
• provide a compensation package that recognizes individual contributions as well as overall business results.

Given these objectives, the Company's executive compensation program is designed to provide a mix of fixed compensation and at-risk compensation that is heavily weighted towards variable compensation tied to the achievement of specific business objectives and corporate financial goals (both short-term and long-term), as well as to the attainment of the executive's individual performance objectives. To that end, the principal components of executive officer compensation are:

• base salary;
• annual cash incentives tied to annual corporate and individual performance; and
• long-term incentives in the form of restricted stock units, stock options and/or other stock-based awards designed to give the executive a continuing stake in the long-term success of the Company and to align the executive's interests with those of stockholders.

In addition, executive officers receive other benefits that the Company believes are reasonable and consistent with its overall compensation program. These include supplemental retirement programs, executive life insurance and executive perquisites.

The Company's executive compensation program also takes into account the compensation practices of companies with which Unisys competes or could compete for executive talent. In establishing total compensation for executive officers, the Compensation Committee reviews total annual compensation, as well as each component of total compensation, against executive compensation benchmarking data provided by Towers Perrin, the committee's outside compensation consultant. The benchmark data reflect median compensation levels for persons holding comparable positions at the benchmark companies. The benchmark companies consist of the approximately 25 companies in the Towers Perrin TriComp survey (companies that are principally in the businesses of systems integration and consulting, information technology outsourcing, infrastructure services and hardware technology) and approximately 55 companies from a variety of industries that are comparable to the Company in terms of revenue size and global scope. In general, total target compensation, as well as each element of total compensation, is intended to be consistent with the median for the benchmark companies. However, because both individual and corporate performance are taken into account in determining compensation, any given executive can be compensated at, above or below the median benchmark levels. For 2006, base salaries and annual incentive targets were generally in line with the benchmark companies. For the reasons set forth below, long-term incentive targets were below the benchmark levels, and, as a result, total target compensation was below competitive levels.

In addition to reviewing executive officer compensation against the benchmark data from the two peer groups, the Compensation Committee also solicits input from the Company's president and chief executive officer regarding total compensation for those executives reporting directly to him.

Principal Components of Executive Officer Compensation

As set forth above, the principal elements of the Company's executive compensation program consist of base salary, annual variable cash incentives and long-term incentive compensation. Each element of compensation is reviewed individually and considered collectively with the other elements of the Company's compensation program to ensure that it is consistent with the goals and objectives of both that particular element of compensation and the overall compensation program.

Base Salary

Base salaries for elected officers are initially determined by evaluating the responsibilities of the position held and the experience of the individual and comparing such salaries to the benchmark compensation data. Increases in salary are based on the Compensation Committee's evaluation of such factors as the level of responsibility, individual performance, pay levels of both the executive in question and other similarly situated executives and the benchmark compensation data. In February 2006, each of the Named Officers listed in the Summary Compensation table received increases in base salary. Except for Mr. Blackmore and Mr. Baroni, these increases represented an approximately 5% increase over 2005 salary. Each of Mr. Blackmore and Mr. Baroni received a greater percentage increase to put his base salary in line with benchmark base salaries. The amount of each increase and the resultant base salary for 2006 were as follows:

Variable Annual Incentive Compensation

During 2006, all of the Company's elected officers participated in the Company's executive variable compensation plan (“EVC Plan”) and the Company's turnaround incentive program.

EVC Plan

The EVC Plan's purpose is to motivate and reward elected officers and other key executives for the attainment of corporate and/or individual 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. The amount of incentive compensation awards payable under the plan depends upon (1) a participant's target annual incentive, (2) the amount of funding the Company makes available for the plan and (3) individual performance. Individual targets for elected officers are approved by the committee and are intended to be in line with benchmark levels and to take into account the responsibilities of the individual's position. For 2006, target award amounts, which are typically stated as a percentage of base salary, were as follows for the Named Officers: Joseph M. McGrath -- 100%; Janet B. Haugen -- 85%; Peter Blackmore -- 85%; Greg J. Baroni -- 85%; Randy J. Hendricks -- 85%.

The extent to which the Company makes funding available for the plan depends upon the degree to which the Company achieves performance targets approved by the Compensation Committee at the beginning of each year. For 2006, the committee determined that awards under the plan would be funded if the Company met certain revenue and pre-tax profit performance targets (exclusive of pension expense, gains from divestitures and restructuring charges) that were based on the Company's Board-approved operating and strategic plans. Each target was weighted 50%. Threshold, target and maximum performance levels were set for each criterion. The amount of funding to be made available in respect of each criterion could range from 50% of the total target awards (if threshold performance levels were met) to 150% (if maximum levels were achieved). Performance at the target levels would result in funding at 100%. No funding would be provided by the Company in respect of a criterion if performance was below the threshold level. In addition, the committee determined that if pre-tax profit at the target level was not achieved, all funding for the year would be reduced by 50%. Both the pre-tax profit and revenue goals were subject to adjustment by the chief executive officer and the Compensation Committee for one-time and extraordinary items. Assuming available funding, the amount of awards granted to individual executives would then depend upon individual performance and could range from 0% to 150% of the funded target amounts.

For 2006, the Company's revenue was below the threshold level, and therefore the Company made funding available only in respect of pre-tax profit. In determining the amount of funding the Company should make available, the Compensation Committee considered the differences between actual results and operating plan assumptions regarding divestitures and restructurings. As a result, the total amount of funding made available was approximately 17% of the total target amount. Given the limited amount of funds available for payments to EVC Plan participants, the Compensation Committee determined not to pay EVC awards to the Company's officers, including the Named Officers, in respect of 2006 because these individuals also participated in the 2006 turnaround cash incentive program discussed below.

2006 Turnaround Cash Incentive Program

On February 9, 2006, the Compensation Committee approved a turnaround cash incentive program to incent certain key employees of the Company, including the Named Officers, to execute the turnaround of the Company. Under this program, up to $12.6 million in the aggregate was made available for payment as a turnaround incentive. Amounts actually payable to a participant would depend primarily on the participant's achievement of individual revenue, cost management and/or cash management targets for 2006. Participants could receive from 0 to 100% of the target award depending on the degree to which their incentive targets were achieved. Payments under this program were subject to the discretion of the Compensation Committee and the chief executive officer. In February 2007, the Compensation Committee determined, based on the overall achievement by all participants of the incentive targets, that the total amount payable to all participants would be 80% of the total target award amount. The target award amount for each Named Officer is set forth in the Grants of Plan-Based Awards table under the heading “Estimated Future Payouts Under Non-Equity Incentive Plan Awards”, and the amount actually payable to each Named Officer under the program is set forth in the Summary Compensation Table under the heading “Non-Equity Incentive Plan Compensation”.

Long-Term Incentive Awards

Long-term incentives in the form of equity-based compensation are intended to ensure that the Company's executives have a continuing stake in the long-term success of the Company and to align their interests with those of stockholders. In 2006, long-term incentives generally took the form of restricted stock unit awards (“RSUs”) that vest into shares of Unisys stock after certain restrictions lapse or performance goals are met. Prior to 2006, the Company had generally granted long-term incentive awards in the form of stock options. The Company elected to grant RSUs instead of stock options in 2006 because RSUs are perceived by employees to have a greater value than stock options, and the Company could grant fewer RSUs for the same amount of expense, but lower dilution. In 2006, the Company granted stock options only to certain newly hired employees as part of their new hire compensation package.

In determining RSU awards made to the elected officers, the Compensation Committee considered the number of shares available for grant under the Company's long-term incentive plan, the potential dilutive impact of grants, the financial expense caused by such grants and the appropriate allocation of grants among elected officers and all other eligible employees. The committee also considered the benchmark data in setting the general parameters for awards. The individual awards within these parameters depended upon the committee's assessment of the individual's performance. The 2006 grant for elected officers was below the median for the benchmark companies, primarily because the Company did not want to incur the additional compensation expense that would have been required to be recorded if the grants had been larger. The total number of RSUs granted to each Named Officer in 2006 is set forth in the Grants of Plan-Based Awards Table, under the headings “Estimated Future Payouts Under Equity-Incentive Plan Awards” and “All Other Stock Awards”.

For 2006, 75% of the RSU award was a performance-based award, in keeping with the Company's emphasis on tying compensation to the achievement of corporate financial goals, and 25% of the RSU award was a time-based award. The time-based portion vests into shares of Unisys common stock in three equal annual installments beginning with the first anniversary of the date of the grant and requires that the executive remain with the Company over this time period to receive the award. The performance-based portion also vests into shares of Unisys common stock in three equal annual installments beginning with the first anniversary of the date of grant, but vesting depends upon the degree to which pre-tax profit (exclusive of pension expense, gains from divestitures and restructuring charges) and/or revenue growth rate goals are met in the related 2006, 2006-2007 and 2006-2008 performance periods. Threshold, target and maximum performance levels were set for each of the two performance measures for each performance period, and each performance measure was weighted 50%. Performance-based units will be converted into shares at rates ranging from 0.5 shares per unit if the threshold level is met to 1.0 share per unit if the target level is met and to 1.5 shares per unit if the maximum level is met. No shares will be issued if threshold levels are not achieved.

For 2006, the Company's pre-tax profit performance was at target, and revenue was below threshold. Therefore, the performance-based RSUs associated with the 2006 performance period were converted into shares at a ratio of 0.5 shares per unit (1.0 share for each unit based on pre-tax profit and no shares for units based on revenue growth). Based on 2006 performance, the Company anticipates that pre-tax profit goals for the remaining performance periods are achievable at target and that the Company will need to over perform against its operating and strategic plans in order to achieve the revenue targets.

Stock Ownership Guidelines

Since 1998, the Company has had stock ownership guidelines in place for both directors and elected officers in order to more closely link their interests with those of stockholders. Under the guidelines, as revised in 2005, elected officers are expected to own a specified number of shares of Unisys stock as follows: chief executive officer -- 200,000 shares; executive vice presidents -- 75,000 shares; senior vice presidents -- 45,000 shares; vice presidents -- 25,000 shares. Stock options, including vested stock options, and restricted stock units do not count toward fulfillment of the ownership guidelines. The ownership guidelines are expected to be met by 2010, or within five years for newly elected officers. The Compensation Committee reviews compliance with the guidelines on an annual basis. The number of shares owned by each of the Named Officers is set forth in the stock ownership table.

Stock Option/ RSU Granting Practices

As set forth above, in 2006, long-term incentives generally took the form of RSUs, rather than stock options, and stock options were granted only to certain newly hired employees as part of their compensation package. Prior to 2006, the Company had primarily granted long-term incentives in the form of stock options. The most prevalent form of stock option grant was the annual grant made to executives. The annual grants were approved at a specified, regularly scheduled meeting of the Compensation Committee early each year. Since 2000, annual stock option grants had been approved at the February meeting; prior to 2000, annual grants were approved at the April meeting. For grants in the United States, the grant date was always the date of the meeting, and the exercise price was at least 100% of the fair market value (calculated as the average of the quoted high and low sales prices on the New York Stock Exchange) of Unisys common stock on the date of grant. The dates of regularly scheduled board and committee meetings are generally determined many months in advance as part of the normal board calendaring process.

Stock options granted as part of the hiring process have a grant date no earlier than the date of approval, have an exercise price at least equal to fair market value on the date of grant and, except as noted below, are approved by the Compensation Committee or the Board of Directors. New hire stock option grants are typically reviewed and approved by the Compensation Committee at its regularly scheduled meetings. For these grants, the date of grant is the date of the meeting, if the individual receiving the grant has already commenced employment at Unisys. If the individual has not yet commenced employment, the date of grant is the business day following the individual's first day of employment. The Compensation Committee has also delegated to the Company's chief executive officer the authority to grant a limited number of stock options during the year to eligible individuals (other than the chief executive officer, his direct reports and their direct reports). The committee's delegation of authority specifies that for these stock options the grant date will be either (1) the first business day of the month following the date of the chief executive officer's approval, if the individual has commenced employment at Unisys, or (2) if the individual has not yet commenced employment, the first business day of the month following the individual's date of hire. The chief executive officer has no discretion with respect to choosing the grant date, and in all cases, the date of grant occurs after the date the grantee commences employment with Unisys.

2006 was the first year in which long-term incentive awards primarily took the form of RSUs. As with stock options, the principal award was the annual grant to executives. In 2006, this grant was not made at the February meeting because this was the first time that performance-based units were to be granted, and the performance criteria had not yet been finalized. The grant was made on March 8, 2006, on the day the Compensation Committee approved the performance targets. As with stock options, RSUs are also granted as part of the hiring process. The same procedures regarding timing of stock option grants to new employees also apply with respect to RSUs granted to new hires.

Other Benefits

Elected officers participate in the retirement programs discussed below under “Pension Benefits” and “Non-Qualified Deferred Compensation”. In addition, the Company has historically offered life insurance benefits to executive officers through split-dollar and later through corporate-owned life insurance. All split-dollar life policies for current executives are being converted to corporate-owned life insurance policies in 2007. Life insurance premiums paid in 2006 for each of the Named Officers are disclosed in the footnotes to the Summary Compensation Table. Perquisites provided to executive officers include car allowance, club memberships, financial counseling/tax preparation services, annual physical and umbrella liability insurance.

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code imposes a $1 million annual limit on the amount of compensation that may be deducted by the Company with respect to each Named Officer employed as of the last day of the applicable year. The limitation does not apply to compensation based on the attainment of objective performance goals.

The Company's 2003 Long-Term Incentive and Equity Compensation Plan and the proposed 2007 Long-Term Incentive and Equity Compensation Plan that has been submitted to stockholders for their approval at the 2007 annual meeting permit the Compensation Committee to design compensation awards to Named Officers that will meet the requirements of Section 162(m) of the Internal Revenue Code. The committee may grant awards under the plans that meet the requirements of Section 162(m) of the Internal Revenue Code at such times as the committee believes that such awards are in the best interests of the Company. The committee has considered the impact of the deduction limitation and has determined that it is not in the best interests of the Company or its stockholders to base compensation solely on objective performance criteria. Rather, the committee believes that it should retain the flexibility to base compensation on its subjective evaluation of performance as well as on the attainment of objective goals.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with management. Based on such review and discussion, the committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Compensation Committee
James J. Duderstadt
Clayton M. Jones
Theodore E. Martin

Summary Compensation Table

The following table sets forth information concerning the total compensation paid to the chief executive officer, the chief financial officer and the other three most highly compensated executive officers of Unisys in 2006 (the “Named Officers”) for services rendered in all capacities to Unisys.

(1) Amounts shown include compensation deferred under the Unisys Savings Plan or a Unisys deferred compensation plan.

(2) Amounts shown are the amounts recognized for financial statement reporting purposes with respect to 2006 in accordance with FAS 123R except that no estimates for forfeitures in respect of service-based vesting have been taken into account. For a discussion of the assumptions made in such valuation, see note 18 to the Company's 2006 financial statements. For more details, see the Grants of Plan-Based Awards Table below.

(3) Amounts shown are payouts under the turnaround incentive program discussed following the Grants of Plan-Based Awards Table.

(4) Amounts shown are the change in pension value only.

(5) Amounts shown for each Named Officer are tax reimbursements, executive life Insurance premiums, company matching contributions under the Unisys Savings Plan and perquisites. For Mr. McGrath, amount includes tax reimbursements of $15,458, executive life Insurance premiums of $36,026, company matching contributions under the Unisys Savings Plan of $4,400, and perquisites of $48,418, which consist of car allowance, financial counseling reimbursement, executive physical, country club dues, luncheon club dues, commuting expenses, umbrella liability insurance premium and company aircraft usage. For Ms. Haugen amount includes tax reimbursements of $2,864, executive life insurance premiums of $8,899, company matching contributions under the Unisys Savings Plan of $4,400, and perquisites of $8,415, which consist of car allowance and umbrella liability insurance premium. For Mr. Blackmore, amount includes tax reimbursements of $11,765, executive life insurance premiums of $66,946, temporary housing allowance of $6,000 and perquisites of $59,564, which consist of car allowance, country club dues, luncheon club dues, financial counseling reimbursement, commuting expenses, umbrella liability insurance premium and company aircraft usage of $25,247. For Mr. Baroni, amount includes executive life Insurance premiums of $52,400 and perquisites of $58,569, which consist of car allowance, umbrella liability insurance premium and company aircraft usage of $50,154. For Mr. Hendricks, amount includes tax reimbursements of $9,332, executive life insurance premiums of $40,433, company matching contributions under the Unisys Savings Plan of $4,400 and perquisites of $10,215, which consist of car allowance, financial counseling reimbursement, country club dues and umbrella liability insurance premium. The incremental cost to the Company of personal use of company aircraft was calculated by multiplying the average cost per mile flown on company aircraft by the number of miles attributable to the individual's personal use of the aircraft. The Company determines average cost per mile based on operational costs such as cost of fuel, trip-related maintenance, crew travel expense, on-board catering, landing fees and trip-related hangar and parking costs. Because the company aircraft are used primarily for business travel, the incremental cost calculations do not include any fixed costs that do not change based on usage, such as pilots' salaries, aircraft lease payments and the cost of maintenance not related to trips. Miles attributable to the individual include miles actually flown by the individual, as well as any related “deadhead” legs, where the aircraft flies empty to pick up the individual and/or to return to its home base.

Grants of Plan-Based Awards

The following table sets forth information on grants of plan-based awards during 2006 to the Named Officers.

Awards shown under “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” are target award amounts under the Company's turnaround incentive program, which was approved on February 9, 2006 to incent certain key employees to execute the turnaround of the Company. Under this program, amounts payable were dependent upon the achievement by each participant of individual revenue, cost management and/or cash management targets for 2006. Participants could receive from 0 to 100% of the target award depending on the degree to which their incentive targets were achieved. Amounts actually payable to each participant were determined in February 2007, and the amounts payable to each Named Officer are set forth in the Summary Compensation Table under the heading “Non-Equity Incentive Plan Compensation”.

Awards shown under “Estimated Future Payouts Under Equity Incentive Plan Awards” are performance-based restricted stock units granted on March 8, 2006 under the Unisys Corporation 2003 Long-Term Incentive and Equity Compensation Plan. Performance-based units will vest into shares of Unisys common stock in three equal annual installments beginning with the first anniversary of the date of grant if pre-tax profit and/or revenue growth goals are achieved in the related 2006, 2006-2007 and 2006-2008 performance periods. Performance-based units will be converted into shares at a rate of 0 to 1.5 shares per unit depending on the degree to which the performance goals are met. As more fully discussed above in “Compensation Discussion and Analysis”, awards in respect of the 2006 performance cycle were converted into 0.5 shares per unit.

Awards shown under “All Other Stock Awards” are time-based restricted stock units granted on March 8, 2006 under the Unisys Corporation 2003 Long-Term Incentive and Equity Compensation Plan. Time-based units will vest into shares of Unisys common stock in three equal annual installments beginning with the first anniversary of the date of grant.

Outstanding Equity Awards at Fiscal Year-End

The following table shows equity awards to the Named Officers that were outstanding as of December 31, 2006.

(1) Awards shown for Mr. Blackmore consist of (a) 25,000 restricted stock units that will vest 100% into shares of Unisys common stock on February 9, 2008 and (b) 20,000 time-based units described in more detail in the Grants of Plan-Based Awards Table, which will vest in three equal annual installments beginning on March 8, 2007. Awards shown for the other Named Officers are the time-based awards described in the Grants of Plan-Based Awards Table.

(2) Market value reflects the $7.84 closing price of Unisys common stock on December 29, 2006.

(3) All awards shown are the performance-based units described in more detail in the Grants of Plan-Based Awards table, which will vest in three equal annual installments beginning on March 8, 2007, if performance goals for each installment are met. The number of shares shown in this column is based on achieving threshold performance goals.

Option Exercises and Stock Vested

The following table gives information on stock option exercises and the vesting of stock awards during 2006 for each of the Named Officers.

Pension Benefits

Each Named Officer participates in three pension plans sponsored by Unisys in the United States:

• Unisys Pension Plan (UPP) -- a qualified defined benefit pension plan available to all U.S. employees who met eligibility requirements by December 31, 2006.
• Unisys Corporation Supplemental Executive Retirement Income Plan (SERIP) -- a nonqualified excess defined benefit plan available to all U.S. employees who met eligibility requirements by December 31, 2006 and whose qualified plan benefits are limited by the Internal Revenue Code or limited because they have deferred compensation under non-qualified plans. The plan is designed to make up for the benefit shortfall created by the Internal Revenue Code limits and the non-qualified deferrals of compensation.
• Unisys Corporation Elected Officer Pension Plan (EOPP) -- a nonqualified defined benefit plan available to all elected officers who met eligibility requirements by December 31, 2006. The plan is designed to provide a minimum target of retirement income for executives.

The table below presents pension plan information as of December 31, 2006 for the Named Officers.

The present value of the accumulated benefit has been determined assuming benefits commence as of the earliest date at which each executive is entitled to unreduced benefits in total from all three plans (the later of age 62 and achievement of vesting requirements). The calculations use the same actuarial assumptions used for financial disclosure requirements for the pension plans, except that the calculations assume that each of the above individuals will remain with the Company until such retirement date and therefore do not apply any decrements in respect of termination, disability and the like. Assumptions as to life expectancy are based on the RP2000 Mortality Table projected to 2010 for healthy males and females. The discount rate used is 6.02%. Where benefits are payable as a 50% contingent annuity without actuarial reduction, which is the case for EOPP participants who are married, benefits have been valued using actuarial factors assuming 80% of plan participants are married and assuming wives are three years younger than husbands.

Mr. Blackmore's years of credited service in the U.S. sponsored plans do not reflect his 16.583 years of service while employed with Unisys in the U.K. However, the U.K. service is reflected for vesting purposes in the U.S. plans.

The following summarizes the benefits under the specific plans:

Unisys Pension Plan (UPP)

Prior to December 31, 2006, all employees of Unisys were eligible to participate in the UPP on the January 1 or July 1 first following attainment of both age 21 and one year of service with Unisys. The plan was frozen effective December 31, 2006, and no new participants are now allowed.

The UPP provides benefits under two benefit formulas:

1. For service beginning on or after January 1, 2003, benefits accrue each year under a cash balance formula under which a participant's account is credited with an amount equal to 4% of plan compensation. In addition, the account balance is credited with interest on a monthly basis using the annual interest rates on 5-Year Constant Maturity Treasury Notes, plus 0.25%. Generally, participants vest in the benefit after completion of five years of service with Unisys. The vested cash balance benefit is available for payment following termination of employment, and the normal form of payment is a life annuity for single participants (the participant receives the periodic amount during his or her lifetime, with no survivor benefit payable after his or her death), or an actuarially reduced 50% contingent annuity for married participants (the participant receives a reduced periodic benefit during his or her lifetime to reflect the survivor payments, and the participant's surviving beneficiary receives 50% of the periodic amount the participant received). Other annuity forms are also available on an actuarially equivalent basis. The benefit is also available in the form of a lump sum distribution. All five Named Officers are eligible for the cash balance benefit.

 

2. For employees hired prior to January 1, 2003, benefits are also based on a career pay formula. Each year, the annual accrued benefit payable to a participant at normal retirement date (age 65) is increased by 1% of plan compensation, plus 0.35% of plan compensation in excess of one-half of the average Social Security taxable wage base for the five preceding years. Participants ultimately are eligible for the larger of: (a) the career pay formula through the date of termination of employment or (b) the career pay formula accrued through December 31, 2002 plus the cash balance benefit described above. Generally, participants vest in the benefit after completion of five years of service with Unisys. The vested benefit is available for payment following termination of employment and attainment of early retirement eligibility (age 55). The benefit is reduced by 0.5% for each month that the benefit commences prior to age 65. Should the employee terminate employment after attainment of both age 55 and 20 years of service with Unisys, the benefit is reduced by 0.5% for each month that the benefit commences prior to age 62. The normal form of payment of the vested career pay benefit is a life annuity for single participants, or an actuarially reduced 50% contingent annuity for married participants. Other annuity forms are also available on an actuarially equivalent basis. All Named Officers, except Mr. Blackmore, are eligible for the career pay benefit.

For both formulas, plan compensation is salary, commissions, overtime pay, paid bonus and paid accrued and unused vacation. Compensation includes amounts deferred under the Unisys Savings Plan. Excluded from compensation are severance payments, supplements, compensation deferred under a non-qualified plan and other forms of extraordinary compensation. Plan compensation is limited by Section 401(a)(17) of the Internal Revenue Code.

As of December 31, 2006, all Named Officers were vested in their UPP benefit and would have been eligible to immediately receive the cash balance portion of their benefit upon termination of employment. None of the Named Officers is currently eligible to receive an early retirement benefit under the career pay formula.

Effective December 31, 2006, benefits ceased to accrue under the UPP. However, the cash balance accounts continue to grow with interest credits.

Unisys Corporation Supplemental Executive Retirement Income Plan (SERIP)

Prior to December 31, 2006, all employees of Unisys were eligible to participate in the SERIP on the January 1 or July 1 first following attainment of both age 21 and one year of service with Unisys. The plan was frozen effective December 31, 2006, and no new participants are now allowed.

The SERIP provides benefits under the same provisions as the UPP except as follows:

• Plan compensation includes compensation deferred under non-qualified plans and is not limited by Internal Revenue Code Section 401(a)(17).

• The benefit payable under the UPP is applied as an offset to the benefits available under the SERIP.

• The vested cash balance portion of the benefit is payable upon termination of employment (or, in the case of benefits accrued or vested on or after January 1, 2005, six months following termination of employment) in the form of a lump sum distribution. The vested career pay portion of the benefit is payable following the later of (a) termination of employment (or, in the case of benefits accrued or vested on or after January 1, 2005, six months following termination of employment) or (b) attainment of age 55. The career pay benefit is payable in the form of a life annuity for single participants, or an actuarially reduced 50% contingent annuity for married participants. No optional forms of benefit are currently available under the SERIP.

As of December 31, 2006, all Named Officers were vested in their SERIP benefit and would have been eligible to receive the cash balance portion of their benefit following termination of employment. None of the Named Officers is currently eligible to receive an early retirement benefit under the career pay formula.

Effective December 31, 2006, benefits ceased to accrue under the SERIP. However, the cash balance accounts continue to grow with interest credits.

The Company has established a grantor trust relating to the SERIP. If a change in control of the Company occurs, the Company is required to fund the trust in an amount equal to the present value of the accrued pension benefits under the plan.

Unisys Corporation Elected Officer Pension Plan (EOPP)

Only elected officers of Unisys are eligible to participate in the EOPP. The plan was frozen effective December 31, 2006, and no new participants are now allowed.

The EOPP provides a gross annual accrued benefit equal to 4% of final average compensation for each of the first 10 years of credited service, plus 1% of final average compensation for each year of credited service in excess of 10 (but not in excess of 30), minus 50% of the participant's Social Security benefit. This benefit is reduced by 0.5% for each month that the benefit commences prior to age 62. The vested benefit is payable following the later of (1) termination of employment (or, in the case of benefits accrued or vested on or after January 1, 2005, six months following termination of employment) or (2) attainment of age 55. The benefit is payable in the form of a life annuity for single participants, or a 50% contingent annuity, which is not actuarially reduced, for married participants. No optional forms of benefit are currently available under the EOPP. The gross benefit is offset by the benefits payable under both the UPP and the SERIP.

Final average compensation is the average of the highest consecutive 60 months of plan compensation out of the last 120 months of employment. Plan compensation is identical to that used for the SERIP.

Generally, benefits under the EOPP vest upon the earliest to occur of (1) attainment of age 55 and 10 years of service with Unisys, (2) for executives who were participants between January 1, 1997 and July 19, 2001, attainment of age 50 and five years of service with Unisys or (3) a change in control of Unisys. As of December 31, 2006, Mr. McGrath and Mr. Blackmore were vested in their EOPP benefit. Only Mr. Blackmore is currently eligible to receive an early retirement benefit.

Effective December 31, 2006, benefits ceased to accrue under the EOPP.

The Company has established a grantor trust relating to the EOPP. If a change in control of the Company occurs, the Company is required to fund the trust in an amount equal to the present value of the accrued pension benefits under the plan.

Unisys Savings Plan

In conjunction with freezing the UPP, SERIP and EOPP defined benefit plans, effective January 1, 2007, the Company increased its matching contributions under the Unisys Savings Plan, which is a tax-qualified defined contribution plan, to 100% of the first 6% of eligible pay contributed by participants on a before-tax basis. If a participant would not be eligible to get the full amount of this Company matching contribution under the Savings Plan because his or her eligible pay exceeds the annual compensation limits for qualified plans under the Internal Revenue Code ($225,000 in 2007), or because the participant has deferred some compensation under the Company's non-qualified 2005 deferred compensation plan, the Company will automatically credit the participant's memorandum account under the 2005 deferred compensation plan with an amount equal to 6% of such excess or deferred eligible pay to make up for the Company matching contributions that would not be permitted under the Savings Plan.

Non-Qualified Deferred Compensation

The table below shows unaudited information with respect to compensation of the Named Officers that has been deferred under a plan that is not tax-qualified. Under the Company's non-qualified deferred compensation plan, eligible employees may defer until a future date payment of all or any portion of their annual salary or bonus, as well as any vested share unit award under the Company's long-term incentive plan. Amounts deferred are recorded in a memorandum account for each participant and are credited or debited with earnings or losses as if such amounts had been invested in one or more of the investment options available under the Unisys Savings Plan, as selected by the participant. Participants may change their investment options at any time. Account balances will be paid either in a single lump sum or in annual installments, at the participant's discretion. The memorandum accounts are not funded, and the right to receive future payments of amounts recorded in these accounts is an unsecured claim against the Company's general assets. However, the Company has established a grantor trust relating to its pre-2005 non-qualified deferred compensation plan. If a change in control of the Company occurs, the Company is required to fund the trust in an amount equal to the aggregate account balances under that plan.

(1) Represents earnings in 2006 in respect of deferrals made in prior years. No amounts shown in this column are reported in the Summary Compensation Table because they are not above-market or preferential earnings.

Potential Payments upon Termination or Change in Control

Under the agreements and plans discussed below, the Named Officers would be entitled to the following payments and benefits upon termination of employment and/or a change in control of the Company.

Employment Agreement

On December 22, 2004, the Company and Joseph W. McGrath signed an employment agreement covering the terms and conditions of Mr. McGrath's employment as President and Chief Executive Officer for the period from January 1, 2005 through December 31, 2007. The agreement provides for a minimum base salary of $900,000 per year, subject to periodic review by the Compensation Committee. In February 2006, Mr. McGrath's annual salary was increased to $950,000. Mr. McGrath is eligible to receive an annual bonus award at a target bonus level of not less than 100% of base salary. The actual bonus payable, if any, will be determined by the Board in its sole discretion after receiving a recommendation from the Compensation Committee. Mr. McGrath 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 Company's long-term incentive plan. The agreement provides for Mr. McGrath to receive certain benefits if his employment is terminated by the Company without cause or by Mr. McGrath for good reason, defined generally as a reduction in aggregate compensation target, a reduction in duties or authority or removal as chief executive officer. In such event, the agreement provides for Mr. McGrath to receive continued payment of his base salary (at its then current rate) and annual bonus (in an amount equal to the average percentage of target bonus paid to him for the three years preceding termination times the target bonus amount in effect on the date of termination) for the remainder of the term, but not less than one year's compensation. Such amounts are to be paid in the same manner and at the same times as the salary and bonus paid to him during his employment. He will also be entitled to continued medical and dental coverage, at the same costs applicable to active employees, through the later of the term of the agreement or his attaining age 55 and full vesting in outstanding awards under the Company's long-term incentive plan. Any such salary and bonus payments made to Mr. McGrath will be reduced by the amount of any cash compensation he receives for services rendered to any entity other than Unisys. The employment agreement also includes a confidentiality provision of unlimited duration and non-compete, non-solicitation and non-disparagement provisions effective for a period equal to the greater of 12 months from the date of termination of employment or the period during which the Company is making the payments described above. In the event of a breach of any of these provisions, the Company will have the right to terminate any of such payments remaining due. If Mr. McGrath's employment had terminated on the last business day of 2006 under circumstances entitling him to the payments described above, he would have received the following: salary -- $950,000, payable in monthly installments; bonus -- $168,889, payable in a lump sum at the time bonuses are payable to other executives; value of vested stock awards -- $1,568,000; value of continued medical and dental coverage -- $47,367. Mr. McGrath is also party to a change in control agreement with the Company, as described below. He is not entitled to receive duplicate payments under the change in control agreement and his employment agreement, and in the event of a conflict he will be allowed the greater entitlement.

Change in Control 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 (1) the acquisition of 20% or more of Unisys common stock, (2) 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 (3) 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. For purposes of determining compensation levels, base salary must be at least equal to the highest salary paid to the executive during the 12 months preceding the change in control, and bonus must be at least equal to the highest bonus paid to the executive for the three fiscal years preceding the change in control. If, following a change in control, the Company terminates the executive without cause or the executive terminates employment for good reason (generally defined as a reduction in the executive's compensation or responsibilities or a change in the executive's job location), or if 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, the terminated executive will be entitled to receive special termination benefits as follows: a lump sum payment equal to three years base salary and bonus (based on the highest salary and bonus paid during the term of the agreement), a lump sum payment equal to the excess of the actuarial value of the pension benefit the executive would have accrued if the executive's employment had continued for three years after the termination date over the actuarial value of the actual pension benefit payable as of the termination date, outplacement services and, for three years following the termination of employment, continued benefits under the Company's welfare benefit plans and programs. 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. If the Named Officers had become entitled to the special termination benefits on the last business day of 2006, they would have received the following:

(1) As set forth above, the Company's defined benefit plans were frozen as of December 31, 2006. Therefore, the amounts shown represent the Company match equivalent to 6% of eligible pay under the Unisys Savings Plan discussed above. If the defined benefit plans had not been frozen, the actuarial value of the three-year pension accrual (calculated using the same assumptions as in the Pension Benefits Table) would have been as follows: Mr. McGrath -- $1,477,632; Ms. Haugen -- $237,874; Mr. Blackmore -- $1,180,312; Mr. Baroni -- $701,615; Mr. Hendricks -- $514,898, and the amount of excise tax gross-up shown in the table would have increased to reflect this.

(2) The agreements provide that the executive may select the provider and the scope of outplacement services, and therefore the costs actually incurred will vary by individual. The Company believes that the amounts shown in this column are a reasonable estimate of the potential costs of outplacement services.

(3) Represents the annual cost of welfare benefits, multiplied by three.

(4) Change in control payments are assumed to consist of the amounts shown in the table, as well as the value of any accelerated vesting of equity awards pursuant to the terms of the Company's long-term incentive plan. The calculations use an excise tax rate of 20%, a Federal income tax rate of 35%, a Medicare tax rate of 1.45% and the current income tax rates for the States of residence of the Named Officers.

Benefit Plans

Under the Company's long-term incentive plan, if a change in control occurs, all time-based awards will become fully vested and a pro-rata portion (based on the completed portion of the related performance cycle) of performance-based awards will vest. If a change in control had occurred on the last business day of 2006, the Named Officers would have become vested in the following number of restricted stock units, having the following values:

(1) Based on the $7.84 closing price of Unisys common stock on December 29, 2006.

A discussion of amounts payable to the Named Officers under the pension plans sponsored by the Company is available under "Pension Benefits." As set forth in “Pension Benefits”, benefits under the Elected Officer Pension Plan become immediately vested upon a change in control of the Company.

Compensation of Directors

In 2006, the Company's non-employee directors received an annual retainer/attendance fee for regularly scheduled meetings of $60,000 and a meeting fee of $1,500 per meeting for attendance at certain additional Board and committee meetings. Chairmen of committees other than the audit committee also received an annual $5,000 retainer. The annual retainer for the chair of the audit committee was $20,000. In February 2006, the Board approved the payment of an additional $100,000 annual retainer to the non-executive Chairman of the Board. Prior to February 2006, the Chairman of the Board had been an employee of the Company. In February 2006, the Board also approved an annual grant to each non-employee director of restricted stock units having a value of $100,000 (based on the fair market value of Unisys common stock on the date of grant). Accordingly, on February 9, 2006 each non-employee director received a grant of 15,397 restricted stock units. The restricted stock units vest in three annual installments beginning one year after the date of grant and will be settled in shares of Unisys common stock. The grant of restricted stock units was made in lieu of stock option grants.

Prior to February 2006, the annual retainers described above were paid in monthly installments, with 50% of each installment paid in cash and 50% in the form of common stock equivalent units. 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. A director's stock unit account is payable in Unisys common stock, either upon termination of service or on a date specified by the director, at the director's option. Directors do not have the right to vote with respect to any stock units. In February 2006, the Board determined that these fees would be payable 100% in cash. They continue to be paid in monthly installments. Directors have the opportunity to receive these fees in the form of stock units if they choose. They also have the opportunity to defer until termination of service, or until a specified date, all or a portion of their cash fees under the Company's deferred compensation plan for directors. Under this plan, any deferred cash amounts, and earnings or losses thereon (calculated by reference to the investment options available under the Unisys Savings Plan and selected by the director), are recorded in a memorandum account maintained for each director. The right to receive future payments of 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, stock units, stock options or restricted stock units for their services as directors. The table below provides a summary of Director Compensation for 2006.

(1) Amounts shown are the annual retainer/meeting fee, annual fees for chairmen of committees and non-executive Chairman of the Board and meeting fees for attendance at additional meetings. Includes amounts that have been deferred under the deferred compensation plan for directors. Also includes the value of retainers and fees paid in stock units prior to March 2006 and the value of stock units received in lieu of cash payments of fees, each as described above.
 

(2) Amounts shown are in respect of the 15,397 restricted stock units granted to each director. Amounts shown are the amounts recognized for financial statement reporting purposes with respect to 2006 in accordance with FAS 123R. The grant-date fair value of these restricted stock unit awards was $100,004.
 

(3) At December 31, 2006, each of the above-named directors had outstanding 15,397 restricted stock units. Directors also had outstanding stock units in respect of directors' fees as follows: Mr. Bolduc -- 27,029; Dr. Duderstadt -- 26,342; Mr. Duques -- 60,826; Mr. Espe -- 6,323; Ms. Fletcher -- 13,943; Mr. Huston -- 30,078; Mr. Jones -- 7,298; Ms. Kenne -- 0; Mr. Martin -- 64,981.
 
(4) At December 31, 2006, directors had outstanding stock options as follows: Mr. Bolduc -- 68,000; Dr. Duderstadt -- 68,000; Mr. Duques -- 68,000; Mr. Espe -- 24,000; Ms. Fletcher -- 48,000; Mr. Huston -- 68,000; Mr. Jones -- 24,000; Ms. Kenne -- 0; Mr. Martin -- 68,000.