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]
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Filed by a Party other than
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Check the appropriate
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Preliminary Proxy
Statement
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Soliciting Material Under Rule
14a-12
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Confidential, For Use of
the
Commission Only (as permitted
by Rule 14a-6(e)(2))
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[X]
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Definitive Proxy
Statement
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[ ]
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Definitive Additional
Materials
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AUTOMATIC DATA PROCESSING, INC.
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(Name of Registrant as
Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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the appropriate box):
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Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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securities to which transaction applies:
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Per unit price or
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state how it was determined):
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Date Filed:
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2013 ANNUAL LETTER TO
SHAREHOLDERS
Dear Shareholders,
In ADPs fiscal 2013, we grew in
multiple top- and bottom-line financial measures while working through an
improving but still challenging global economy. We introduced innovative products and
services that helped to improve our competitiveness and drive new business
bookings. We also continued to help existing clients migrate to new, easier to
use platforms while helping them deal with complex regulatory
changes.
But there is something else
happening that is just as important. This past year, our belief in our strategic
direction to become a leading human capital management (HCM) company was
validated in many ways. In conversations with our clients, I hear a common theme
that human capital is a companys biggest area of investment, opportunity and
concern. They say its ADPs expertise, service and technology that enables them
to ensure a more engaged workforce and offers the assurance of support for the
many changes and HCM challenges they face.
We have seen the adoption of our
integrated HCM solutions by more than 40,000 clients. And we have been helping
clients prepare to comply with the United States Affordable Care Act, with
resources needed to manage various aspects of this complex and rapidly evolving
law provided by our integrated HCM solutions.
Our strategy, delivered through an
approach focused on simplification, innovation and growth, is the key to
continuing ADPs success as a company and continuing to reward you for your
investment. This letter provides a closer look at each of these three
objectives.
Growth
Two years ago we made the strategic
decision to concentrate on integrated, cloud-based HCM solutions, with a global
market that we estimated at $90 billion. The strategy is paying off as we
perform well both for clients and against competitors.
Our fiscal 2013 results continue to
reflect the strength of our underlying business model, including the diversity
of our client base and products, against the uneven global economic recovery. We
saw continued strength in our key metrics, solid revenue growth, and continued
improvements across our business segments:
-
As stated in our Aug. 1, 2013 earnings release, we
grew revenues 7% over fiscal 2012, with 6% of this
growth organic, to $11.31 billion. This included revenue growth in
Employer Services (up 7%, 6%
organic),
Professional Employer Organization (PEO) Services (up 11%, all organic), and
Dealer Services
(up 9%, 8%
organic).
-
We achieved strong new business bookings growth
for Employer Services and PEO Services of 11% over
last year to $1.35 billion, a new high. We also achieved record client
revenue retention of 91.3% (up 0.4
percentage
points). This combination of sales success and client loyalty demonstrates the
strength of both
our products and
services.
-
Diluted earnings per share, after adjusting for a
fiscal 2013 pretax non-cash goodwill impairment charge
and a fiscal 2012 pretax gain on a sale of assets, grew 6% to
$2.89.
These financial results are thanks
in part to an increase in market demand for newer solutions, leading to growth
in our client count to about 620,000.
Existing clients demonstrated an
eagerness to upgrade to newer platforms, allowing our migration strategy to gain
momentum. Our ADP Vantage HCM
®
(for large companies), ADP Workforce
Now
®
(midsize), GlobalView
®
(multinationals), and RUN
Powered by ADP
®
(small) solutions all saw solid gains in revenues and
new bookings.
For illustration of the pace of
adoption, we doubled the number of clients on ADP Workforce Now, from 20,000 to
40,000, in only 17 months, from November 2011 to April 2013. ADP Vantage HCM,
which has been generally available for just over a year, also grew rapidly and
exited the fiscal year with tremendous momentum.
We have paired our innovative
platforms with our unique expertise relevant to the Affordable Care Act (ACA) in
the U.S. to present employers with a compelling value proposition. The ACA
requires businesses to comply with reporting requirements on employment levels,
salaries, hours worked and more. ADP has been consulting with clients on these
issues on a one-to-one basis while creating tools to help facilitate their
compliance with various requirements of the ACA. This combination helped us
close numerous deals and achieve strong client retention. The strong market move
to integrated HCM platforms, combined with ACA-related activity, has created a
larger market for ADP to address.
Our organic growth demonstrated that
our products and services are well
regarded, and that our sales force is
talented and well equipped to capitalize on evolving market conditions. Our
sales force is also increasing its efficiency to make an even greater
contribution to our profitability. We will continue to make strategic
acquisitions, such as our acquisition of Payroll S.A. in June 2013, but our
continued ability to grow organically puts us in the best position to achieve
our overall growth objectives.
The Payroll S.A. acquisition
increased our outsourcing, payroll and employee benefits services presence in
the high-growth Latin America region. One of ADPs strongest opportunities for
growth is further expansion of our services across the globe. With roughly 80
percent of our revenues coming from the U.S., we have huge upside potential
internationally. We made excellent strides in this direction in fiscal 2013,
growing both single-country and multinational bookings with our ADP
Streamline
®
and GlobalView offers, respectively.
Employer Services and Dealer
Services now conduct business in 125 countries in the aggregate. We offer our
cloud-based HCM technology in 90 countries. ADPs value proposition for
companies outside the U.S. is only getting stronger.
Dealer Services helped ADPs growth,
in both revenue and earnings, aided in part by a strong North American auto
market. Our digital capabilities have received a favorable reception in the
marketplace, with more opportunity remaining globally.
ADP ServiceEdge
SM
has
quickly gained popularity throughout the automotive industry since its launch in
July 2012, changing the way dealerships approach their Service Retail Workflow.
With a single service workflow tool integrating multiple dealership departments,
dealers are saving time, increasing productivity, and keeping their customers
satisfied.
ADP is also applying improved
analytic capabilities through Lot Management, a new retail solution for
automotive dealers that helps them effectively manage their used vehicle
inventories, an increasingly important area.
Innovation
ADP is a technology-enabled service
company. Service is a key differentiator. Our ultimate success depends on our
ability to serve our clients and help them maximize the contributions and
productivity of their employee bases. There is no doubt, however, that our
technology enablement has become more critical to ADPs future as new
tech-focused companies compete with us.
This is why we are happy to see the
strong market acceptance of our HCM platforms, which give employers integrated
solutions to simplify the service experience along with sophisticated workforce
management tools for recruiting, talent management, analytics, and even document
management.
Mobile capabilities are an important
element of HCM, so we were proud to see continued rapid adoption of ADPs mobile
solutions. In June, we announced the 1 millionth download of our mobile app,
which allows workers to access their pay, benefits, and other HR information,
wherever they are.
The RUN Powered by ADP payroll
platform for small businesses has been a mobile hit, exceeding the 250,000
client mark far ahead of our initial projections. One reason for its popularity
is another ADP innovation: live, 24/7 client service that accommodates the
dynamic and busy schedules of small business owners.
Our Added Value Services (AVS) team
developed an exciting new solution, ADP SmartCompliance
SM
, to help
clients with compliance issues. AVS also secured over $1.4 billion in tax
credits for clients in fiscal 2013.
2
Simplification
Developments in technologies for
consumers over the past couple of decades have been remarkable not just for
their innovations in power and capabilities, but also for their ease of use.
These developments have easily outpaced business technologies in this regard. We
are working hard to close the gap.
Our new platforms make processes
easier for employers and their employees at all levels. We make it possible for
a visiting nurse to punch in and punch out on a smartphone, from the patients
front porch. We make it possible for a small business owner to run payroll while
sitting in a golf cart. We make it possible for a department manager to rate and
rank her team with an interface that has the interactivity and engagement of an
online game.
We created a tablet application that
contains the entire sales process, allowing a prospective client to get back to
business faster while giving the salesperson a more effective sales process and
more time to spend with clients. It even allows a prospective client to sign a
contract on the tablet screen electronically.
Were also working to simplify
legacy processes for instance, moving formerly paper-intensive tasks online.
This saves clients time, decreases our carbon footprint, and saves us money.
Simplification also means moving
clients from legacy products to our strategic modern platforms and, where
possible, reducing the number of overlapping or redundant solutions.
Simplification will only become more
important as technology and competition continue to develop. We are determined
to stay on top of both.
Managemement and Board
of Directors
John Ayala was appointed Corporate
Vice President, Client Experience and Continuous Improvement, with
responsibility for leading business process improvement efforts to transform the
client experience and drive our simplification objectives.
Mark Benjamin, previously the
President of our Employer Services International (ESI) business, took on the
newly created role of President, Global Enterprise Solutions. We created this
new organization by combining ESI with our large-account North American
businesses.
Doug Politi, an ADP veteran of
20-plus years, was named President, Added Value Services, which is taking an
increasingly central role in helping businesses comply with the ACA.
Jan Siegmund, previously President,
Added Value Services and Chief Strategy Officer, was appointed Chief Financial
Officer.
Joe Timko joined ADP as Chief
Strategy Officer, bringing us a wealth of strategy and management experience
from consulting and a broad array of technology companies.
There were no changes to the Board
of Directors in fiscal 2013. However, in August, after the reporting period,
Enrique Salem announced that he intends not to stand for re-election to the
Board of Directors at the end of his current term after three years as an ADP
Board Member. I would like to thank Enrique for his leadership and contributions
to ADP.
And while he no longer was serving
an active role with ADP, the passing of former CEO Senator Frank Lautenberg was
a loss felt by all ADP associates, past and present. There have been only six
CEOs in ADPs 64-year history, and I have been fortunate to receive the advice
and counsel of all of them. This leadership continuum is part of what makes ADP
such a solid company. Franks legacy at ADP is our strong sales team and our
sharp focus on values and ethics. He will be missed, but his imprint
remains.
3
Commitment to Diversity and
Associate Development
ADP believes that promoting,
cultivating, and developing a diverse workforce is critical to delivering
superior client value and financial results. Its so important to us that weve
made it a part of our core values (Each Person Counts), and we are pleased to
have received a number of awards recognizing our progress in this area in fiscal
2013, including:
-
DiversityInc
®
magazine honored ADP in
its Top 50 Companies for Diversity for the second year in
a row.
-
Training Magazine
®
ranked ADP as a top
company in its Training Top 125
®
list for the third year in a
row.
-
The Human Rights Campaign Foundation named ADP one
of its Best Places to Work for Lesbian, Gay,
Bisexual and Transgender Equality for the fourth year in a
row.
Capital Structure
ADPs financial strength also
continues to be a market differentiator. ADP remains one of only four publicly
traded U.S. companies rated AAA by the two leading credit rating agencies, reflecting
the strength of our business model and of our balance sheet. To our clients,
this means the highest level of financial soundness in their payroll and money
movement partner.
ADP remains committed to shareholder
friendly actions and returning excess cash to shareholders. In addition to
ongoing investments in our core business, our priorities for the use of cash
remain tuck-in acquisitions that complement our existing solution set or expand
our geographic footprint, followed by dividends and share buybacks.
In fiscal 2013, we increased our
cash dividend by 10 percent, the 38th consecutive year of dividend increases,
paying out $806 million in cash dividends. We also repurchased $647 million of
ADP stock.
The return of excess cash through
dividends and, when market conditions are favorable, share buybacks, are
important elements of our commitment to driving strong Total Shareholder Return
(TSR). These actions, combined with our revenue growth and margin improvement,
are helping us move closer to our goal of driving TSR in the top quartile of
publicly traded U.S. companies over the long term.
Growth Opportunity and
Outlook
As indicated in the beginning of
this letter, ADP is firmly focused on growth. At the time of this writing, some
economic indicators in the U.S. are moving in our favor, and we are seeing some
encouraging signs in other countries and regions.
I and the ADP management team
believe that the markets we are pursuing provide excellent potential, which led
us to our previously disclosed guidance of 7% revenue growth and 8% to 10%
earnings per
share growth in fiscal 2014. Numerous factors could affect that
including employment levels and interest rates but if ADP associates continue
to execute on our strategy as well as they did in fiscal 2013, our targets
should be achievable.
|
Carlos Rodriguez
|
President and
Chief Executive Officer
|
September 26, 2013
4
FORWARD-LOOKING STATEMENTS
This letter and other written or oral
statements made from time to time by ADP may contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Statements that are not historical in nature and which may be
identified by the use of words like expects, assumes, projects,
anticipates, estimates, we believe, could and other words of similar
meaning, are forward-looking statements. These statements are based on
managements expectations and assumptions and are subject to risks and
uncertainties that may cause actual results to differ materially from those
expressed. Factors that could cause actual results to differ materially from
those contemplated by the forward-looking statements include: ADPs success in
obtaining, retaining and selling additional services to clients; the pricing of
products and services; changes in laws regulating payroll taxes, professional
employer organizations and employee benefits; overall market and economic
conditions, including interest rate and foreign currency trends; competitive
conditions; auto sales and related industry changes; employment and wage levels;
changes in technology; availability of skilled technical associates; and the
impact of new acquisitions and divestitures. ADP disclaims any obligation to
update any forward-looking statements, whether as a result of new information,
future events or otherwise. These risks and uncertainties, along with the risk
factors discussed under Item 1A. - Risk Factors in our Annual Report on Form
10-K for the fiscal year ended June 30, 2013, should be considered in evaluating
any forward-looking statements contained herein.
5
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AUTOMATIC DATA PROCESSING,
INC.
One ADP Boulevard
Roseland, New Jersey
07068
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NOTICE OF 2013 ANNUAL MEETING
OF STOCKHOLDERS
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The 2013 Annual Meeting of
Stockholders of Automatic Data Processing, Inc. will take place at 10:00 a.m.,
Eastern Standard Time, Tuesday, November 12, 2013 at our corporate headquarters,
One ADP Boulevard, Roseland, New Jersey.
A Notice of Internet Availability of
Proxy Materials or the proxy statement for the 2013 Annual Meeting of
Stockholders is first being mailed to stockholders on or about September 26,
2013.
The purposes of the meeting are
to:
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1.
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Elect a board of
directors;
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2.
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Hold an advisory vote
on executive compensation;
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3.
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Ratify the appointment
of Deloitte & Touche LLP, an independent registered public accounting
firm, to serve as our independent certified public accountants for fiscal
year 2014;
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4.
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Re-approve the
performance-based provisions of the Automatic Data Processing, Inc. 2008
Omnibus Award Plan; and
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5.
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Transact any other
business that may properly come before the meeting or any adjournment(s)
thereof.
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Only stockholders of record at the
close of business on September 13, 2013 are entitled to receive notice of, to
attend, and to vote at the meeting.
If you
plan to attend the meeting in person, please note the admission procedures
described under How Can I Attend the Meeting? on page 1 of the proxy
statement.
Your vote is important, and we urge
you to vote whether or not you plan to attend the meeting. The Notice of
Internet Availability of Proxy Materials instructs you on how to access your
proxy card to vote via the Internet or by telephone. If you receive a paper copy
of the proxy materials, you may also vote by completing, signing, dating and
returning the accompanying printed proxy in the enclosed envelope, which
requires no postage if mailed in the United States.
By order of the Board of
Directors
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MICHAEL A. BONARTI
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Secretary
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September 26, 2013
Roseland, New
Jersey
TABLE OF CONTENTS
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Page
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2013 Proxy Statement Summary
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i
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Questions and Answers About the Annual Meeting and
Voting
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1
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Proposal 1 Election of Directors
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5
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Our
Directors
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6
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Stockholder
Approval Required
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9
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Corporate Governance
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10
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Compensation Committee Interlocks and
Insider Participation
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13
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Compensation of Non-Employee Directors
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14
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Director Compensation Table for Fiscal Year
2013
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15
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Security Ownership of Certain Beneficial Owners and
Management
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17
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Equity Compensation Plan
Information
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18
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Proposal 2 Advisory Vote on Executive
Compensation
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19
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Stockholder
Approval Required
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19
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Compensation Discussion and Analysis
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19
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Introduction
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19
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Executive
Summary
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20
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Compensation
Principles
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23
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Cash
Compensation
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26
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Long-Term
Incentive Compensation Programs
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28
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Other
Compensation Components and Considerations
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31
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Compensation Committee Report
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34
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Compensation of Executive Officers
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35
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Summary
Compensation Table for Fiscal Year 2013
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35
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All Other
Compensation for Fiscal Year 2013
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37
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Grants of
Plan-Based Awards Table for Fiscal Year 2013
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38
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Outstanding
Equity Awards for Fiscal Year-End 2013
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42
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Outstanding
Equity Vesting Schedule for Fiscal Year-End 2013
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44
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Option
Exercises and Stock Vested Table for Fiscal Year 2013
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47
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Pension
Benefits for Fiscal Year 2013
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48
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Non-Qualified
Deferred Compensation for Fiscal Year 2013
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51
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Potential Payments to Named Executive
Officers Upon Termination or Change in Control
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52
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Audit Committee Report
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60
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Independent Registered Public Accounting
Firms Fees
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Proposal 3 Appointment of Independent Registered Public
Accounting Firm
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62
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Stockholder
Approval Required
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62
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Proposal 4 Re-approval of the
Performance-Based Provisions of the Automatic Data
Processing,
Inc. 2008 Omnibus Award Plan
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62
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Stockholder
Approval Required
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63
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Summary
Description of the 2008 Omnibus Plan
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63
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Section 16(a) Beneficial Ownership Reporting
Compliance
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Stockholder Proposals
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69
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Electronic Delivery of Future Stockholder
Communications
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70
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2013 PROXY STATEMENT
SUMMARY
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This summary highlights certain
information contained elsewhere in the proxy statement. This summary does not
contain all of the information that you should consider. You should read the
entire proxy statement carefully before voting.
2013 Annual Meeting of
Stockholders
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Time and Date
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10:00 a.m. Eastern Standard Time,
Tuesday, November 12, 2013
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Place
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One ADP Boulevard, Roseland, New
Jersey, 07068
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Record Date
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Stockholders of record at the
close of business on September 13, 2013 are entitled to vote at the
meeting in person or by proxy.
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Admission
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Admission to the meeting is
restricted to stockholders and/or their designated representatives. All
stockholders will be required to show valid picture identification in
order to be admitted to the meeting.
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Proxy Materials
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Under rules adopted by the
Securities and Exchange Commission, we are furnishing proxy materials to
our stockholders primarily via the Internet, instead of mailing printed
copies of those materials to each stockholder. On September 26, 2013, we
commenced the mailing to our stockholders (other than those who previously
requested electronic or paper delivery) of a Notice of Internet
Availability of Proxy Materials containing instructions on how to access
our proxy materials. If you would prefer to receive printed proxy
materials, please follow the instructions included in the Notice of
Internet Availability of Proxy Materials.
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How to Vote
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The Notice of Internet
Availability of Proxy Materials instructs you on how to access your proxy
card to vote through the Internet or by telephone. If you receive a paper
copy of the proxy materials, you may also vote your shares by completing,
signing, dating and returning the accompanying printed proxy in the
enclosed envelope, which requires no postage if mailed in the United
States.
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Voting Matters and Board Voting
Recommendations
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Proposal
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Board
Recommendation
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Page Reference For
More Detail
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Proposal 1:
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Election of directors
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For Each Nominee
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5
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Proposal 2:
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Advisory resolution to approve compensation of named
executive officers
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For
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19
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Proposal 3:
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Ratification of Deloitte & Touche LLP as our
independent registered public accounting firm for fiscal year
2014
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For
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62
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Proposal 4:
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Re-approval of the performance-based provisions of the
Automatic Data Processing, Inc. 2008 Omnibus Award Plan
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For
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62
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i
Election of Directors (Proposal
1)
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The board of directors has nominated
the following current directors for re-election as directors. Please refer to
page 6 in the proxy statement for important information about the qualifications
and experience of each of the following director nominees.
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Committee
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Director
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Principal
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Memberships
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Name
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Age
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Since
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Occupation
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Independent
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AC
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CC
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NCGC
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Ellen R. Alemany
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57
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2011
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Retired Chairman and Chief
Executive Officer of
Citizens
Financial Group, Inc. and
Head of RBS Americas
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X
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X
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Gregory D. Brenneman
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51
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2001
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Chairman of CCMP Capital
Advisors, LLC
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X
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F
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C
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Leslie A. Brun
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61
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2003
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Chairman and Chief Executive
Officer of Sarr Group,
LLC
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X
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Richard T. Clark
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67
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2011
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Retired Chairman and Chief
Executive Officer
of
Merck & Co., Inc.
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X
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X
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X
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Eric C. Fast
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64
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2007
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Chief Executive Officer
of Crane Co.
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X
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C, F
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Linda R. Gooden
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60
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2009
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Retired Executive Vice President
of Lockheed Martin
Corporation
Information Systems &
Global Solutions
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X
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X
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R.
Glenn Hubbard
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55
|
|
2004
|
|
Dean of Columbia Universitys
Graduate School of
Business
|
|
X
|
|
F
|
|
X
|
|
|
|
John P. Jones
|
|
62
|
|
2005
|
|
Retired Chairman and Chief
Executive Officer of
Air
Products and Chemicals, Inc.
|
|
X
|
|
|
|
X
|
|
C
|
|
Carlos A. Rodriguez
|
|
49
|
|
2011
|
|
President and Chief Executive
Officer of Automatic
Data
Processing, Inc.
|
|
|
|
|
|
|
|
|
|
Gregory L. Summe
|
|
56
|
|
2007
|
|
Vice Chairman of
The Carlyle Group
|
|
X
|
|
|
|
X
|
|
X
|
AC
|
|
Audit Committee
|
|
F
|
|
Financial Expert
|
CC
|
|
Compensation Committee
|
|
C
|
|
Committee Chair
|
NCGC
|
|
Nominating / Corporate Governance
|
|
|
|
|
|
|
Committee
|
|
|
|
|
ii
Advisory Resolution to Approve Executive Compensation
(Proposal 2)
|
Consistent with the stockholders
advisory vote at our 2011 Annual Meeting of Stockholders, we determined to hold
the advisory say-on-pay vote to approve our named executive officer compensation
on an annual basis. Therefore, we are asking our stockholders to approve, on an
advisory basis, our named executive officer compensation for fiscal year 2013.
Our stockholders will have the opportunity to approve, on an advisory basis, our
named executive officer compensation for fiscal year 2014 at the 2014 Annual
Meeting of Stockholders.
The board of directors recommends a
vote FOR this resolution because it believes that the policies and practices
described in the C
OMPENSATION
D
ISCUSSION
AND
A
NALYSIS
section on page 19 of the proxy statement are effective in achieving the
companys goals of linking pay to performance and levels of responsibility,
encouraging our executive officers to remain focused on both short-term and
long-term operational and financial goals of the company and linking executive
performance to stockholder value.
At our 2012 Annual Meeting of
Stockholders, our stockholders approved the compensation of our fiscal year 2012
named executive officers by a vote of approximately 96% in favor.
Ratification of the Appointment of Auditors (Proposal
3)
|
We are asking our shareholders to
ratify the selection of Deloitte & Touche LLP (Deloitte) as our
independent certified public accountants for fiscal year 2014. A summary of fees
paid to Deloitte for services provided in fiscal years 2012 and 2013 is provided
on page 61 of the proxy statement.
Re-approval
of the Performance-Based Provisions of the
Automatic Data Processing,
Inc. 2008 Omnibus Award Plan (Proposal
4)
|
We are submitting the
performance-based provisions of the Automatic Data Processing, Inc. 2008 Omnibus
Award Plan (the 2008 Omnibus Award Plan) for stockholder approval in order to
satisfy the shareholder approval requirement of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the Code). The board of directors adopted
the 2008 Omnibus Award Plan on August 14, 2008, and our stockholders approved it
on November 11, 2008.
The 2008 Omnibus Award Plan is
generally intended to provide incentive compensation and performance
compensation awards that may qualify as performance-based compensation within
the meaning of Section 162(m) of the Code. Section 162(m) generally does not
allow publicly held companies to obtain tax deductions for compensation of more
than $1 million paid in any year to certain covered employees, including the
chief executive officer and the other three most highly compensated executive
officers (other than the chief financial officer), unless such payments are
performance-based in accordance with conditions specified under Section
162(m). One of the requirements of performance-based compensation for purposes
of Section 162(m) is that the material terms of the performance goals under
which compensation may be paid must be disclosed to and approved by the
stockholders every five years. For purposes of Section 162(m), these terms
include the employees eligible to receive compensation, a description of the
business criteria on which performance goals are based, and the maximum amount
of compensation that can be paid to an employee under the performance goals.
A summary of the material features
of the 2008 Omnibus Award Plan, including the performance-based provisions, is
provided on page 63 of the proxy statement.
Fiscal Year 2013 Business
Highlights
|
We achieved solid results for fiscal
year 2013, reflecting the strength of our underlying business model, including
the diversity of our client base and products, against the uneven global
economic recovery. Our organic revenue growth improved each quarter during
fiscal year 2013. Our focus on product innovation and improvements in sales
force productivity have led to growth in new business bookings ahead of our
expectations to 11% for the year. Worldwide client revenue retention in our
Employer Services segment increased to 91.3%, a new record level. Aided by our
strong financial performance, we returned nearly $1.5 billion in excess cash to
our shareholders through cash dividends and share buybacks during fiscal year
2013 in line with our longstanding commitment to shareholder friendly actions.
Our common stock generated a total shareholder return of 27% in fiscal year
2013, compared to a total shareholder return of 21% for the S&P 500 Index
over the same period.
iii
We
believe that compensation should be designed to create a direct link between
performance and stockholder value. Five principles that guide our decisions
involving executive compensation are that compensation should be:
-
based on (i) the overall performance of the
company, (ii) the performance of each executives business
unit, and (iii) each executives individual
performance;
-
closely aligned with the short-term and long-term
financial and strategic objectives that build sustainable
long-term stockholder value;
-
competitive, in order to attract and retain
executives critical to our long-term success;
-
consistent with high standards of corporate
governance and best practices; and
-
designed to discourage the incentive for
executives to take excessive risks or to behave in ways that are
inconsistent with the companys strategic planning processes
and high ethical standards.
Good Governance and Best
Practices
|
We are committed to ensuring that our
compensation programs reflect principles of good governance, including the
following:
-
Pay for performance:
We design our
compensation programs to link pay to performance and levels of responsibility,
to encourage our executive officers to remain focused on both the short-term
and long-term operational and financial goals of the company, and to link
executive performance to stockholder value.
-
Annual say-on-pay vote:
We hold an advisory
say-on-pay vote to approve our named executive officer compensation on an
annual basis.
-
Clawback policy:
We maintain a compensation
recovery, or clawback provision in our 2008 Omnibus Award Plan.
-
Stock ownership guidelines:
We maintain
stock ownership guidelines to encourage equity ownership by our executive
officers.
-
Double trigger on change in control
payments:
Our Change in Control Severance Plan for Corporate Officers is
based on a double trigger, such that payments of cash and vesting of equity
awards occur only if termination of employment without cause or with good
reason occurs during the 3-year period after a change in
control.
-
Limited perquisites:
We provide limited,
reasonable perquisites that we believe are consistent with our overall
compensation philosophy.
-
No IRC Section 280G or 409A tax gross-ups:
We do not provide tax gross-ups related to perquisites or under our change in
control provisions.
-
No stock option repricing or discount stock
options:
We do not lower the exercise price of any outstanding stock
options, and the exercise price of our stock options is not less than 100% of
the fair market value of our common stock on the date of
grant.
-
Anti-hedging or pledging policy:
We
prohibit our directors and executive officers from engaging in any hedging or
similar transactions involving ADP securities, holding ADP securities in a
margin account, or pledging ADP securities as collateral for a
loan.
-
Independence of our compensation committee and
advisor:
The compensation committee of our board of directors, which is
comprised solely of independent directors, utilizes the services of Frederic
W. Cook & Co., Inc. (Cook & Co.) as an independent compensation
consultant. Cook & Co. reports to the compensation committee, does not
perform any other services for the company other than in connection with an
annual review of competitive director compensation for the
nominating/corporate governance committee of our board of directors, and has
no economic or other ties to the company or the management team that could
compromise their independence or objectivity.
iv
2013 Compensation
Highlights
|
Please
refer to the C
OMPENSATION
D
ISCUSSION
AND
A
NALYSIS
section on page 19 of
the proxy statement, and the tables and narratives that follow on page 35 of the
proxy statement, for more detail concerning the compensation of our named
executive officers.
Consistent with our pay for
performance philosophy, the compensation of our named executive officers is
structured with a significant portion of their total compensation at risk and
paid based on the performance of the company and the applicable business unit.
Our financial performance in fiscal year 2013 impacted the compensation for all
of our executive officers, not just our named executive officers, in several
ways, most notably through our annual cash bonus plan and performance-based
restricted stock program.
The following are key highlights of
our fiscal 2013 executive compensation program:
|
|
For fiscal year 2013, we increased
the base salary of each named executive officer by an average of 4.1%,
except for Mr. Siegmund, who was promoted to chief financial officer in
November 2012, and for Mr. OBrien, who was hired in April
2012.
|
|
|
|
For fiscal year 2013, we maintained
annual cash bonus targets for the named executive officers at fiscal year
2012 levels, except for Mr. Siegmunds bonus target, which increased from
70% of base salary to 80% due to his promotion. In fiscal year 2013, our
named executive officers (other than Mr. Reidy, our former chief financial
officer who separated from the company on January 2, 2013) received cash
bonuses that averaged approximately 106.1% of target.
|
|
-
Performance-based restricted
stock
(PBRS) and stock
options:
|
|
The design and targeted mix of our
performance-based restricted stock (PBRS) and stock option programs
remained generally unchanged from fiscal year 2012, except for the vesting
period for PBRS grants that applies after the conclusion of the 12-month
performance period, which was extended to 12 months from 6 months. Our
one-year earnings per share growth for fiscal year 2013 resulted in awards
to our named executive officers of restricted stock under our PBRS program
at 100% of target.
|
A summary of fiscal year 2013 total
direct compensation for our named executive officers (other than Mr. Reidy) is
set forth in the following table:
|
|
Base
|
|
Annual
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
Name
|
|
Salary
|
|
Bonus
|
|
PBRS
|
|
Options
|
|
Total
|
Carlos Rodriguez
President and Chief
Executive Officer
|
|
|
$
|
850,000
|
|
|
|
|
$
|
1,437,520
|
|
|
|
$
|
2,223,135
|
|
|
|
$
|
1,396,440
|
|
|
|
$
|
5,907,095
|
|
|
|
Jan Siegmund
Chief Financial
Officer
|
|
|
$
|
525,000
|
*
|
|
|
|
$
|
484,680
|
|
|
|
$
|
428,625
|
|
|
|
$
|
215,500
|
|
|
|
$
|
1,653,805
|
|
|
|
Regina Lee
President, Major Account
Services and
ADP Canada
|
|
|
$
|
516,254
|
|
|
|
|
$
|
416,720
|
|
|
|
$
|
685,800
|
|
|
|
$
|
215,500
|
|
|
|
$
|
1,834,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steve Anenen
President, Dealer
Services
|
|
|
$
|
462,376
|
|
|
|
|
$
|
332,726
|
|
|
|
$
|
514,350
|
|
|
|
$
|
155,160
|
|
|
|
$
|
1,464,612
|
|
|
|
Dermot J. OBrien
Chief Human
Resources Officer
|
|
|
$
|
475,000
|
|
|
|
|
$
|
351,453
|
|
|
|
$
|
485,775
|
|
|
|
$
|
155,160
|
|
|
|
$
|
1,467,388
|
|
____________________
*
|
|
Mr. Siegmunds salary reflects
his base salary in effect after his promotion to chief financial officer
in November 2012.
|
v
Excluding
Mr. Reidys fiscal year 2013 compensation, the mix of total direct compensation
(base salary, cash bonus and long-term incentive awards) for fiscal year 2013
was designed to deliver the following approximate proportions of total
compensation to Mr. Rodriguez, our chief executive officer, and the other named
executive officers (on average) if company and individual target levels of
performance are achieved:
Important Dates for the 2014 Annual Meeting of
Stockholders
|
Please refer to the STOCKHOLDER
PROPOSALS section on page 69 of the proxy statement for more information
regarding the applicable requirements for submission of stockholder
proposals.
If a stockholder intends to submit
any proposal for inclusion in the companys proxy statement for the companys
2014 Annual Meeting of Stockholders in accordance with Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, the proposal must be received by
the corporate secretary of the company no later than May 29, 2014.
Separate from the requirements of
Rule 14a-8 relating to the inclusion of a stockholder proposal in the companys
proxy statement, the companys amended and restated by-laws require that notice
of a stockholder nomination for candidates for our board of directors or any
other business to be considered at the companys 2014 Annual Meeting of
Stockholders must be received by the company no earlier than July 15, 2014, and
no later than the close of business (5:30 p.m. Eastern Daylight Time) on August
14, 2014.
vi
AUTOMATIC DATA PROCESSING,
INC.
One ADP Boulevard
Roseland, New
Jersey 07068
ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON NOVEMBER 12, 2013
____________________
PROXY
STATEMENT
____________________
QUESTIONS AND ANSWERS ABOUT THE
ANNUAL MEETING AND VOTING
WHY AM
I RECEIVING THESE PROXY MATERIALS?
We are providing these proxy
materials to holders of shares of the companys common stock, par value $0.10
per share, in connection with the solicitation of proxies by our board of
directors for the forthcoming 2013 Annual Meeting of Stockholders to be held on
November 12, 2013 at 10:00 a.m. Eastern Standard Time, and at any
postponement(s) or adjournment(s) thereof. The company will bear all expenses in
connection with this solicitation.
HOW IS THE COMPANY
DISTRIBUTING THE PROXY MATERIALS?
Under rules adopted by the
Securities and Exchange Commission, we are furnishing proxy materials to our
stockholders primarily via the Internet, instead of mailing printed copies of
those materials to each stockholder. On September 26, 2013, we commenced the
mailing to our stockholders (other than those who previously requested
electronic or paper delivery of printed proxy materials) of a Notice of Internet
Availability of Proxy Materials containing instructions on how to access our
proxy materials, including our proxy statement and our annual report on Form
10-K (which is not a part of the proxy soliciting material). This process is
designed to expedite stockholders receipt of proxy materials, lower the cost of
the Annual Meeting, and help conserve natural resources. However, if you would
prefer to receive printed proxy materials, please follow the instructions
included in the Notice of Internet Availability of Proxy Materials. If you have
previously elected to receive our proxy materials electronically, you will
continue to receive these materials via e-mail unless you elect
otherwise.
This proxy statement and our annual
report on Form 10-K are also available on our corporate website at www.adp.com
under SEC Filings in the Investor Relations section.
WHO IS ENTITLED TO VOTE AT
THE MEETING?
The only outstanding class of
securities entitled to vote at the meeting is our common stock, par value $0.10
per share. At the close of business on September 13, 2013, the record date for
determining stockholders entitled to notice of, to attend, and to vote at the
meeting, we had 480,228,873 issued and outstanding shares of common stock
(excluding 158,483,569 treasury shares not entitled to vote). Each outstanding
share of common stock is entitled to one vote with respect to each matter to be
voted on at the meeting.
HOW CAN I ATTEND THE
MEETING?
Admission to the meeting is
restricted to stockholders and/or their designated representatives. If your
shares are registered in your name and you plan to attend the meeting, your
admission ticket will be the top portion of the proxy card. If your shares are
in the name of your broker or bank or you received your proxy materials
electronically, you will need to bring evidence of your stock ownership, such as
your most recent brokerage account statement.
All stockholders will be required to
show valid picture identification. If you do not have valid picture
identification and either an admission ticket or proof of your stock ownership,
you will not be admitted to the meeting. For security purposes, packages and
bags will be inspected and you may be required to check these items. Please
arrive early enough to allow yourself adequate time to clear
security.
1
HOW
MANY SHARES MUST BE PRESENT TO HOLD THE MEETING?
The representation in person or by
proxy of a majority of the issued and outstanding shares of stock entitled to
vote at the meeting constitutes a quorum. Under our amended and restated
certificate of incorporation and our amended and restated bylaws and under
Delaware law, abstentions and non-votes are counted as present in determining
whether the quorum requirement is satisfied. A non-vote occurs when a nominee
holding shares for a beneficial owner does not vote on a particular proposal
because the nominee does not have discretionary voting power for that particular
item and has not received instructions from the beneficial owner.
HOW CAN I VOTE MY
SHARES?
The Notice of Internet Availability
of Proxy Materials instructs you on how to access your proxy card to vote
through the Internet or by telephone. If you receive a paper copy of the proxy
materials, you may also vote your shares by completing, signing, dating and
returning the accompanying printed proxy in the enclosed envelope, which
requires no postage if mailed in the United States. Unless contrary instructions
are indicated on the proxy, all shares represented by valid proxies received
pursuant to this solicitation (and not revoked before they are voted) will be
voted in accordance with the recommendations of our board of directors as
indicated below. If you are a registered stockholder and attend the meeting, you
may deliver your completed proxy card in person.
IF I HOLD SHARES IN STREET
NAME, DOES MY BROKER NEED INSTRUCTIONS IN ORDER TO VOTE MY
SHARES?
If your shares are held in street
name (i.e., your shares are held by a bank, brokerage firm or other nominee),
you must provide voting instructions to your bank or broker by the deadline
provided in the materials you receive from your bank or broker. If you hold your
shares in street name and you do not instruct your bank or broker as to how to
vote your shares, your bank or broker may only vote your shares in its
discretion on the ratification of the appointment of Deloitte & Touche LLP
as our independent registered public accounting firm for fiscal year 2014
(Proposal 3), but will not be allowed to vote your shares on any of the other
proposals described in this proxy statement, including the election of
directors. Under applicable Delaware law, a broker non-vote will have no effect
on the outcome of any of the other proposals described in this proxy statement
because the non-votes are not considered in determining the number of votes
necessary for approval.
WHAT MATTERS WILL BE VOTED
ON AT THE MEETING, WHAT ARE MY VOTING CHOICES, AND HOW DOES THE BOARD OF
DIRECTORS RECOMMEND THAT I VOTE?
Proposal
|
|
Voting Choices
|
|
Board Recommendation
|
Proposal 1
: Election of the 10 nominees named in this
proxy statement to serve on the companys board of directors
|
|
-
For all
-
For all except
identified
director
nominee(s)
-
Withhold all
|
|
FOR election of all 10 director
nominees
|
|
Proposal 2
: Advisory resolution approving the
compensation of the companys named executive officers as disclosed in the
Compensation Discussion and
Analysis
section on page 19 of this proxy statement
|
|
|
|
FOR
|
|
Proposal 3
: Ratification of the appointment of
Deloitte & Touche LLP as our independent registered public accounting
firm for fiscal year 2014
|
|
|
|
FOR
|
|
|
|
|
|
|
Proposal 4
: Re-approval of the performance-based
provisions of the Automatic Data Processing, Inc. 2008 Omnibus Award
Plan
|
|
|
|
FOR
|
|
2
So far as the board of directors is
aware, only the above matters will be acted upon at the meeting. If any other
matters properly come before the meeting, the accompanying proxy may be voted on
such other matters in accordance with the best judgment of the person or persons
voting the proxy.
HOW
MANY VOTES ARE NEEDED TO APPROVE THE PROPOSALS, AND WHAT IS THE EFFECT OF
ABSTENTIONS OR WITHHELD VOTES?
Proposal
1:
The affirmative vote of the holders
of a majority of the shares represented in person or by proxy and entitled to
vote thereon is required to elect a director, provided that if the number of
nominees exceeds the number of directors to be elected (a situation that the
company does not anticipate), the directors shall be elected by the vote of a
plurality of the shares represented in person or by proxy. Votes may be cast in
favor of all nominees, withheld from all nominees or withheld from specifically
identified nominees. Votes that are withheld will have the effect of a negative
vote, provided that if the number of nominees exceeds the number of directors to
be elected, withheld votes will be excluded entirely and will have no effect on
the vote. A broker non-vote will have no effect on the outcome of this proposal
because the non-votes are not considered in determining the number of votes
necessary for approval.
Proposal
2:
The affirmative vote of the holders
of a majority of the shares represented in person or by proxy and entitled to
vote thereon is required to approve the advisory resolution on executive
compensation. Votes may be cast in favor of or against this proposal or a
stockholder may abstain from voting. Abstentions will have the effect of a
negative vote. Because the vote on this proposal is advisory in nature, it will
not affect any compensation already paid or awarded to any named executive
officer and will not be binding on or overrule any decisions by the compensation
committee or the board of directors. Because we value our stockholders views,
however, the compensation committee and the board of directors will consider the
results of this advisory vote when formulating future executive compensation
policy. A broker non-vote will have no effect on the outcome of the advisory
resolution because the non-votes are not considered in determining the number of
votes necessary for approval.
Proposal
3:
The affirmative vote of the holders
of a majority of the shares represented in person or by proxy and entitled to
vote thereon is required to ratify the appointment of Deloitte & Touche LLP,
an independent registered public accounting firm, as the companys independent
certified public accountants for fiscal year 2014. Votes may be cast in favor of
or against this proposal or a stockholder may abstain from voting. Abstentions
will have the effect of a negative vote. Brokers have the authority to vote
shares for which their customers did not provide voting instructions on the
ratification of the appointment of Deloitte & Touche LLP.
Proposal
4:
The affirmative vote of the holders
of a majority of the shares represented in person or by proxy and entitled to
vote thereon is required to approve the performance-based provisions of the
Automatic Data Processing, Inc. 2008 Omnibus Award Plan. Votes may be cast in
favor of or against this proposal or a stockholder may abstain from voting.
Abstentions will have the effect of a negative vote. A broker non-vote will have
no effect on the outcome of this proposal because the non-votes are not
considered in determining the number of votes necessary for approval.
MAY I REVOKE MY PROXY OR
CHANGE MY VOTE?
If your shares are registered in
your name, you may revoke your proxy and change your vote prior to the
completion of voting at the Annual Meeting by:
-
submitting a valid, later-dated proxy card or a
later-dated vote in accordance with the voting instructions
on the Notice of Internet Availability of Proxy Materials in
a timely manner; or
-
giving written notice of such revocation to the
companys corporate secretary prior to or at the Annual
Meeting or by voting in person at the Annual Meeting.
3
If your
shares are held in street name, you should contact your bank or broker and
follow its procedures for changing your voting instructions. You also may vote
in person at the Annual Meeting if you obtain a legal proxy from your bank or
broker.
IS MY VOTE
CONFIDENTIAL?
Proxies and ballots identifying the
vote of individual stockholders will be kept confidential from our management
and directors, except as necessary to meet legal requirements in cases where
stockholders request disclosure or in a contested election.
WHERE CAN I FIND THE VOTING
RESULTS OF THE ANNUAL MEETING?
The preliminary voting results will
be announced at the Annual Meeting. The final voting results, which are tallied
by independent tabulators and certified by independent inspectors, will be
published in the companys current report on Form 8-K, which we are required to
file with the Securities and Exchange Commission within four business days
following the Annual Meeting.
WHAT IS
HOUSEHOLDING?
To reduce the expense of delivering
duplicate proxy materials to stockholders who may have more than one account
holding our stock but share the same address, we have adopted a procedure known
as householding. Under this procedure, certain stockholders of record who have
the same address and last name, and who do not participate in electronic
delivery of proxy materials, will receive only one copy of our Notice of
Internet Availability of Proxy Materials and, as applicable, any additional
proxy materials that are delivered until such time as one or more of these
stockholders notifies us that they want to receive separate copies. Stockholders
who participate in householding will continue to have access to and utilize
separate proxy voting instructions.
If you are a registered stockholder
and choose to have separate copies of our Notice of Internet Availability of
Proxy Materials, proxy statement and annual report on Form 10-K mailed to you,
you must opt-out by writing to Broadridge Financial Solutions, Inc.,
Householding Department, 51 Mercedes Way, Edgewood, New York 11717 or by calling
1-800-542-1061 and we will cease householding all such disclosure documents
within 30 days. If we do not receive instructions to remove your accounts from
this service, your accounts will continue to be householded until we notify
you otherwise. If you own our common stock in nominee name (such as through a
broker), information regarding householding of disclosure documents should have
been forwarded to you by your broker.
You can also contact Broadridge
Financial Solutions at 1-800-542-1061 if you received multiple copies of the
Annual Meeting materials and would prefer to receive a single copy in the
future.
4
PROPOSAL 1
ELECTION OF DIRECTORS
The board of directors has nominated
the following current directors for re-election as directors. Properly executed
proxies will be voted as marked. Unmarked proxies will be voted in favor of
electing the persons named below (each of whom is now a director) as directors
to serve until the next Annual Meeting of Stockholders and until their
successors are duly elected and qualified. If any nominee is no longer a
candidate at the time of the meeting (a situation that we do not anticipate),
proxies will be voted in favor of remaining nominees and may be voted for
substitute nominees designated by the board of directors.
|
|
|
|
Served as a
|
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
Continuously
|
|
|
Name
|
|
|
Age
|
|
Since
|
|
Principal
Occupation
|
Ellen R. Alemany
|
|
57
|
|
2011
|
|
Retired Chairman and Chief Executive Officer
of Citizens Financial Group, Inc., a subsidiary of RBS, and Head of RBS
Americas
|
|
Gregory D.
Brenneman
|
|
51
|
|
2001
|
|
Chairman of CCMP Capital Advisors, LLC, a
global private equity firm
|
|
Leslie A. Brun
|
|
61
|
|
2003
|
|
Chairman and Chief Executive Officer of Sarr
Group, LLC, an investment holding company
|
|
Richard T. Clark
|
|
67
|
|
2011
|
|
Retired Chairman and Chief Executive Officer
of Merck & Co., Inc.
|
|
Eric C. Fast
|
|
64
|
|
2007
|
|
Chief Executive Officer of Crane Co., a
manufacturer of industrial products
|
|
Linda R. Gooden
|
|
60
|
|
2009
|
|
Retired Executive Vice President of Lockheed
Martin Corporation Information Systems & Global Solutions
|
|
R. Glenn Hubbard
|
|
55
|
|
2004
|
|
Dean of Columbia Universitys Graduate
School of Business
|
|
John P. Jones
|
|
62
|
|
2005
|
|
Retired Chairman and Chief Executive Officer
of Air Products and Chemicals, Inc., an industrial gas and related
industrial process equipment business
|
|
Carlos A.
Rodriguez
|
|
49
|
|
2011
|
|
President and Chief Executive Officer of
Automatic Data Processing, Inc.
|
|
Gregory L. Summe
|
|
56
|
|
2007
|
|
Vice Chairman of The Carlyle Group, a global
alternative asset manager
|
Mr.
Enrique Salem has notified the board of directors that he will not stand for
re-election at the conclusion of his current term ending at the 2013 Annual
Meeting of Stockholders.
5
Below are summaries of the principal
occupations, business experience, and background of the nominees.
Director since: 2011
Independent
|
|
ELLEN R.
ALEMANY
Retired Chairman and
Chief Executive Officer of Citizens Financial Group, Inc. and Head of RBS
Americas
Ms. Alemany is the retired Head
of RBS Americas, the management structure that oversees The Royal Bank of
Scotlands businesses in the Americas, and chief executive officer of RBS
Citizens Financial Group, Inc., an RBS subsidiary. Ms. Alemany retired
from RBS in September 2013. She joined RBS as the Head of RBS Americas in
June 2007, and was named to the additional role of chief executive officer
of RBS Citizens Financial Group, Inc. in March 2008. She was also
appointed the chairman of RBS Citizens Financial Group, Inc. in March
2009. Ms. Alemany joined RBS from Citigroup, where she served as the chief
executive officer for global transaction services from February 2006 until
April 2007. Ms. Alemany joined Citigroup in 1987, and held a number of
senior positions during her tenure, including executive vice president for
the commercial business group from March 2003 until January 2006, and also
CitiCapital, where she served as president and chief executive officer
from September 2001 until January 2006. Prior to being appointed executive
vice president for the commercial business group in 2003, Ms. Alemany also
held a number of executive positions in Citigroups Global Corporate Bank,
including customer group executive of North American markets, global
industry head of media and communications, U.S. industry head of consumer
products, and executive vice president of Citibank and customer group
executive for the global relationship bank in Europe, based in London.
With over 30 years of management experience in financial services and a
proven track record of achievement and leadership, Ms. Alemany brings a
wealth of managerial and operational expertise to our board of directors,
as well as extensive experience in the issues facing multinational
businesses.
|
|
|
|
Director since:
2001
Independent
|
|
GREGORY D.
BRENNEMAN
Chairman of CCMP
Capital Advisors, LLC
Mr. Brenneman has been chairman
of CCMP Capital Advisors, LLC, a global private equity firm, since August
2008. He served as executive chairman of the board of Quiznos, a national
quick-service restaurant chain, from August 2008 to July 2010, and as its
president and chief executive officer from January 2007 to September 2008.
He has been the chairman and chief executive officer of TurnWorks, Inc., a
private equity firm, since November 1994. Mr. Brenneman served as chief
executive officer and a director of Burger King Corporation from August
2004 to April 2006 and as chairman of the board of directors from February
2005 to April 2006. He served as president and chief executive officer of
PwC Consulting from June 2002, where he led restructuring efforts that
successfully culminated in its strategic sale to International Business
Machines Corporation in October 2002. In addition, he served as president
and a director of Continental Airlines, Inc. from 1996 to 2001. Mr.
Brenneman is also a director of The Home Depot, Inc. and the chairman of
the board of Francescas Holdings Corporation. A successful business
leader with a proven track record, Mr. Brenneman brings to our board of
directors extensive experience in the issues facing public companies and
multinational businesses, including expertise in management, accounting,
corporate finance and transactional matters. In addition, his
directorships at other public companies provide him with broad experience
on governance issues facing public
companies.
|
6
Director since:
2003
Independent
|
|
LESLIE A.
BRUN
Chairman and Chief Executive
Officer of Sarr Group, LLC
Mr. Brun is chairman and chief
executive officer of Sarr Group, LLC, an investment holding company that
manages Mr. Bruns personal and family investments. He is the founder and
was chairman emeritus of Hamilton Lane, a private equity advisory and
management firm where he served as chief executive officer and chairman
from 1991 until 2005. In addition, Mr. Brun is a managing director and
head of investor relations at CCMP Capital Advisors, LLC, a global private
equity firm. Mr. Brun also serves as the chairman of the board of
directors of Broadridge Financial Solutions, Inc., a director and chairman
of the audit committee of Merck & Co., Inc., and a director of NXT
Capital. Mr. Brun has extensive financial expertise coupled with a track
record of achievement demonstrated by his career at Hamilton Lane, his
experience as a managing director and co-founder of the investment banking
group of Fidelity Bank, and as a vice president in the corporate finance
division of E.F. Hutton & Co. Mr. Brun also brings to our board of
directors management expertise and board leadership experience essential
to a large public company. In addition, his directorships at other public
companies provide him with broad experience on governance issues facing
public companies.
|
|
|
|
Director since:
2011
Independent
|
|
RICHARD T.
CLARK
Retired Chairman and Chief
Executive Officer of Merck & Co., Inc.
Mr. Clark is the retired chairman
of the board, chief executive officer, and president of Merck & Co.,
Inc. Mr. Clark served as chairman of Merck & Co., Inc. from April 2007
until December 2011, as chief executive officer from May 2005 until
December 2010, and as president from May 2005 until April 2010. He held a
variety of other positions during his 39-year tenure at Merck, including
president of the Merck manufacturing division from June 2003 to May 2005,
and chairman and chief executive officer of Medco Health Solutions, Inc.,
from March 2002 to June 2003. Mr. Clark is a director of Corning
Incorporated, a global manufacturing company, and serves on the advisory
board of American Securities, a private equity firm. With a proven track
record of leadership and achievement, Mr. Clark offers our board of
directors broad managerial and operational expertise, as well as extensive
experience in the issues facing public companies and multinational
businesses.
|
|
|
|
Director since:
2007
Independent
|
|
ERIC C.
FAST
Chief Executive Officer of
Crane Co.
Mr. Fast has been chief executive
officer of Crane Co., a manufacturer of industrial products, since April
2001, and served as President from 1999 through January 2013. Mr. Fast has
also been a director of Crane Co. since 1999. Mr. Fast is also a director
of National Integrity Life Insurance Company and Regions Financial
Corporation. He was a director of Convergys Corporation from 2000 to 2007.
Mr. Fast also served as a managing director, co-head of global investment
banking, and a member of the management committee of Salomon Smith Barney
from 1997 to 1998. Mr. Fast held those same positions at Salomon Brothers
Inc. from 1995 until the merger of Salomon Brothers Inc. and
Travelers/Smith Barney, and prior to that he was co-head of U.S. corporate
finance at Salomon Brothers Inc. from 1991 to 1995. Mr. Fast has extensive
financial and transactional experience, demonstrated by his career in
investment banking prior to his tenure at Crane Co. With years of
demonstrated leadership ability, Mr. Fast contributes significant
organizational skills to our board of directors, including expertise in
financial, accounting, and transactional
matters.
|
7
Director since: 2009
Independent
|
|
LINDA R.
GOODEN
Retired Executive Vice
President of Lockheed Martin Corporation Information
Systems &
Global Solutions
Ms. Gooden is the retired
executive vice president information systems & global solutions of
Lockheed Martin Corporation, a position that she held from January 2007 to
March 2013. She previously served as deputy executive vice president
information & technology services of Lockheed Martin Corporation from
October 2006 to December 2006, and president, Lockheed Martin Information
Technology from September 1997 to December 2006. Ms. Gooden is a director
of WGL Holdings, Inc., a public utility holding company. Ms. Gooden brings
to our board of directors broad managerial and operational expertise, a
strong background in information technology, as well as a proven track
record of achievement and sound business judgment demonstrated throughout
her career with Lockheed Martin Corporation.
|
|
|
|
Director since: 2004
Independent
|
|
R. GLENN
HUBBARD
Dean of Columbia
Universitys Graduate School of Business
Mr. Hubbard has been the dean of
Columbia Universitys Graduate School of Business since 2004 and has been
the Russell L. Carson professor of finance and economics since 1994. He is
also a director of BlackRock Closed-End Funds, KKR Financial Holdings, LLC
and MetLife, Inc. and a member of the Panel of Economic Advisors for the
Federal Reserve Bank of New York. Mr. Hubbard served as a director of
Information Services Group, Inc. from 2006 to 2008, Duke Realty
Corporation from 2004 to 2008, Capmark Financial Corporation from 2006 to
2008, Dex Media, Inc. from 2004 to 2006, and R.H. Donnelley Corporation in
2006. Mr. Hubbard was chairman of the Presidents Council of Economic
Advisers from 2001 to 2003. Mr. Hubbard provides our board of directors
with substantial knowledge of and expertise in global macroeconomic
conditions and economic, tax and regulatory policies, as well as
perspective on financial markets. In addition, his directorships at other
public companies provide him with broad experience on governance issues
facing public companies.
|
|
|
|
Director since: 2005
Independent
|
|
JOHN P.
JONES
Retired Chairman and Chief
Executive Officer of Air Products and Chemicals, Inc.
Mr. Jones is the retired chairman
of the board, chief executive officer, and president of Air Products and
Chemicals, Inc., an industrial gas and related industrial process
equipment business. Mr. Jones served as chairman of Air Products and
Chemicals, Inc. from October 2007 until April 2008, as chairman and chief
executive officer from September 2006 until October 2007, and as chairman,
president, and chief executive officer from December 2000 through
September 2006. He also served as a director of Sunoco, Inc. from 2010 to
2012. With a track record of achievement and sound business judgment
demonstrated during his thirty-six year tenure at Air Products and
Chemicals, Inc., Mr. Jones brings to the board of directors extensive
experience in issues facing public companies and multinational businesses,
including organizational management, strategic planning, and corporate
governance matters, combined with proven business and financial
acumen.
|
8
Director since:
2011
Management
|
|
CARLOS A. RODRIGUEZ
President and Chief Executive Officer of Automatic Data Processing,
Inc.
Mr.
Rodriguez is president and chief executive officer of the company. He
served as president and chief operating officer of the company before he
was appointed to his current position in November 2011. Having started his
career at the company in 1999, Mr. Rodriguez previously served as
president of several key businesses, including National Accounts Services,
Employer Services International, Small Business Services, and Professional
Employer Organization, giving him deep institutional knowledge across the
companys business. Mr. Rodriguez is also a director of Hubbell Inc., a
manufacturer of electrical and electronic products. Mr. Rodriguez brings a
wealth of business acumen and leadership experience to our board of
directors, coupled with a proven track record of integrity, achievement,
and strategic vision.
|
|
|
|
Director since: 2007
Independent
|
|
GREGORY L. SUMME
Vice
Chairman of The Carlyle Group
Mr. Summe
has been vice chairman of global buyout at The Carlyle Group, a global
alternative asset manager, since September 2009. Prior to joining The
Carlyle Group, Mr. Summe served as the chairman of the board and chief
executive officer of PerkinElmer, Inc., a provider of health and safety
technology and services, which he led for eleven years from 1998 to April
2009. Mr. Summe joined PerkinElmer in 1998 in the role of president and
chief operating officer, and was appointed its chairman of the board and
chief executive officer in 1999. He continued to serve as its chief
executive officer until 2008, and as the chairman of the board until April
2009. Mr. Summe also served as a senior advisor at Goldman Sachs Capital
Partners, a private equity business affiliated with Goldman, Sachs &
Co., from 2008 to 2009. Mr. Summe is a director of State Street
Corporation and the chairman of its nominating and corporate governance
committee. Mr. Summe is also a director of Freescale Semiconductor and the
chairman of its compensation committee. Since 2013, Mr. Summe has also
served as the managing partner of Glen Capital Partners, an investment
fund. With a proven track record of success as chairman and chief
executive officer of a public company with multinational operations,
combined with his experience in the private equity and alternative asset
management sectors, Mr. Summe brings to the board of directors extensive
experience managing sophisticated businesses, insight into organizational
and corporate governance issues, as well as financial acumen critical to a
public company.
|
Stockholder Approval
Required
At the 2013 Annual Meeting of
Stockholders, directors will be elected by the affirmative vote of the holders
of a majority of the shares represented in person or by proxy and entitled to
vote thereon, provided that if the number of nominees exceeds the number of
directors to be elected (a situation we do not anticipate), the directors shall
be elected by the vote of a plurality of the shares represented in person or by
proxy.
THE BOARD OF DIRECTORS
RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR
THE ELECTION OF THE NOMINEES TO THE
BOARD OF DIRECTORS.
9
Corporate Governance
It is our policy that our directors
attend the Annual Meetings of Stockholders. Eleven directors attended our 2012
Annual Meeting of Stockholders.
During fiscal year 2013, our board
of directors held 5 meetings. All of our incumbent directors attended at least
75%, in the aggregate, of the meetings of the board of directors and the
committees of which they were members during the periods that they served on our
board of directors.
The board of directors categorical
standards of director independence are consistent with NASDAQ Stock Market
(NASDAQ) listing standards and are available online at:
http://www.adp.com/about-us/corporate-social-responsibility/governance/corporate-governance-principles/standards-of-director-independence.aspx.
Directors meeting these standards are considered to be independent. Ms.
Alemany, Ms. Gooden, and Messrs. Brenneman, Brun, Clark, Fast, Hubbard, Jones,
Salem, and Summe meet these standards and are, therefore, considered to be
independent directors. Mr. Rodriguez does not meet these standards and is,
therefore, not considered to be an independent director. Based on the foregoing
categorical standards, all current members of the audit, compensation and
nominating/corporate governance committees are independent. Mr. Brun, our
independent non-executive chairman of the board, is not a member of any of these
board committees.
The table below provides membership
and meeting information for each of the committees of the board of
directors.
|
|
|
Committee Memberships
|
|
Name
|
|
|
AC
|
|
CC
|
|
NCGC
|
|
Ellen R. Alemany
|
|
|
|
|
|
X
|
|
Gregory D.
Brenneman
|
|
F
|
|
C
|
|
|
|
Richard T. Clark
|
|
X
|
|
X
|
|
|
|
Eric C. Fast
|
|
C, F
|
|
|
|
|
|
Linda R. Gooden
|
|
X
|
|
|
|
|
|
R. Glenn Hubbard
|
|
F
|
|
X
|
|
|
|
John P. Jones
|
|
|
|
X
|
|
C
|
|
Enrique T. Salem
|
|
|
|
|
|
X
|
|
Gregory L. Summe
|
|
|
|
X
|
|
X
|
|
Number of
meetings
|
|
|
|
|
|
|
|
held in fiscal
2013
|
|
7
|
|
5
|
|
3
|
AC
|
|
Audit Committee
|
|
F
|
|
Financial Expert
|
CC
|
|
Compensation Committee
|
|
C
|
|
Committee Chair
|
NCGC
|
|
Nominating / Corporate Governance Committee
|
|
|
|
|
Board Leadership
Structure
Our Corporate Governance Principles
do not require the separation of the roles of chairman of the board and chief
executive officer because the board believes that effective board leadership can
depend on the skills and experience of, and personal interaction between, people
in leadership roles. Our board of directors is currently led by Mr. Brun, our
independent non-executive chairman of the board. Mr. Rodriguez, our chief
executive officer, serves as a member of the board of directors. The board of
directors believes this leadership structure is in the best interests of the
companys stockholders at this time. Separating these positions allows our chief
executive officer to focus on developing and implementing the companys business
plans and supervising the companys day-to-day business operations and allows
our chairman of the board to lead the board of directors in its oversight,
advisory, and risk management roles.
Executive
Sessions
Executive sessions of the
non-management directors are held during each board of directors and committee
meeting. Mr. Brun, our independent non-executive chairman of the board, presides
at each executive session of the board of directors.
10
Director Nomination
Process
When the board of directors decides
to recruit a new member, or when the board of directors considers any director
candidates submitted for consideration by our stockholders, it seeks strong
candidates who, ideally, meet all of its categorical standards of director
independence, and who are, preferably, senior executives of large companies who
have backgrounds directly related to our technologies, markets and/or clients.
Additionally, candidates should possess the following personal characteristics:
(i) business community respect for his or her integrity, ethics, principles,
insights and analytical ability; and (ii) ability and initiative to frame
insightful questions, speak out and challenge questionable assumptions and
disagree without being disagreeable. The nominating/corporate governance
committee will not consider candidates who lack the foregoing personal
characteristics. In addition, the nominating/corporate governance committee
considers a wide range of other factors in determining the composition of our
board of directors, including age, diversity of background, diversity of
thought, and other individual qualities such as professional experience, skills,
education, and training.
Nominations of candidates for our
board of directors by our stockholders for consideration at our 2014 Annual
Stockholder Meeting are subject to the deadlines and other requirements
described under S
TOCKHOLDER
P
ROPOSALS
on page 69 of this proxy statement.
Retirement
Policy
Each director will automatically
retire from the board of directors at the companys Annual Meeting of
Stockholders following the date he or she turns 72. Management directors who are
no longer officers of the company are required to offer to resign from the board
of directors.
Audit
Committee
The audit committee acts under a
written charter, which is available online at
http://www.adp.com/about-us/corporate-social-responsibility/governance/audit-committee-charter.aspx.
The members of the audit committee satisfy the independence requirements of
NASDAQ
®
listing standards. The audit committees principal functions
are to assist the board of directors in fulfilling its oversight
responsibilities with respect to (i) our systems of internal controls regarding
finance, accounting, legal compliance, and ethical behavior, (ii) our auditing,
accounting and financial reporting processes generally, (iii) our financial
statements and other financial information that we provide to our stockholders,
the public and others, (iv) our compliance with legal and regulatory
requirements, and (v) the performance of our corporate audit department and our
independent auditors.
Nominating/Corporate
Governance Committee
The nominating/corporate governance
committee acts under a written charter, which is available online at
http://www.adp.com/about-us/corporate-social-responsibility/governance/nominating-corporate-governance-committee-charter.aspx.
The members of the nominating/corporate governance committee satisfy the
independence requirements of NASDAQ listing standards. The principal functions
of the nominating/corporate governance committee are to (i) identify individuals
qualified to become members of the board of directors and recommend a slate of
nominees to the board of directors annually, (ii) ensure that the audit,
compensation and nominating/corporate governance committees of the board of
directors have the benefit of qualified and experienced independent directors,
(iii) review and reassess annually the adequacy of the board of directors
corporate governance principles and recommend changes as appropriate, (iv)
oversee the evaluation of the board of directors and management and recommend to
the board of directors senior managers to be elected as new corporate vice
presidents of the company, and (v) review our policies and programs that relate
to matters of corporate citizenship.
Compensation
Committee
The compensation committee acts
under a written charter, which is available online at http://www.adp.com/
about-us/corporate-social-responsibility/governance/compensation-committee-charter.aspx.
The members of the compensation committee satisfy the independence requirements
of NASDAQ listing standards. In addition, each member of the compensation
committee is a Non-Employee Director as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, and an outside director as
defined in the regulations under Section 162(m) of
11
the Internal Revenue Code of 1986, as
amended. The compensation committee may form and delegate authority to
subcommittees when appropriate, provided that the subcommittees are composed
entirely of directors who satisfy the applicable independence requirements of
NASDAQ.
The compensation committee sets and
administers our executive compensation program. See C
OMPENSATION
D
ISCUSSION
AND
A
NALYSIS
on page 19 of this proxy
statement.
The compensation committee is
authorized to engage the services of outside advisors, experts and others to
assist the committee. For fiscal year 2013, the compensation committee sought
advice from Frederic W. Cook & Co., Inc., an independent compensation
consulting firm specializing in executive and director compensation. For further
information about Frederic W. Cook & Co., Inc.s services to the
compensation committee, see C
OMPENSATION
D
ISCUSSION
AND
A
NALYSIS
under Compensation Consultant
on page 25 of this proxy statement.
The Boards Role in Risk
Oversight
Our board of directors provides
oversight with respect to the companys enterprise risk assessment and risk
management activities, which are designed to identify, prioritize, assess,
monitor and mitigate the various risks confronting the company, including risks
that are related to the achievement of the companys operational and financial
strategy. The board of directors performs this oversight function periodically
as part of its meetings and also through its committees, each of which examines
various components of enterprise risk as part of its assigned responsibilities.
Management is responsible for implementing and supervising day-to-day risk
management processes and reporting to the board of directors and its committees
as necessary.
Our audit committee focuses on
financial risks, including reviewing with management, the companys internal
auditors, and the companys independent auditors the companys major financial
risk exposures, the adequacy and effectiveness of accounting and financial
controls, and the steps management has taken to monitor and control financial
risk exposures. In addition, our audit committee reviews risks related to
compliance with applicable laws, regulations, and ethical standards, and also
operational risks related to information security and system disruption. Our
audit committee regularly receives, reviews and discusses with management
presentations and analyses on our aggregate risk exposures, including market,
credit, compliance, and operational risks.
Our nominating/corporate governance
committee oversees risks associated with board structure and other corporate
governance policies and practices, including review and approval of any
related-party transactions under our Related Persons Transaction
Policy.
Our compensation committee oversees
risks related to compensation matters. Our compensation committee considered the
risks presented by the companys compensation policies and practices at its
meetings in August 2012 and 2013 and believes that our policies and practices of
compensating employees do not encourage excessive or unnecessary risk-taking for
the following reasons:
-
Our incentive plans have diverse performance
measures, including company and business unit financial
measures, operational measures, and individual
goals;
-
Our compensation programs balance annual and
long-term incentive opportunities;
-
We cap incentive plan payouts within a reasonable
range;
-
The mix of performance-based restricted stock and
stock options in our long-term incentive programs
serves the best interests of stockholders and the
company;
-
Our stock ownership guidelines link the interests
of our executive officers to those of our stockholders; and
-
Our compensation recovery policy for equity awards
provides for the clawback of the value of awards in
the event an employee engages in conduct contributing to a financial
restatement.
Our committees report on risk
oversight matters directly to the board of directors on a regular
basis.
12
Communications with All
Interested Parties
All interested parties who wish to
communicate with the board of directors, the audit committee, or the
non-management directors, individually or as a group, may do so by sending a
detailed letter to P.O. Box 34, Roseland, New Jersey 07068, leaving a message
for a return call at 973-974-5770 or sending an email to
adp_audit_committee@adp.com. We will relay any such communication to the
non-management director to which such communication is addressed, if applicable,
or to the most appropriate committee chairperson, the chairman of the board, or
the full board of directors, unless, in any case, it is outside the scope of
matters considered by the board of directors or duplicative of other
communications previously forwarded to the board of directors. Communications to
the board of directors, the non-management directors, or to any individual
director that relate to the companys accounting, internal accounting controls,
or auditing matters are referred to the chairperson of the audit
committee.
Transactions with
Related Persons
We have a written Related Persons
Transaction Policy pursuant to which any transaction between the company and a
related person in which such related person has a direct or indirect material
interest, and where the amount involved exceeds $120,000, must be submitted to
our nominating/corporate governance committee for review, approval, or
ratification.
A related person means a director,
executive officer or beneficial holder of more than 5% of the companys
outstanding common stock, or any immediate family member of the foregoing, as
well as any entity at which any such person is employed, is a partner or
principal (or holds a similar position), or is a beneficial owner of a 10% or
greater direct or indirect equity interest. Our directors and executive officers
must inform our general counsel at the earliest practicable time of any plan to
engage in a potential related person transaction.
This policy requires our
nominating/corporate governance committee to be provided with full information
concerning the proposed transaction, including the benefits to the company and
the related person, any alternative means by which to obtain like benefits, and
terms that would prevail in a similar transaction with an unaffiliated third
party. In considering whether to approve any such transaction, the
nominating/corporate governance committee will consider all relevant factors,
including the nature of the interest of the related person in the transaction
and whether the transaction may involve a conflict of interest.
Specific types of transactions are
excluded from the policy, such as, for example, transactions in which the
related persons interest derives solely from his or her service as a director
of another entity that is a party to the transaction.
The wife of Michael L. Capone, our
vice president and chief information officer, is employed as an executive of the
company and received total cash compensation for fiscal year 2013 in excess of
$120,000.
Availability of
Corporate Governance Documents
Our Corporate Governance Principles
and Related Persons Transaction Policy may be viewed online on the companys
website at www.adp.com under Governance in the About ADP section. Our Code
of Business Conduct & Ethics and Code of Ethics for Principal Executive
Officer and Senior Financial Officers may be found at www.adp.com under Ethics
in the About ADP section. In addition, these documents are available in print
to any stockholder who requests them by writing to Investor Relations at the
companys headquarters.
Compensation Committee Interlocks
and Insider Participation
Messrs. Brenneman, Clark, Hubbard,
Jones, and Summe are the five independent directors who sit on the compensation
committee. No compensation committee member has ever been an officer of the
company. During fiscal year 2013 and as of the date of this proxy statement, no
compensation committee member has been an employee of the company or eligible to
participate in our employee compensation programs or plans, other than the
companys 2008 Omnibus Award Plan under which non-employee directors have
received stock option grants and deferred stock units. None of the executive
officers of the company have served on the compensation committee or on the
board of directors of any entity that employed any of the compensation committee
members or directors of the company.
13
Compensation of Non-Employee
Directors
The annual retainer for non-employee
directors, other than Mr. Brun, the chairman of our board of directors, is
$205,000, $125,000 of which is paid in the form of deferred stock units and
$80,000 of which may, at the election of each director, be paid in cash,
deferred or paid in deferred stock units. The chairman of our board of directors
receives an annual retainer of $360,000, $220,000 of which is paid in the form
of deferred stock units and $140,000 of which may, at the election of the
chairman of our board of directors, be paid in cash, deferred or paid in
deferred stock units. The chairperson of the audit committee was paid an
additional annual retainer of $15,000 and the chairperson of each of the
compensation committee and the nominating/corporate governance committee was
paid an additional annual retainer of $10,000. The additional annual retainer
may, at the directors election, be paid in cash or in deferred stock units.
Meeting fees are not paid in respect of the first seven meetings of the board of
directors or of any individual committee. Non-employee directors receive $2,000
for each board of directors meeting attended and $1,500 for each committee
meeting attended beginning with the eighth meeting of the board of directors or
any individual committee, as applicable.
Effective at the time of the 2013
Annual Meeting of Stockholders, the annual retainer for non-employee directors,
other than Mr. Brun, the chairman of our board of directors, will be increased
to $220,000, $130,000 of which will be paid in the form of deferred stock units
and $90,000 of which may, at the election of each director, be paid in cash,
deferred or paid in deferred stock units. Also effective at the time of the 2013
Annual Meeting of Stockholders, the annual retainer for the chairman of our
board of directors will be increased to $370,000, $225,000 of which will be paid
in the form of deferred stock units and $145,000 of which may, at the election
of the chairman of our board of directors, be paid in cash, deferred or paid in
deferred stock units.
All of our non-employee directors
chose to receive the entire elective portion of their annual retainers in the
form of deferred stock units except for Mr. Brenneman, who elected to receive
the amount of his additional annual retainer in cash. Under our 2008 Omnibus
Award Plan a director may specify whether, upon separation from the board, he or
she would like to receive the deferred cash amounts in such directors deferred
account in a lump sum payment or in a series of substantially equal annual
payments over a period ranging from two to ten years.
Pursuant to our 2008 Omnibus Award
Plan, each non-employee director is credited with an annual grant of deferred
stock units on the date established by the board for the payment of the annual
retainer equal in number to the quotient of $125,000 ($130,000 effective at the
time of our 2013 Annual Meeting of Stockholders), or $220,000 ($225,000
effective at the time of our 2013 Annual Meeting of Stockholders) in the case of
the chairman of the board of directors, divided by the closing price of a share
of our common stock on the date this amount is credited. Deferred stock units
are fully vested when credited to a directors account. When a dividend is paid
on our common stock, each directors account is credited with an amount equal to
the cash dividend. When a director ceases to serve on our board, such director
will receive a number of shares of common stock equal to the number of deferred
stock units in such directors account and a cash payment equal to the dividend
payments accrued, plus interest on the dividend equivalents from the date such
dividend equivalents were credited. The interest will be paid with respect to
each twelve-month period beginning on November 1 of such period to the date of
payment and will be equal to the rate for five-year U.S. Treasury Notes
published in The Wall Street Journal
®
on the first business day of
November of each such twelve-month period plus 0.50%. Non-employee directors do
not have any voting rights with respect to their deferred stock
units.
Non-employee directors no longer
receive annual stock option grants. Prior to our 2010 Annual Meeting of
Stockholders, upon initial election to the board of directors, a non-employee
director received a grant of options to purchase 5,000 shares of common stock if
such director attended a regularly scheduled board of directors meeting prior to
the next Annual Meeting of Stockholders. Thereafter, a non-employee director
received an annual grant of options to purchase 5,000 shares of common stock.
All such options were granted under the 2008 Omnibus Award Plan, have a term of
ten years, and were granted at the fair market value of the common stock as
determined by the closing price of our common stock on the NASDAQ Global Select
Market
®
on the date of the grant.
14
Options granted to our non-employee
directors under the 2008 Omnibus Award Plan are exercisable in four equal
installments, with the first twenty-five percent becoming exercisable on the
first anniversary of the options grant date, and the remaining three
installments becoming exercisable on each successive anniversary date
thereafter. The options vest only while a director is serving in such capacity,
unless certain specified events occur, such as death or permanent disability, in
which case the options immediately vest and become fully exercisable. In
addition, non-employee directors who have been non-employee directors for at
least ten years will have all of their options vested upon retirement from the
board of directors and will have 36 months to exercise their options.
Non-employee directors who have served as non-employee directors for fewer than
ten years at the time they retire or otherwise leave the board will not qualify
for accelerated vesting, but will have 60 days to exercise their then-vested
options. Notwithstanding the foregoing, all options will expire no more than ten
years from their date of grant.
Our share ownership guidelines are
intended to promote ownership in the companys stock by our non-employee
directors and to align their financial interests more closely with those of
other stockholders of the company. Each non-employee director has a minimum
shareholding requirement of our common stock equal to five times his or her
annual cash retainer.
The following table shows
compensation for our non-employee directors for fiscal year 2013.
DIRECTOR COMPENSATION TABLE FOR
FISCAL YEAR 2013
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Paid in
|
|
Stock
|
|
All Other
|
|
|
|
Name
|
|
|
Cash(5)
($)
|
|
Awards(6)
($)
|
|
Compensation(7) ($)
|
|
Total
($)
|
(a)
|
|
|
|
(b)
|
|
|
|
(c)
|
|
|
|
(g)
|
|
|
(h)
|
Ellen Alemany
|
|
|
$
|
80,000
|
|
|
|
$
|
125,000
|
|
|
|
$
|
40,000
|
|
|
$
|
245,000
|
Gregory D. Brenneman(1)
|
|
|
$
|
90,000
|
|
|
|
$
|
125,000
|
|
|
|
$
|
0
|
|
|
$
|
215,000
|
Leslie A. Brun(2)
|
|
|
$
|
140,000
|
|
|
|
$
|
220,000
|
|
|
|
$
|
0
|
|
|
$
|
360,000
|
Richard T. Clark
|
|
|
$
|
80,000
|
|
|
|
$
|
125,000
|
|
|
|
$
|
0
|
|
|
$
|
205,000
|
Eric C. Fast(3)
|
|
|
$
|
95,000
|
|
|
|
$
|
125,000
|
|
|
|
$
|
15,000
|
|
|
$
|
235,000
|
Linda R. Gooden
|
|
|
$
|
80,000
|
|
|
|
$
|
125,000
|
|
|
|
$
|
5,000
|
|
|
$
|
210,000
|
R. Glenn Hubbard
|
|
|
$
|
80,000
|
|
|
|
$
|
125,000
|
|
|
|
$
|
0
|
|
|
$
|
205,000
|
John P. Jones(4)
|
|
|
$
|
90,000
|
|
|
|
$
|
125,000
|
|
|
|
$
|
0
|
|
|
$
|
215,000
|
Enrique T. Salem
|
|
|
$
|
80,000
|
|
|
|
$
|
125,000
|
|
|
|
$
|
0
|
|
|
$
|
205,000
|
Gregory L. Summe
|
|
|
$
|
80,000
|
|
|
|
$
|
125,000
|
|
|
|
$
|
20,000
|
|
|
$
|
225,000
|
____________________
(1)
|
As chairman of the compensation
committee, Mr. Brenneman received a $10,000 annual retainer, which is
included in fees earned.
|
|
|
(2)
|
Mr. Brun is the non-executive
chairman of the board of directors.
|
|
(3)
|
As chairman of the audit
committee, Mr. Fast received a $15,000 annual retainer, which is included
in fees earned.
|
|
(4)
|
As chairman of the
nominating/corporate governance committee, Mr. Jones received a $10,000
annual retainer, which is included in fees earned.
|
|
(5)
|
Represents the following, whether
received as cash, deferred or received as deferred stock units: (i) the
elective portion of directors annual retainer, and (ii) annual retainers
for committee chairpersons. See footnote 6 below for additional
information about deferred stock units held by
directors.
|
15
(6)
|
Represents the portion of the annual retainer required
to be credited in deferred stock units to a directors annual retainer
account. Amounts set forth in the Stock Awards column represent the
aggregate grant date fair value for fiscal year 2013 as computed in
accordance with FASB Accounting Standards Codification Topic 718 (FASB
ASC Topic 718), disregarding estimates of forfeitures related to
service-based vesting conditions. For additional information about the
assumptions used in these calculations, see Note 10 to our audited
consolidated financial statements for the fiscal year ended June 30, 2013
included in our annual report on Form 10-K for the fiscal year ended June
30, 2013.
|
|
|
|
The grant date fair value for
each deferred stock unit award granted to directors in fiscal year 2013
(including in respect of elective deferrals of amounts otherwise payable
in cash), calculated in accordance with FASB ASC Topic 718, is as
follows:
|
|
|
|
|
|
Grant
Date
|
|
Director
|
|
|
Grant
Date
|
|
Fair Value
|
|
Ellen Alemany
|
|
11/13/2012
|
|
|
$
|
205,000
|
|
|
|
|
|
|
|
|
|
|
|
Gregory D. Brenneman
|
|
11/13/2012
|
|
|
$
|
205,000
|
|
|
|
|
|
|
|
|
|
|
|
Leslie A. Brun
|
|
11/13/2012
|
|
|
$
|
360,000
|
|
|
|
|
|
|
|
|
|
|
|
Richard T. Clark
|
|
11/13/2012
|
|
|
$
|
205,000
|
|
|
|
|
|
|
|
|
|
|
|
Eric C. Fast
|
|
11/13/2012
|
|
|
$
|
220,000
|
|
|
|
|
|
|
|
|
|
|
|
Linda R. Gooden
|
|
11/13/2012
|
|
|
$
|
205,000
|
|
|
|
|
|
|
|
|
|
|
|
R. Glenn Hubbard
|
|
11/13/2012
|
|
|
$
|
205,000
|
|
|
|
|
|
|
|
|
|
|
|
John P. Jones
|
|
11/13/2012
|
|
|
$
|
215,000
|
|
|
|
|
|
|
|
|
|
|
|
Enrique T. Salem
|
|
11/13/2012
|
|
|
$
|
205,000
|
|
|
|
|
|
|
|
|
|
|
|
Gregory L. Summe
|
|
11/13/2012
|
|
|
$
|
205,000
|
|
|
The aggregate number of
outstanding deferred stock units held by each director at June 30, 2013 is
as follows: Ms. Alemany, 6,854; Mr. Brenneman, 24,629; Mr. Brun, 39,424;
Mr. Clark, 8,212; Mr. Fast, 20,152; Ms. Gooden, 15,541; Mr. Hubbard,
25,031; Mr. Jones, 24,365; Mr. Salem, 13,512; Mr. Summe,
19,461.
|
|
|
|
In fiscal year 2013, no stock
option awards were granted. The aggregate number of outstanding stock
options held by each director at June 30, 2013 is as follows: Mr.
Brenneman, 4,750; Mr. Brun, 1,250; Mr. Fast, 15,000; Ms. Gooden, 3,750;
Mr. Hubbard, 36,948; Mr. Jones, 31,461; Mr. Salem, 5,000; and Mr. Summe,
15,000.
|
|
|
(7)
|
Reflects contributions by the
ADP Foundation that match the charitable gifts made by our directors. The
ADP foundation makes matching charitable contributions in an amount not to
exceed $20,000 in a calendar year in respect of any given directors
charitable contributions for that calendar year. Amounts in the Director
Compensation Table may exceed $20,000 because, while matching charitable
contributions are limited to the $20,000 in a calendar year, the Director
Compensation Table reflects matching charitable contributions for the
fiscal year ended June 30, 2013.
|
16
Security Ownership of Certain
Beneficial Owners and Management
The following table contains
information regarding the beneficial ownership of the companys common stock by
(i) each director and nominee for director of the company, (ii) each of our
named executive officers included in the Summary Compensation Table below (we
refer to such executive officers as named executive officers), (iii) all
company directors and executive officers as a group (including the named
executive officers) and (iv) all stockholders that are known to the company to
be the beneficial owners of more than 5% of the outstanding shares of the
companys common stock. Unless otherwise noted in the footnotes following the
table, each person listed below has sole voting and investment power over the
shares of common stock reflected in the table. Unless otherwise noted in the
footnotes following the table, the information in the table is as of August 31,
2013 and the address of each person named is P.O. Box 34, Roseland, New Jersey,
07068.
|
|
Amount and
Nature of
|
|
|
|
Name of
Beneficial Owner
|
|
|
Beneficial Ownership (1)
|
|
Percent
|
Ellen Alemany
|
|
|
6,854
|
|
|
*
|
|
Steven J. Anenen(2)
|
|
|
171,777
|
|
|
*
|
|
Gregory D. Brenneman
|
|
|
28,129
|
|
|
*
|
|
Leslie A. Brun
|
|
|
41,424
|
|
|
*
|
|
Richard T. Clark
|
|
|
8,212
|
|
|
*
|
|
Eric C. Fast
|
|
|
33,902
|
|
|
*
|
|
Linda R. Gooden
|
|
|
18,041
|
|
|
*
|
|
R. Glenn Hubbard
|
|
|
61,729
|
|
|
*
|
|
John P. Jones
|
|
|
54,576
|
|
|
*
|
|
Regina R. Lee
|
|
|
207,834
|
|
|
*
|
|
Dermot J. OBrien
|
|
|
18,762
|
|
|
*
|
|
Christopher R. Reidy(3)
|
|
|
178,460
|
|
|
*
|
|
Carlos A. Rodriguez
|
|
|
150,712
|
|
|
*
|
|
Enrique T. Salem
|
|
|
17,262
|
|
|
*
|
|
Jan Siegmund
|
|
|
102,849
|
|
|
*
|
|
Gregory L. Summe
|
|
|
33,211
|
|
|
*
|
|
The Vanguard Group, Inc.(4)
|
|
|
26,980,842
|
|
|
5.6
|
%
|
Directors and executive officers as a group (26
persons,
|
|
|
|
|
|
|
|
including those directors and executive
officers named above)
|
|
|
1,719,089
|
|
|
*
|
|
____________________
*
|
Indicates less than one
percent.
|
|
|
(1)
|
Includes: (i) 449,770 shares that
may be acquired upon the exercise of stock options that are exercisable on
or prior to October 31, 2013 held by the following directors and executive
officers: 91,914 (Mr. Anenen), 3,500 (Mr. Brenneman), 13,750 (Mr. Fast),
2,500 (Ms. Gooden), 35,698 (Mr. Hubbard), 30,211 (Mr. Jones), 120,177 (Ms.
Lee), 7,500 (Mr. OBrien), 59,500 (Mr. Rodriguez), 3,750 (Mr. Salem),
67,520 (Mr. Siegmund), and 13,750 (Mr. Summe); (ii) 124,312 shares that
may be acquired upon the exercise of stock options held by Mr. Reidy on
November 2, 2012, the effective date that he ceased to be an officer of
the company, which were exercisable on or prior to January 1, 2013, and
(iii) 952,004 shares subject to stock options held by the directors and
executive officers as a group. Includes shares issuable upon settlement of
deferred stock units held by non-employee directors as follows: 6,854 (Ms.
Alemany), 24,629 (Mr. Brenneman), 39,424 (Mr. Brun), 8,212 (Mr. Clark),
20,152 (Mr. Fast), 15,541 (Ms. Gooden), 25,031 (Mr. Hubbard), 24,365 (Mr.
Jones), 13,512 (Mr. Salem), and 19,461 (Mr. Summe).
|
|
(2)
|
Includes 16,946 shares that Mr.
Anenen deferred upon exercise of stock options prior to 2002.
|
|
(3)
|
The number of shares owned by Mr.
Reidy is based on information as of November 2, 2012, which is the
effective date when he ceased to be an officer of the
company.
|
17
(4)
|
|
Information is furnished in
reliance on the Form 13F of The Vanguard Group, Inc. (Vanguard) filed on
August 13, 2013. The address of The Vanguard Group, Inc. is P.O. Box 2600,
V26, Valley Forge, PA 19482-2600. Vanguard shares investment power over
666,791 shares with Vanguard Fiduciary Trust Company and also shares
investment power over 148,083 shares with Vanguard Investments Australia
Ltd. Vanguard has sole investment power over 26,165,968 shares. Vanguard
has sole voting authority over 846,077 shares and no voting authority over
26,134,765 shares.
|
Equity Compensation Plan
Information
The following
table sets forth information as of June 30, 2013 regarding compensation plans
under which the companys equity securities are authorized for
issuance:
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities
|
|
|
|
|
|
|
|
|
|
|
|
|
remaining available for
|
|
|
Number of securities
|
|
Weighted-average
|
|
future issuance under
|
|
|
to be issued upon
|
|
exercise price of
|
|
equity compensation
|
|
|
exercise of outstanding
|
|
outstanding
|
|
plans (excluding
|
|
|
options, warrants
|
|
options, warrants
|
|
securities reflected
|
Plan category
|
|
|
and rights
|
|
and rights
|
|
in Column (a))
|
|
|
(a)
|
|
(b)
|
|
(c)
|
Equity compensation plans approved
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
by
stockholders
|
|
|
13,155,030
|
(1)
|
|
|
|
$
|
43.97
|
|
|
|
32,213,537
|
(2)
|
|
Equity compensation plans
not approved
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
by
stockholders
|
|
|
0
|
|
|
|
|
$
|
-
|
|
|
|
0
|
|
|
Total
|
|
|
13,155,030
|
|
|
|
|
$
|
43.97
|
|
|
|
32,213,537
|
|
|
____________________
(1)
|
|
Includes (i) 1,624,880 shares of
restricted stock and 3,770 deferred restricted stock units issuable under
our fiscal year 2013 one-year performance-based restricted stock program
(which were issued in September 2013), (ii) 89,106 deferred restricted
stock units issuable under our one-year performance-based restricted stock
program prior to June 30, 2013, (ii) 197,181 shares issuable upon
settlement of deferred stock units held by our directors, and (iii) 16,946
shares deferred by Steven J. Anenen upon his exercise of stock options
prior to 2002. The remaining balance consists of outstanding stock
options. Weighted average exercise price shown in column (b) of this table
does not take into account awards under our performance-based restricted
stock program, deferred restricted stock units, or deferred
shares.
|
|
(2)
|
|
Includes 27,858,517 shares
available for future issuance under the 2008 Omnibus Award Plan and
4,355,020 shares of common stock remaining available for future issuance
under the Employees Savings-Stock Purchase Plan. Approximately 277,583
shares of common stock were subject to purchase as of June 30, 2013 under
the Employees Savings-Stock Purchase Plan.
|
18
PROPOSAL 2
ADVISORY VOTE ON EXECUTIVE
COMPENSATION
We are asking
stockholders to approve the following advisory resolution at the Annual
Meeting:
RESOLVED, that the stockholders approve, on an advisory basis, the
compensation of the companys named executive officers as disclosed in the
Compensation Discussion and Analysis, the accompanying compensation tables and
the related narrative disclosure in the companys proxy statement for the 2013
Annual Meeting of Stockholders.
The board of directors recommends a vote FOR this resolution because it
believes that the policies and practices described in the C
OMPENSATION
D
ISCUSSION
AND
A
NALYSIS
are effective in achieving the
companys goals of linking pay to performance and levels of responsibility,
encouraging our executive officers to remain focused on both short-term and
long-term operational and financial goals of the company and linking executive
performance to stockholder value.
We urge stockholders to read the C
OMPENSATION
D
ISCUSSION
AND
A
NALYSIS
section appearing on pages 19
through 33 of this proxy statement, as well as the Summary Compensation Table
For Fiscal Year 2013 and related compensation tables and narrative appearing on
pages 35 through 51 of this proxy statement, which provide detailed information
on the companys compensation policies and practices and the compensation of our
named executive officers.
Stockholder Approval
Required
The affirmative vote of the holders of a majority of the shares
represented in person or by proxy and entitled to vote thereon at the meeting of
stockholders is required to approve the advisory resolution on named executive
compensation. Because the vote on this proposal is advisory in nature, it will
not affect any compensation already paid or awarded to any named executive
officer and will not be binding on or overrule any decisions by the compensation
committee or the board of directors. Because we value our stockholders views,
however, the compensation committee and the board of directors will consider the
results of this advisory vote when formulating future executive compensation
policy.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR
THE APPROVAL OF THE ADVISORY RESOLUTION ON EXECUTIVE
COMPENSATION.
COMPENSATION DISCUSSION AND
ANALYSIS
Introduction
The following Compensation Discussion and Analysis, or CD&A,
section of this proxy statement discusses the material elements of our fiscal
year 2013 executive compensation programs for the following persons, who are our
named executive officers, or NEOs:
-
Carlos A. Rodriguez, our Chief Executive
Officer;
-
Jan Siegmund, our Chief Financial
Officer;
-
Regina R. Lee, our Division President, Employer
ServicesMajor Account Services and ADP Canada;
-
Steven J. Anenen, our Division President, Dealer
Services;
-
Dermot OBrien, our Chief Human Resources Officer;
and
-
Christopher R. Reidy, our former Chief Financial
Officer, who ceased to be an officer of the company
effective on November 2, 2012, and separated from the company on
January 2, 2013.
19
The CD&A
also provides an overview of our executive compensation philosophy and explains
how the compensation committee of our board of directors arrives at specific
compensation decisions involving the NEOs. In addition, the CD&A explains
how our executive compensation programs are designed and operate with respect to
our NEOs by discussing the following fundamental aspects of our compensation
programs:
-
compensation principles;
-
cash compensation;
-
long-term incentive compensation;
and
-
other compensation components and considerations
(including retirement benefits and deferred compensation).
The compensation committee of our board of directors determines the
compensation of our chief executive officer and all other executive officers.
When making decisions related to officers, including the NEOs (other than our
chief executive officer), the committee considers recommendations from the chief
executive officer.
Executive Summary
Strong Stockholder Support for our Compensation
Programs
At our 2012 Annual Meeting of Stockholders, our stockholders approved the
compensation of our fiscal year 2012 NEOs by a vote of approximately 96% in
favor. Given this strong support and the companys continued strong performance,
the compensation committee retained the basic foundation of our overall
compensation program during fiscal year 2013, but made certain changes to ensure
that the program continued to support our key human resource and financial
objectives. For fiscal year 2013, earnings per share growth was removed as a
performance measure in determining the annual cash bonus for executive officers
and was replaced by pre-tax operating income from continuing operations in order
to avoid duplication with the continued use of earnings per share as the metric
under our performance-based restricted stock program. In addition, for the
fiscal year 2013 performance-based restricted stock program, the vesting period
that applies after the date the stock is granted following the end of the
one-year performance period was extended to 12 months from 6 months.
The compensation committee will continue to evaluate the degree to which
our compensation programs link pay to performance, and take steps to ensure that
the program encourages our executive officers to remain focused on both the
short-term and long-term operational and financial goals of the
company.
Fiscal Year 2013 Business Highlights
We achieved solid results for fiscal year 2013, reflecting the strength
of our underlying business model, including the diversity of our client base and
products, against the uneven global economic recovery. Our organic revenue
growth improved each quarter during fiscal year 2013. Our focus on product
innovation and improvements in sales force productivity have led to growth in
new business bookings ahead of our expectations to 11% for the year. Worldwide
client revenue retention in our Employer Services segment increased to 91.3%, a
new record level. Aided by our strong financial performance, we returned nearly
$1.5 billion in excess cash to our shareholders through cash dividends and share
buybacks during fiscal year 2013 in line with our longstanding commitment to
shareholder friendly actions. Our common stock generated a total shareholder
return of 27% in fiscal year 2013, compared to a total shareholder return of 21%
for the S&P 500 Index over the same period. The compensation committee
considered our strong financial performance in their discussion regarding our
incentive plans, and believes that incentive plan payouts are commensurate with
our performance.
Our financial performance in fiscal year 2013 impacted the compensation
of our executive officers in several ways, most notably our annual cash bonus
plan and performance-based restricted stock program. The compensation
committees determination of incentive compensation under our cash bonus program
for all of our executive officers, not just our named executive officers, was
based on fiscal year 2013 revenue growth of 7.1% compared to a target of 7%,
excluding the effect of foreign exchange movement, and adjusted operating income
growth of 4.2% compared to a target of 4.5%. The incentive compensation under
our performance-based restricted stock program was based on fiscal year 2013
adjusted earnings per share growth of 6.3% compared to a target of >5% to 7%.
The actual
20
operating income and earnings per share
results considered by the compensation committee exclude the impact of certain
non-recurring items consisting of a goodwill impairment charge in fiscal year
2013 related to the acquisition of our ADP AdvancedMD
®
business in
the third quarter of fiscal year 2011 and a gain resulting from the sale of
certain assets completed in the second quarter of fiscal year 2012. In fiscal
year 2013, our named executive officers (other than Mr. Reidy) received cash
bonuses that averaged approximately 106.1% of target. Our one-year earnings per
share growth for fiscal year 2013 resulted in awards to our named executive
officers of restricted stock under our performance-based restricted stock
program at 100% of target.
The tables
below illustrate the alignment between company performance and the incentive
compensation paid to Mr. Rodriguez for fiscal year 2013:
Good Governance and Best Practices
We are committed to ensuring that our compensation programs reflect
principles of good governance. The following practices are key aspects of our
programs:
-
Pay for performance:
We design our compensation programs to link pay to performance and
levels of responsibility, to encourage our executive officers to remain
focused on both the short-term and long-term operational and financial goals
of the company and to link executive performance to stockholder
value.
-
Annual say-on-pay vote:
Consistent with our stockholders advisory vote at our
November 2011 stockholder meeting, we hold an advisory say-on-pay vote to
approve our named executive officer compensation on an annual
basis.
-
Independence of our compensation committee and
advisor:
The compensation committee of our
board of directors, which is comprised solely of independent directors,
utilizes the services of Frederic W. Cook & Co., Inc. (Cook & Co.)
as an independent compensation consultant. Cook & Co. reports to the
compensation committee, does not perform any other services for the company
other than in connection with an annual review of competitive director
compensation for the nominating/corporate governance committee of our board
of directors, and has no economic or other ties to the company or the
management team that could compromise their independence and
objectivity.
-
Clawback policy:
We maintain a compensation recovery, or clawback provision in our
2008 Omnibus Award Plan.
-
Stock ownership guidelines:
We maintain stock ownership guidelines to encourage equity
ownership by our executive officers. Mr. Rodriguezs stock ownership guideline
is six times his base salary. The other named executive officers have a stock
ownership guideline of three times base salary. Executive officers whose
ownership levels are below minimum requirements are required to retain as
shares of common stock at least 75% of post-tax net gains on stock option
exercises, and 75% of shares (net of taxes) received upon vesting of
restricted stock.
21
-
Double trigger on change in control
payments:
Our Change in Control Severance
Plan for Corporate Officers is based on a double trigger, such that payments
of cash and vesting of equity awards occur only if termination of employment
without cause or with good reason occurs during the 3-year period after a
change in control.
-
Limited perquisites:
We provide limited, reasonable perquisites that we believe are
consistent with our overall compensation philosophy.
As part of our
commitment to principles of good governance, we do not engage in the following
practices:
-
Anti-hedging policy:
We prohibit our directors and executive officers from engaging in any
hedging or similar transactions involving ADP securities.
-
Anti-pledging policy:
We prohibit our directors and executive officers from
holding ADP securities in a margin account or pledging ADP securities as
collateral for a loan.
-
No repricing of underwater stock
options:
We do not lower the exercise price
of any outstanding stock options.
-
No discount
stock options:
The exercise price of our
stock options is not less than 100% of the fair market value of our common
stock on the date of grant.
-
No IRC Section 280G or 409A tax
gross-ups:
We do not provide tax gross-ups
under our change in control provisions.
Fiscal Year 2013 Executive Compensation
Highlights
For fiscal
year 2013, we maintained annual cash bonus targets at fiscal year 2012 levels
and increased the base salary of each named executive officer by an average of
4.1%, except for Mr. Siegmund, who was promoted to chief financial officer in
November 2012, and for Mr. OBrien, who was hired in April 2012. The design and
targeted mix of our performance-based restricted stock (PBRS) and stock option
programs remained unchanged from fiscal year 2012, however the vesting period
for PBRS grants that applies after the conclusion of the 12-month performance
period was extended to 12 months from 6 months. A summary of fiscal year 2013
total direct compensation for our named executive officers (with the exception
of Mr. Reidy, who ceased to be an officer of the company effective on November
2, 2012 and separated from the company on January 2, 2013) is set forth in the
following table, and additional detail is presented in the subsequent discussion
as well as the tables and narratives that follow this CD&A:
|
Name
|
|
Base Salary
|
|
|
Annual Bonus
|
|
|
PBRS
2
|
|
|
Stock Options
2
|
|
|
Total
|
|
|
Mr.
Rodriguez
|
|
$
|
850,000
|
|
|
|
$
|
1,437,520
|
|
|
|
$
|
2,223,135
|
|
|
$
|
1,396,440
|
|
|
|
$
|
5,907,095
|
|
|
Mr.
Siegmund
|
|
$
|
525,000
|
1
|
|
|
$
|
484,680
|
|
|
|
$
|
428,625
|
|
|
$
|
215,500
|
|
|
|
$
|
1,653,805
|
|
|
Ms.
Lee
|
|
$
|
516,254
|
|
|
|
$
|
416,720
|
|
|
|
$
|
685,800
|
|
|
$
|
215,500
|
|
|
|
$
|
1,834,274
|
|
|
Mr.
Anenen
|
|
$
|
462,376
|
|
|
|
$
|
332,726
|
|
|
|
$
|
514,350
|
|
|
$
|
155,160
|
|
|
|
$
|
1,464,612
|
|
|
Mr.
OBrien
|
|
$
|
475,000
|
|
|
|
$
|
351,453
|
|
|
|
$
|
485,775
|
|
|
$
|
155,160
|
|
|
|
$
|
1,467,388
|
|
____________________
1
|
|
Mr. Siegmunds salary reflects his base salary in effect after his
promotion to chief financial officer in November 2012.
|
|
|
|
2
|
|
Equity amounts are the grant date fair values for the fiscal year
2013 equity awards, which are the same amounts disclosed in the Summary
Compensation Table for Fiscal Year 2013 on page 35 of this proxy
statement.
|
Looking Forward
In fiscal year 2014, we will introduce a performance stock unit program
based on financial objectives that are measured over a three-year performance
period consisting of three one-year earnings per share performance goals. This
new three-year program will replace our current PBRS program. The fiscal 2014
target award opportunity under the new three-year stock unit program will be
earned and issued in fiscal 2017 based on earnings per share
22
performance goals for fiscal years
2014, 2015 and 2016, creating a gap in the annual vesting schedule under our
current PBRS program in fiscal 2016. We will address this gap with a transition
grant award opportunity under our current PBRS program in fiscal 2014, which
will vest in September of fiscal 2016 in accordance with the current program,
thereby avoiding possible retention risk in the absence of the vesting
opportunity in fiscal 2016. We believe the new three-year program will help
drive the companys longer term financial goals by tying a substantial portion
of the total compensation opportunity to multi-year performance, and better
promote talent retention by lengthening the performance period. For a
description of our current PBRS program see
Performance-Based Restricted Stock
on
page 30 of this proxy statement.
Compensation
Principles
We believe
that compensation should be designed to create a direct link between performance
and stockholder value. Five principles that guide our decisions involving
executive compensation are that compensation should be:
-
based on (i) the overall performance of the
company, (ii) the performance of such executives business
unit, and (iii) each executives individual
performance;
-
closely aligned with the short-term and long-term
financial and strategic objectives that build sustainable
long-term stockholder value;
-
competitive, in order to attract and retain
executives critical to our long-term success;
-
consistent with high standards of corporate
governance and best practices; and
-
designed to discourage the incentive for
executives to take excessive risks or to behave in ways that are
inconsistent with the companys strategic planning processes
and high ethical standards.
Our compensation programs are designed so that target pay reflects
relative levels of responsibility among our key executives, and such that the
proportion of pay tied to operating performance and changes in shareholder value
varies directly with the level of responsibility and accountability to
shareholders. We assign all executives to pay grades by comparing their
position-specific duties and responsibilities with market data and our internal
management structure. Each pay grade has a base salary range and a total annual
cash compensation range, as well as ranges for annual equity grants. Executives
are positioned within these ranges based on a variety of factors, most notably
their experience and skill set and their performance over time.
We design our performance-based compensation so that actual, realized
compensation will vary relative to the target award opportunity based on
performance. As such, actual compensation amounts may vary above or below
targeted levels depending on performance of a business unit and achievement of
individual performance goals. We have adopted this compensation design to
provide meaningful incentives for our key executives to achieve excellent
results. We also believe that it is important for our executive officers to have
an ongoing long-term investment in the company as outlined on page 33 of this
proxy statement under Stock Ownership Guidelines.
Growth in revenue and operating income are important performance measures
in annual cash bonus determinations, and earnings per share growth is used to
determine the number of shares earned in a performance period under our
performance-based restricted stock program. These performance criteria were
chosen for the variable incentive plans because they focus our executive
officers on the companys long-term strategic goals of increasing the growth and
profitability of our business, which are the key drivers of sustainable
increases in stockholder value. The earnings per share measurement we use is
diluted earnings per share from continuing operations.
23
Elements
of Compensation
The following table summarizes the major elements of our fiscal year 2013
executive officer compensation programs.
Compensation
Element
|
Objectives
|
Key
Characteristics
|
Base Salary
|
To provide a fixed amount for
performing the duties and responsibilities of the position
|
Determined based on overall
performance, level of responsibility, pay grade, competitive compensation
data and comparison to other company executives
|
Annual Cash Bonus
|
To motivate executive officers to
achieve individual, business unit and company-wide business
goals
|
Payment based on achievement of
target individual, business unit and company-wide business
goals
|
Performance-Based Restricted
Stock Awards
|
To motivate executive officers to
achieve certain longer-term goals and create long-term alignment with
stockholders
|
-
Awards based on target growth in
earnings per share
-
Shares issued following applicable
performance period, subject to an
additional vesting period
|
Stock Options
|
To align the interests of
executive officers with long-term stockholders interests and ensure that
realized compensation occurs only when there is a corresponding increase
in stockholder value
|
-
Granted annually based on pay
grades and individual performance
-
Grants vest over four years
|
Consistent
with our pay for performance philosophy, our named executive officers
compensation is structured with a significant portion of their total
compensation at risk and paid based on the performance of the company and the
applicable business unit. Excluding Mr. Reidys fiscal year 2013 compensation,
the mix of total direct compensation (base salary, cash bonus and long-term
incentive awards) for fiscal year 2013 was designed to deliver the following
approximate proportions of total compensation to Mr. Rodriguez, our chief
executive officer, and the other named executive officers (on average) if
company and individual target levels of performance are achieved. Mr.
Rodriguezs higher portion of at-risk compensation reflects his greater
responsibility for overall company performance.
24
Compensation Consultant
The compensation committee has engaged Cook & Co. to provide
assistance with the design of our compensation programs, the development of
comparative market-based compensation data for the chief executive officer
position and the determination of the chief executive officers target
compensation awards. The specific matters on which Cook & Co. provided
advice in fiscal year 2013 were the design of executive compensation programs
and practices, including the changes to long-term incentives, and chief
executive officer pay levels. In June 2012, Cook & Co. delivered to our
compensation committee the results of a competitive assessment of compensation
for use in determining fiscal year 2013 target compensation for Mr. Rodriguez.
Cook & Co. also examined the mix of proposed performance-based restricted
stock awards and stock option grants for our named executive officers in fiscal
year 2013 and confirmed that the proposals for the named executive officers
appeared reasonable and customary, given the companys size and
structure.
As part of its ongoing support to the compensation committee, Cook &
Co. also reviews executive compensation disclosures (including this Compensation
Discussion and Analysis), reviews and provides comments on changes to the
committees charter, advises on emerging trends and the implications of
regulatory and governance developments, and reviews and provides commentary on
materials and proposals prepared by management that are presented at the
committees meetings.
The compensation committee determined that the work of Cook & Co. did
not raise any conflicts of interest in fiscal 2013. In making this assessment,
the compensation committee considered the independence factors enumerated in
Rule 10C-1(b) under the Securities Exchange Act of 1934 and applicable NASDAQ
listing standards, including the fact that Cook & Co. does not provide any
other services to the company, the level of fees received from the company as a
percentage of Cook & Co.s total revenue, policies and procedures employed
by Cook & Co. to prevent conflicts of interest, and whether the individual
Cook & Co. advisers to the compensation committee own any stock of the
company or have any business or personal relationships with members of the
compensation committee or our executive officers.
Compensation Review and
Determination
Our annual pay review focuses on base salary, annual cash bonus and
long-term equity incentives. In determining the compensation of our named
executive officers, we consider the type of business we are in and the nature of
our organization. The compensation committee also considers market data provided
by their independent compensation consultant and by management. The compensation
committee examines summary compensation sheets detailing the amounts and mix of
base salary, cash bonus, and equity grants for each of our named executive
officers, which compare the amounts and mix to competitive compensation
practices. We generally target base salary, annual cash bonus and long-term
equity incentives at the median of competitive compensation levels, but we will
set targets above or below the median when warranted in the discretion of the
compensation committee. The degree to which target
compensation ranges above or below
the median competitive rate is primarily based on each executives skill set and
experience relative to market peers. Executives who are new in their roles and
therefore less experienced than market peers are typically positioned lower in
the range, whereas executives with long tenure in their role may be positioned
higher in the range.
We consult different sets of compensation data reflecting the levels and
practices of different groups of businesses to determine competitive
compensation levels for our chief executive officer and other named executive
officers.
Chief Executive Officer.
In
benchmarking Mr. Rodriguezs compensation, the compensation committee at its
June 2012 meeting, reviewed the market compensation data from all U.S. public
companies with annual revenue between $8 billion and $14 billion based on
results as of April 30, 2012 (97 companies), which we believe is representative
of the competitive environment we face with respect to senior executives.
Utility companies were excluded because of the regulatory environment in which
they operate. The median base salary, median target cash compensation and median
target direct compensation (total cash plus long-term incentive compensation) of
the comparison companies was $1,050,000, $2,686,000 and $8,553,000,
respectively.
25
For fiscal
year 2013, Mr. Rodriguezs base salary was at the 8
th
percentile, his
target cash compensation was at the 19
th
percentile and his target
direct compensation was at the 23
th
percentile of the compensation of
the chief executive officers of the comparison companies.
Other Named Executive Officers
.
With respect to the total cash and long-term incentive compensation for Ms. Lee
and Messrs. Siegmund, Anenen, OBrien and Reidy, management provided the
compensation committee with competitive compensation market data based on
compensation surveys reflecting the pay practices of publicly traded companies.
The surveys used were the Towers Watson
®
U.S. General Industry
Executive Database, the Hewitt Associates
®
Executive Total
Compensation by Industry Survey, the Mercer Human Resources U.S. General
Industry Executive Database and, for Messrs. Siegmund, OBrien and Reidy, the
Equilar Inc.
®
Top 25 Database. The number of companies included in
the surveys ranged from 49 to 129. The companies included for Messrs. Siegmund,
OBrien and Reidy were based on a revenue range such that the median company
revenue approximates the annual revenue of ADP. The companies included for Ms.
Lee and Mr. Anenen were based on a revenue range such that the median company
revenue approximates the annual revenue of the business units that the executive
officer leads.
Differences in Compensation of Our Named Executive
Officers
We carefully designed the pay mix for our chief executive officer to be
competitive when measured against the pay packages of other chief executive
officers as indicated by the compensation study.
We have found that due to the broad responsibilities and the experience
required for the chief executive officer position, compensation for chief
executive officers in public companies that are similar in size to ours is
significantly higher than those for other named executive officers.
When determining the compensation level for each of our executive
officers, the compensation committee reviews each individual compensation
element based on the previous years level, as well as how the proposed level
for that individual element would compare to the other executive officers. The
aggregate level for each executive officers compensation is then compared
against the executives previous years totals and against compensation of other
executive officers of the company.
Cash Compensation
Base Salary
Base salaries are a fixed amount paid to each executive for performing
his or her normal duties and responsibilities. We determine the amount based on
the executives overall performance, level of responsibility, pay grade,
competitive compensation practices data and comparison to other company
executives. Based on these criteria, our named executive officers received the
following annual salary increases in fiscal year 2013 (Mr. OBrien did not
receive a salary increase for fiscal year 2013 because he was hired in April
2012):
Named
Executive Officer
|
|
FY12 Salary
|
|
Increase
|
|
FY13 Salary
|
Mr. Rodriguez
|
|
|
$
|
800,000
|
|
|
6.3
|
%
|
|
|
$
|
850,000
|
|
Mr. Siegmund
|
|
|
$
|
415,000
|
|
|
26.5
|
%
|
|
|
$
|
525,000
|
|
Ms. Lee
|
|
|
$
|
500,000
|
|
|
3.3
|
%
|
|
|
$
|
516,254
|
|
Mr. Anenen
|
|
|
$
|
450,000
|
|
|
2.8
|
%
|
|
|
$
|
462,376
|
|
Mr. OBrien
|
|
|
$
|
475,000
|
|
|
0.0
|
%
|
|
|
$
|
475,000
|
|
Mr. Reidy
|
|
|
$
|
560,000
|
|
|
2.0
|
%
|
|
|
$
|
571,202
|
|
Salary increases for the named executive officers were made effective
July 1, 2012, the first day of the 2013 fiscal year. In addition to the 3%
salary increase Mr. Siegmund received effective July 2012, the compensation
committee decided to increase Mr. Siegmunds salary in November 2012 by
approximately an additional 23% in connection with his promotion to chief
financial officer. In determining the amount of such increase, the compensation
committee considered the recommendations of Cook & Co. and the increased
responsibilities assumed by Mr. Siegmund as a result of his
promotion.
26
Annual
Cash Bonus
Overview
We paid our named executive officers cash bonuses for fiscal year 2013
based on the attainment of individual, business unit and company-wide business
goals established at the beginning of the fiscal year.
For each executive officer, we establish a target bonus amount, which is
initially expressed as a percentage of projected year-end annual base salary.
This target bonus percentage ranges from 70% to 160% of base salary for the
named executive officers. We also assign a percentage value to each bonus
component of each named executive officers annual cash bonus plan and then
determine the target bonus amount linked to each component. We establish these
performance ranges to provide our named executive officers with a strong
incentive to exceed the targets. The maximum bonus payment to our chief
executive officer is 200% of his target bonus level. All other named executive
officers have a maximum bonus payment of 175% of their respective target bonus
levels. There is no minimum payment level.
The compensation committee establishes and approves the annual target
bonus objectives and award opportunities for each of our named executive
officers. In making these determinations, the compensation committee considers a
variety of factors including market data, each officers relative level of
responsibility, and the chief executive officers recommendations for executives
other than himself. Our named executive officers participate in the discussions
surrounding their bonus objectives so that they can provide their input and
understand the expectations of each bonus plan component. Each named executive
officer receives a final version of his or her individualized bonus plan after
it has been approved by the compensation committee. Except in extraordinary
circumstances, bonus objectives are not modified during the fiscal year, and no
bonus objectives were modified during fiscal year 2013.
The compensation committee reviews the performance of each of our named
executive officers relative to his or her annual fiscal year target bonus plan
objectives at its regularly scheduled August meeting, which is the first meeting
following the end of our fiscal year. Based on this review, the compensation
committee determines and approves the annual cash bonuses for each of our
executive officers.
Named Executive Officers Fiscal Year 2013 Bonuses
Fiscal year 2013 target bonuses for the named executive officers were the
same in percentage terms as in fiscal year 2012, except for Mr. Siegmunds bonus
target, which increased from 70% of base salary to 80%, due to his promotion.
Following the conclusion of fiscal year 2013, the compensation committee
considered the performance of the company, the business units and the individual
named executive officers for the 2013 fiscal year against the named executive
officers bonus objectives, assessed which of the individual bonus targets were
met, exceeded or not fully achieved and approved cash bonuses as
follows:
|
|
Target Bonus as %
|
|
Target Bonus
|
|
Maximum Bonus as
|
|
Actual Bonus
|
|
Bonus Amount as
|
Named Executive Officer
|
|
|
of Base Salary
|
|
Amount
|
|
% of Target
|
|
Amount
|
|
% of Target
|
Mr.
Rodriguez
|
|
|
160%
|
|
|
|
$
|
1,360,000
|
|
|
|
200%
|
|
|
|
$
|
1,437,520
|
|
|
|
105.7%
|
|
Mr. Siegmund
|
|
|
80%
|
|
|
|
$
|
420,000
|
|
|
|
175%
|
|
|
|
$
|
484,680
|
|
|
|
115.4%
|
|
Ms.
Lee
|
|
|
80%
|
|
|
|
$
|
413,000
|
|
|
|
175%
|
|
|
|
$
|
416,720
|
|
|
|
100.9%
|
|
Mr. Anenen
|
|
|
70%
|
|
|
|
$
|
323,700
|
|
|
|
175%
|
|
|
|
$
|
332,726
|
|
|
|
102.8%
|
|
Mr.
OBrien
|
|
|
70%
|
|
|
|
$
|
332,500
|
|
|
|
175%
|
|
|
|
$
|
351,453
|
|
|
|
105.7%
|
|
In addition, per his employment agreement, Mr. Reidy was paid an amount
equal to his fiscal year 2013 cash bonus at 100% of his target in connection
with his separation from the company.
27
Fiscal Year 2013 Target Bonus
Objectives
Each objective for our named
executive officers was satisfied as set forth below:
|
Mr. Rodriguez
|
Mr. Siegmund
|
Ms. Lee
|
Mr. Anenen
|
Mr. OBrien
|
Bonus Objectives
|
Target
Weight
|
Payout
as %
of
Target
|
Target
Weight
|
Payout
as %
of
Target
|
Target
Weight
|
Payout
as %
of
Target
|
Target
Weight
|
Payout
as %
of
Target
|
Target
Weight
|
Payout
as %
of
Target
|
Revenue Growth
|
20.0%
|
102.8%
|
15.0%
|
102.8%
|
15.0%
|
102.8%
|
15.0%
|
102.8%
|
20.0%
|
102.8%
|
Operating Income
Growth
|
20.0%
|
96.4%
|
20.0%
|
96.4%
|
20.0%
|
96.4%
|
20.0%
|
96.4%
|
20.0%
|
96.4%
|
Sales Growth
|
20.0%
|
138.6%
|
15.0%
|
138.6%
|
15.0%
|
138.6%
|
-
|
-
|
20.0%
|
138.6%
|
Division Financial
Performance
|
-
|
-
|
20.0%
|
156.5%
|
20.0%
|
84.0%
|
35.0%
|
100.9%
|
-
|
-
|
Strategic Objectives
|
40.0%
|
95.3%
|
30.0%
|
95.3%
|
30.0%
|
95.3%
|
30.0%
|
109.3%
|
40.0%
|
95.3%
|
The bonus objectives were designed
to reward achievement of goals that are aligned with the key components of our
operational and strategic success, the degree to which the named executive
officers have responsibility over overall company performance or individual
division results, and to provide a set of common objectives that facilitate
collaborative engagement. The compensation committee established the following
financial goals for our named executive officers:
Revenue Growth
: 7% as a target objective, 200% of target was to be awarded
for revenue growth of 11% or greater, and 0% of target was to be awarded for
revenue growth below 2.5%.
Operating
Income
: 4.5% as a target objective, 200% of
target was to be awarded for operating income growth of 8.5% or greater, and 0%
of target was to be awarded for negative operating income growth.
Sales Growth (ES
Worldwide)
: 9% for as a target objective,
200% of target was to be awarded for sales growth of 13% or greater, and 0% of
target was to be awarded for negative sales growth. This objective is not
included in Mr. Anenens bonus plan.
Division Financial Performance:
Successfully achieve net operating income,
client retention and, in the case of Mr. Anenen, sales, equal to their
respective divisions target results for fiscal year 2013.
Strategic
Objectives:
-
Increase percent of new product R&D spend as a
percent of total R&D.
-
Complete platform migration and rationalizations
planned for fiscal year 2013.
-
Improve market share gains against key
competitors.
-
Establish a business process improvement
program.
-
Achieve at least 1% of plan revenue through
strategic acquisitions and pursue strategic divestitures.
-
Solidify leadership team and build talent
pipeline. Build a solid succession plan for senior leadership
team. Continue to drive improvement in diversity. Achieve
positive improvement to associate
engagement
scores.
Long-Term Incentive Compensation
Programs
We believe that long-term incentive
compensation is a significant factor in attracting and retaining key executives
and in aligning their interests directly with the interests of our stockholders.
For fiscal year 2013, long-term incentives are awarded in the form of
performance-based restricted stock awards and stock option grants. The
compensation committee selected these awards because they ensure that the
overall long-term incentive program is closely tied to changes in stockholder
value and the degree to which critical operating objectives are attained, and
support our talent retention objectives.
28
Based on a long-term incentive
compensation study conducted with the assistance of Cook & Co., we
rebalanced the weighting of performance-based restricted stock awards and stock
option grants. As a result, for all of our named executive officers except our
chief executive officer, we target a long-term incentive compensation mix of 70%
performance-based restricted stock and 30% stock options. For fiscal year 2013,
the compensation committee approved a long-term incentive mix for the chief
executive officer of 60% performance-based restricted stock and 40% stock
options. The compensation committee believes that this incentive mix is
appropriate for the chief executive officer because of his greater role in
driving long-term stockholder value creation.
The compensation committee may also
from time to time grant discretionary awards of time-based restricted stock to
our executive officers. These awards are for special situations and are not
considered in the target allocation of total long-term incentive compensation
between performance-based restricted stock awards and stock option grants. No
such awards were made to our executive officers in fiscal year 2013.
The target long-term incentive mix
approved for fiscal year 2013 grants is shown in the following chart:
As part of our annual market
analysis of compensation data, we compare our long-term equity incentive grant
values with competitive levels. We establish share grant target amounts or
ranges of target amounts for each executive level by setting such target
amounts, and the midpoints of such ranges of target amounts, at the market
median levels. The compensation committee reviews the share grant targets and
target ranges annually to ensure that the resulting awards based on current
stock price and option fair value remain generally consistent with our median
compensation philosophy.
Prior to the beginning of each
fiscal year, we analyze the target performance-based restricted stock award and
stock option grant levels to confirm that our desired target long-term incentive
compensation values are appropriate in the context of the compensation studies
referred to under Compensation Review and Determination above. When comparing
our desired values to these compensation studies, we look at both equity
elements in total.
At its August 2012 meeting, the
compensation committee approved target awards of one-year performance-based
restricted stock for fiscal year 2013 for all named executive officers. At its
January 2013 meeting, the compensation committee approved stock option grants
for the named executive officers for fiscal year 2013. Performance-based
restricted stock awards (at target) and stock option grants for fiscal year 2013
are summarized in the table below:
Named
Executive Officer
|
|
|
Target PBRS Award
|
|
Stock Options
|
Mr. Rodriguez
|
|
|
38,900
|
|
|
|
162,000
|
|
Mr. Siegmund
|
|
|
7,500
|
|
|
|
25,000
|
|
Ms. Lee
|
|
|
12,000
|
|
|
|
25,000
|
|
Mr. Anenen
|
|
|
9,000
|
|
|
|
18,000
|
|
Mr. OBrien
|
|
|
8,500
|
|
|
|
18,000
|
|
Mr. Reidy
|
|
|
13,000
|
|
|
|
0
|
|
29
Mr. Reidy separated from the company
before the fiscal year 2013 stock options were granted. Mr. Rodriguezs
employment agreement affects his long-term incentive compensation. Mr.
Rodriguezs employment agreement is summarized in more detail below under Mr.
Rodriguezs Employment Agreement. Mr. Reidys separation agreement, which he
entered into in connection with his separation from the company, governs his
long-term incentive compensation granted prior to his separation. Mr. Reidys
separation agreement is summarized in more detail below under Mr. Reidys
Separation Agreement.
Performance-Based
Restricted Stock
We use a performance-based
restricted stock program, in which vesting occurs over a multi-year period, to
align the compensation of our key executives with long-term company operating
performance, create commonality of interest between executives and shareholders,
and to support talent retention objectives. We typically communicate to our
executive officers (including the named executive officers) in the first quarter
of each fiscal year the target number of shares of restricted stock subject to a
performance-based restricted stock award if we achieve 100% of the designated
performance objective. After the conclusion of the one-year performance period,
the compensation committee determines the extent to which the performance
objective was achieved, and the applicable percentage of the number of target
shares, if any, that have been earned. The earned shares are typically issued in
the following September (i.e., September 2013 in respect of fiscal year 2013
performance) in the form of restricted stock, which is subject to time-based
vesting. The fiscal year 2013 performance-based restricted stock program
requires a one-year vesting period.
In August 2012 we established that
earnings per share growth for fiscal year 2013 of more than 5% would be required
to receive the awards at the target level, and the awards would be adjusted
upward or downward at the end of the performance period as follows:
Earnings Per Share Growth
|
|
Restricted Stock Grant
as
Percentage of Target
|
0%
or under
|
|
0%
|
|
>0% to 1%
|
|
50%
|
|
>1% to 3%
|
|
75%
|
|
>3% to 5%
|
|
85%
|
|
>5% to 7%
|
|
100%
|
|
>7% to 9%
|
|
115%
|
|
>9% to 11%
|
|
125%
|
|
Over 11%
|
|
150%
|
|
Our earnings per share growth for
fiscal year 2013 was 6.3%, resulting in awards of restricted stock at 100% of
target level. These shares of restricted stock were issued in September 2013 and
will vest fully in September 2014, subject to the executives continued
employment with the company through the vesting date. Dividends are paid only
with respect to shares of restricted stock that have been issued.
Stock
Options
We grant stock options to our
executive officers based upon their pay grades (other than our chief executive
officer). Stock options generally vest over four years. The grant level for each
pay grade is determined based on our annual review of our long-term incentive
compensation program. Our chief executive officer recommends to the compensation
committee the number of stock options for our executive officers, other than
himself. The compensation committee determined and approved stock option grants
for our chief executive officer as part of a review of his entire compensation
package based on the guidance of its independent compensation consultant, Cook
& Co. The grant levels approved by the compensation committee for fiscal
year 2013 were consistent with the grant levels approved for fiscal year 2012,
with the exception of Mr. Siegmund (who received more stock options to reflect
his promotion to chief financial officer) and Mr. Rodriguez (who received fewer
stock options in fiscal year 2013 because he had received in fiscal year 2012 a
special, one-time stock option award in connection with his promotion to chief
executive officer).
30
While the compensation committee can
consider a stock option grant at any time for our executive officers, it makes
its regularly scheduled stock option grants at its first meeting in January of
each calendar year. The compensation committee generally sets its calendar of
meetings in August of each year and we do not coordinate the January meeting
date, or any other meeting dates, with any regularly scheduled announcement or
corporate event. Additional stock option grants may be made to assist us in
recruiting, promoting or retaining executive officers.
Time-Based Restricted
Stock
The compensation committee may from
time to time grant discretionary awards of time-based restricted stock to our
executive officers. These discretionary grants assist us in the recruitment,
promotion or retention of executive officers. Our named executive officers did
not receive any time-based restricted stock grants in fiscal year
2013.
Other Compensation Components and
Considerations
In addition to the compensation
components discussed above and the opportunity to participate in the same
Employees Savings-Stock Purchase Plan and the same health and welfare benefits
available to our U.S. associates generally, we offer our executive officers
retirement benefits, deferred compensation, limited perquisites and change in
control protection. We believe these additional benefits are fair, competitive,
consistent with our overall compensation philosophy and designed to ensure that
we can effectively retain our executive officers as well as effectively compete
for executive talent.
Retirement
Benefits
All executive officers can
participate in the Automatic Data Processing, Inc. Retirement and Savings Plan
(our 401(k) plan) and are automatically enrolled in the Automatic Data
Processing, Inc. Pension Retirement Plan (a tax-qualified, defined benefit, cash
balance pension plan). These plans are generally available to all U.S.
associates. Executive officers also participate in the Supplemental Officers
Retirement Plan, which provides retirement benefits to our executive officers in
excess of those generally available under our qualified cash balance pension
plan. The Supplemental Officers Retirement Plan enables us to attract and retain
experienced senior executive talent necessary to achieve growth by providing for
their financial security following their retirement, and provides these
executive officers with a retirement benefit targeted to a competitive income
replacement ratio at normal retirement age.
Deferred
Compensation
All executive officers may defer all
or a portion of their annual cash bonuses and/or performance-based restricted
stock awards into a deferred compensation account. We make this program
available to our executive officers to be competitive, to facilitate the
recruitment of new executives and to provide our executive officers with a tax
efficient way to save for retirement. The company does not match deferrals by
its named executive officers or otherwise contribute any amounts to the named
executive officers deferred compensation amounts. Since the deferral accounts
are made up of funds already earned by the executive officers, we do not
consider the executives deferred account balances, or investment earnings or
losses on such balances, when we make compensation decisions.
Perquisites
We provide each of our executive
officers the use of automobiles leased by the company. Consistent with our
policy towards all attendees, we pay for the spouses of our executive officers
to accompany them to our annual sales Presidents Club events. In addition, the
ADP Foundation makes contributions that match the charitable gifts made by our
executive officers up to a maximum of $20,000 per calendar year. Finally,
company policy permits Mr. Rodriguez to occasionally use the companys aircraft
for personal travel in order to maximize his business availability and
productivity, provided that he reimburses the company for the aggregate
incremental cost incurred by the company in connection with any such personal
use.
We did not make any tax gross-up
payments to our named executive officers in fiscal year 2013, except for
payments related to relocation expenses, which are available to all U.S.
associates who participate in the companys relocation program.
31
Change in Control and
Severance Arrangements
The Automatic Data Processing, Inc.
Change in Control Severance Plan for Corporate Officers is designed (i) to
retain our corporate officers (including the named executive officers) and our
staff vice presidents and (ii) to align their interests with our stockholders
interests so that they can consider transactions that are in the best interests
of our stockholders and maintain their focus without concern regarding how any
such transaction might personally affect them. In addition, Mr. Rodriguezs
employment agreement, which was entered into in December 2011, contains
provisions related to severance and change in control as described below under
Potential Payments To Named Executive Officers Upon Termination or Change of
Control.
Under our Change in Control
Severance Plan for Corporate Officers (described below under Potential Payments
To Named Executive Officers Upon Termination or Change of Control), our
executive officers have separation entitlements that differ from one another.
Mr. Rodriguez is entitled to severance equal to approximately one and one-half
to two times base salary and bonus upon termination of employment without cause
or with good reason, while our other named executive officers are entitled to
severance equal to approximately one to one and one-half times base salary and
bonus. We believe that a higher severance multiple for our chief executive
officer is needed in order to attract the individual we believe is best suited
for the office. Our chief executive officer is the individual the public and our
stockholders most closely identify as the face of the company. He has the
greatest individual impact on our success, and he faces the greatest personal
risks when the company takes risks. Our Change in Control Severance Plan for
Corporate Officers also provides that the vesting of certain unvested equity
awards may be accelerated under some termination scenarios based on a double
trigger in which payments of cash and vesting of equity awards occur only if
termination of employment without cause or with good reason occurs during the
3-year period after a change in control.
The severance formulas we use for
executive officers are each designed to provide the level of temporary
replacement income we feel is appropriate for that office, but the compensation
our executive officers may receive after termination of employment or a change
in control is not taken into account when current compensation levels are
determined.
Accounting and Tax
Considerations
We consider accounting and tax
implications when we design our equity-based and cash compensation programs and
when we make awards or grants. In particular, Section 162(m) of the Internal
Revenue Code generally disallows a tax deduction to public companies for
compensation over $1,000,000 paid to covered employees (which are defined as
our named executive officers, other than the chief financial officer). However,
qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met. We strive to make only those equity-based
awards and grants that qualify as performance-based compensation or that we
otherwise can deduct when determining our corporate taxes. However, the
overriding consideration when evaluating the pay level or design component of
any portion of our executives compensation is the effectiveness of the
component and the stockholder value that management and the compensation
committee believe the pay component reinforces. The compensation committee may,
however, award compensation that is not deductible under Section 162(m) when, in
the exercise of the committees judgment, it would be in the best interests of
the company and its stockholders to do so. Compensation attributable to the
vesting of time-based restricted stock does not qualify as performance-based
compensation, and therefore may not be deductible to the extent it results in
aggregate non-performance based compensation in excess of $1,000,000. With the
exception of Mr. OBrien, who received a one-time grant of 15,000 shares of
time-based restricted stock in April of 2012 in connection with being hired as
our chief human resources officer, our named executive officers have not
received any time-based restricted stock since fiscal year 2010.
Our stockholders have previously
approved incentive plans (including our 2008 Omnibus Award Plan) which are
intended to permit the company to make equity-based awards and cash bonuses that
may qualify as performance-based compensation for purposes of Section 162(m). We
are submitting the performance criteria set forth in our 2008 Omnibus Award Plan
for re-approval to ensure that the company may continue to deduct compensation
attributable to awards granted under the plan.
See
Re-approval of the
Performance-Based Provisions of the 2008 Omnibus Award Plan on page 62 of this
proxy statement.
32
Compensation Recovery
(Clawback)
Our stock option and restricted
stock award agreements pursuant to our 2008 Omnibus Award Plan permit the
compensation committee to cause a recipients award to be forfeited, and to
require the recipient to pay to us any option gain and/or the value of vested
restricted stock, as applicable, if the recipient engages in activity that is in
conflict with or adverse to our interests, including but not limited to fraud or
conduct contributing to any financial restatements or irregularities, or if the
recipient violates a restrictive covenant.
Stock Ownership
Guidelines
The compensation committee has
established stock ownership guidelines to encourage equity ownership by our
executive officers in order to reinforce the link between their financial
interests and those of our stockholders. We set the stock ownership guidelines
on the basis of each executive officers pay grade, expressed as a multiple of
the executive officers base salary on the first day of the fiscal year. Stock
ownership (as defined under the guidelines) consists of stock owned outright by
the executive officer or beneficially through ownership by direct family members
(spouses and/or dependent children), or stock owned through our Retirement and
Savings Plan.
Under our stock ownership
guidelines, Mr. Rodriguez is expected to own an amount of our stock equal in
value to six times his base salary and Ms. Lee and Messrs. Siegmund, Anenen and
OBrien are expected to own an amount of our stock equal in value to three times
their respective base salaries. Executive officers whose ownership levels are
below the minimum required levels are required to retain as shares of common
stock at least 75% of post-tax net gains on stock option exercises, and 75% of
shares (net of taxes) received upon vesting of restricted stock. As of the end
of fiscal year 2013, all named executive officers met the stock ownership
guidelines, with the exception of Mr. OBrien, who was hired in April
2012.
33
COMPENSATION COMMITTEE
REPORT
The compensation committee has
reviewed and discussed with management the foregoing Compensation Discussion and
Analysis section of the companys 2013 proxy statement. Based on its review and
discussions with management, the compensation committee recommended to the board
of directors that the Compensation Discussion and Analysis be included in the
companys 2013 proxy statement.
Compensation Committee
of the
Board of Directors
|
|
Gregory D. Brenneman,
Chairman
|
Richard T. Clark
|
R. Glenn Hubbard
|
John P. Jones
|
Gregory L.
Summe
|
34
COMPENSATION OF EXECUTIVE
OFFICERS
The following table summarizes the
compensation of our named executive officers for fiscal year 2013.
SUMMARY COMPENSATION TABLE FOR FISCAL
YEAR 2013
Name and
Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)(4)
|
|
Option
Awards
($)(4)
|
|
Non-Equity
Incentive
Plan
Compensation
($)(5)
|
|
Change in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(6)
|
|
All
Other
Compensation
($)(7)
|
|
Total
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
Carlos A.
Rodriguez
|
|
2013
|
|
$
|
850,000
|
|
|
$
|
0
|
|
|
$
|
2,223,135
|
|
$
|
1,396,440
|
|
|
$
|
1,437,520
|
|
|
|
$
|
379,644
|
|
|
|
$
|
51,016
|
|
|
$
|
6,337,755
|
President and
Chief
|
|
2012
|
|
$
|
729,744
|
|
|
$
|
0
|
|
|
$
|
926,200
|
|
$
|
1,673,900
|
|
|
$
|
1,452,400
|
|
|
|
$
|
636,696
|
|
|
|
$
|
50,482
|
|
|
$
|
5,469,422
|
Executive
Officer
|
|
2011
|
|
$
|
500,000
|
|
|
$
|
0
|
|
|
$
|
487,200
|
|
$
|
170,800
|
|
|
$
|
573,800
|
|
|
|
$
|
155,660
|
|
|
|
$
|
41,620
|
|
|
$
|
1,929,080
|
|
Jan Siegmund
|
|
2013
|
|
$
|
492,484
|
|
|
$
|
0
|
|
|
$
|
428,625
|
|
$
|
215,500
|
|
|
$
|
484,680
|
|
|
|
$
|
43,364
|
|
|
|
$
|
27,743
|
|
|
$
|
1,692,396
|
Chief
Financial
|
|
2012
|
|
$
|
415,001
|
|
|
$
|
0
|
|
|
$
|
347,325
|
|
$
|
132,150
|
|
|
$
|
358,500
|
|
|
|
$
|
379,772
|
|
|
|
$
|
32,997
|
|
|
$
|
1,665,745
|
Officer(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regina R. Lee
|
|
2013
|
|
$
|
516,254
|
|
|
$
|
0
|
|
|
$
|
685,800
|
|
$
|
215,500
|
|
|
$
|
416,720
|
|
|
|
$
|
180,371
|
|
|
|
$
|
67,578
|
|
|
$
|
2,082,223
|
Division
President
|
|
2012
|
|
$
|
500,004
|
|
|
$
|
0
|
|
|
$
|
555,720
|
|
$
|
176,200
|
|
|
$
|
468,800
|
|
|
|
$
|
729,497
|
|
|
|
$
|
80,843
|
|
|
$
|
2,511,064
|
|
|
2011
|
|
$
|
475,270
|
|
|
$
|
0
|
|
|
$
|
487,200
|
|
$
|
170,800
|
|
|
$
|
574,600
|
|
|
|
$
|
206,540
|
|
|
|
$
|
275,757
|
|
|
$
|
2,190,167
|
|
Steven J. Anenen
|
|
2013
|
|
$
|
462,376
|
|
|
$
|
0
|
|
|
$
|
514,350
|
|
$
|
155,160
|
|
|
$
|
332,726
|
|
|
|
$
|
199,410
|
|
|
|
$
|
31,957
|
|
|
$
|
1,695,979
|
Division
President
|
|
2012
|
|
$
|
450,001
|
|
|
$
|
0
|
|
|
$
|
416,790
|
|
$
|
132,150
|
|
|
$
|
373,000
|
|
|
|
$
|
980,380
|
|
|
|
$
|
32,002
|
|
|
$
|
2,384,323
|
|
|
2011
|
|
$
|
425,003
|
|
|
$
|
0
|
|
|
$
|
345,100
|
|
$
|
128,100
|
|
|
$
|
453,300
|
|
|
|
$
|
342,814
|
|
|
|
$
|
41,779
|
|
|
$
|
1,736,095
|
|
Dermot J.
OBrien
|
|
2013
|
|
$
|
475,000
|
|
|
$
|
50,000
|
(2)
|
|
$
|
485,775
|
|
$
|
155,160
|
|
|
$
|
351,453
|
|
|
|
$
|
61,508
|
|
|
|
$
|
30,887
|
|
|
$
|
1,609,783
|
Chief
Human
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resources
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher R.
Reidy
|
|
2013
|
|
$
|
289,995
|
|
|
$
|
0
|
|
|
$
|
742,950
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
4,165
|
|
|
|
$
|
1,533,800
|
|
|
$
|
2,570,910
|
Chief
Financial
|
|
2012
|
|
$
|
560,002
|
|
|
$
|
0
|
|
|
$
|
602,030
|
|
$
|
176,200
|
|
|
$
|
540,300
|
|
|
|
$
|
571,293
|
|
|
|
$
|
39,036
|
|
|
$
|
2,488,861
|
Officer(3)
|
|
2011
|
|
$
|
543,048
|
|
|
$
|
0
|
|
|
$
|
527,800
|
|
$
|
170,800
|
|
|
$
|
667,900
|
|
|
|
$
|
196,651
|
|
|
|
$
|
42,378
|
|
|
$
|
2,148,577
|
____________________
(1)
|
Mr. Siegmund became chief financial officer on November
5, 2012.
|
|
|
(2)
|
Sign on bonus Mr. OBrien received in connection with
being hired as chief human resources officer.
|
|
(3)
|
Mr. Reidy ceased to be an officer of the company
effective on November 2, 2012 and separated from the company on January 2,
2013.
|
|
(4)
|
Amounts set forth in the Stock Awards and Option Awards
columns represent the aggregate grant date fair value of awards granted in
fiscal years 2013, 2012, and 2011 computed in accordance with FASB ASC
Topic 718, disregarding estimates of forfeitures related to service-based
vesting conditions. For additional information about the assumptions used
in these calculations, see Note 10 to our audited consolidated financial
statements for the fiscal year ended June 30, 2013 included in our annual
report on Form 10-K for the fiscal year ended June 30, 2013. The amounts
shown in the Stock Awards column reflect the grant date fair value of
performance-based restricted stock based upon the probable outcome of the
performance condition as of the grant date. The maximum value of the
performance-based restricted stock awards granted in fiscal years 2013,
2012, and 2011, respectively, assuming achievement of the highest level of
performance are: Mr. Rodriguez, $3,334,703, $1,389,300, and $730,800; Mr.
Siegmund, $642,938 and $520,988; Ms. Lee, $1,028,700, $833,580, and
$730,800; Mr. Anenen, $771,525, $625,185, and $517,650; and Mr. Reidy,
$1,114,425, $903,045, and $791,700.
|
35
(5)
|
Performance-based bonuses paid
under the annual cash bonus program are shown in this column. A discussion
of our annual cash bonus program may be found in our
Compensation Discussion
and Analysis
under Cash Compensation -
Annual Cash Bonus
on page 27 of
this proxy statement.
|
|
|
(6)
|
Amounts shown reflect the
aggregate increase during the last fiscal year in the present value of the
executives benefit under our tax-qualified cash balance pension plan, the
Automatic Data Processing, Inc. Pension Retirement Plan, and our
non-qualified supplemental retirement plan, the Supplemental Officers
Retirement Plan. There were no above-market or preferential earnings on
nonqualified deferred compensation. The Pension Retirement Plan and the
Supplemental Officers Retirement Plan provide benefits in the form of a
lump sum and/or an annuity. We calculated the present value as of June 30,
2010 based on the RP-2000 white collar mortality table (projected to
2017), a 3.75% interest crediting rate for the pension plan, and a 5.25%
discount rate; the present value as of June 30, 2011 is based on the
RP-2000 white collar mortality table (projected to 2018), a 3.90% interest
crediting rate for the pension plan, and a 5.40% discount rate; the
present value as of June 30, 2012 is based on the RP-2000 white collar
mortality table (projected to 2019), a 3.25% interest crediting rate for
the pension plan, and a 3.90% discount rate; the present value as of June
30, 2013 is based on the RP-2000 white collar mortality table (projected
to 2020), a 3.25% interest crediting rate for the pension plan, and a 4.5%
discount rate.
|
|
(7)
|
Please refer to the All Other
Compensation for Fiscal Year 2013 table on page 37 of this proxy
statement for further information.
|
36
ALL OTHER COMPENSATION FOR FISCAL
YEAR 2013
Name
|
|
|
Other
Benefits
|
|
Tax
Payments
|
|
Matching
Charitable
Contributions
|
|
Separation
Payments
|
|
Total
|
|
|
(1)
|
|
(2)
|
|
(3)
|
|
(4)
|
|
|
Carlos A. Rodriguez
|
|
|
$
|
31,766
|
|
|
|
$
|
0
|
|
|
|
$
|
19,250
|
|
|
|
$
|
0
|
|
|
|
$
|
51,016
|
|
Jan Siegmund
|
|
|
$
|
16,743
|
|
|
|
$
|
0
|
|
|
|
$
|
11,000
|
|
|
|
$
|
0
|
|
|
|
$
|
27,743
|
|
Regina R. Lee
|
|
|
$
|
48,761
|
|
|
|
$
|
11,817
|
|
|
|
$
|
7,000
|
|
|
|
$
|
0
|
|
|
|
$
|
67,578
|
|
Steven J. Anenen
|
|
|
$
|
31,957
|
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
|
$
|
31,957
|
|
Dermot J. OBrien
|
|
|
$
|
22,487
|
|
|
|
$
|
0
|
|
|
|
$
|
8,400
|
|
|
|
$
|
0
|
|
|
|
$
|
30,887
|
|
Christopher R.
Reidy
|
|
|
$
|
7,208
|
|
|
|
$
|
0
|
|
|
|
$
|
1,700
|
|
|
|
$
|
1,524,892
|
|
|
|
$
|
1,533,800
|
|
____________________
(1)
|
|
Other Benefits
include:
|
|
|
|
|
|
|
|
(a)
|
|
Actual cost to the company of
leasing automobiles (and covering related maintenance, registrations and
insurance fees) used for personal travel: Mr. Rodriguez, $17,761; Mr.
Siegmund, $2,427; Ms. Lee, $18,214; Mr. Anenen, $14,710; Mr. OBrien
$17,892; and Mr. Reidy $6,745.
|
|
|
|
(b)
|
|
Amount paid by the company on
behalf of the executives and their spouses or significant others who
accompanied them in connection with travel sponsored by the company: Mr.
Rodriguez, $2,320; Mr. Siegmund, $2,860; Ms. Lee, $4,520; and Mr. Anenen,
$5,894.
|
|
|
|
(c)
|
|
Relocation expense (available to
the companys associates generally): Ms. Lee, $14,586.
|
|
|
|
(d)
|
|
Matching contributions to the
companys Retirement and Savings Plan (available to the companys
associates generally): Mr. Rodriguez, $10,605; Mr. Siegmund, $10,605; Ms.
Lee, $10,605; Mr. Anenen, $10,605; and Mr. OBrien, $3,825.
|
|
|
|
(e)
|
|
Life insurance and accidental
death and dismemberment premiums paid by the company (available to the
companys associates generally): Mr. Rodriguez, $1,080; Mr. Siegmund $851;
Ms. Lee, $836; Mr. Anenen, $748; Mr. OBrien, $770; and Mr. Reidy,
$463.
|
|
|
|
(f)
|
|
Other benefits include occasional
personal travel on the companys aircraft by Mr. Rodriguez and his
immediate family. Mr. Rodriguezs immediate family may also occasionally
accompany him on the companys aircraft when he is traveling on company
business. Pursuant to company policy, Mr. Rodriguez reimbursed the company
for the amount of aggregate incremental cost incurred by the company in
connection with any such personal use. Incremental cost is calculated by
multiplying the personal flight time, including empty aircraft positioning
time, by the aircrafts hourly variable operating cost. Variable operating
cost includes maintenance, fuel, cleaning, landing fees, flight fees,
catering, and crew traveling expenses, including hotels, meals and
transportation.
|
|
(2)
|
|
Gross-up for relocation
expense (available to all participants in the relocation
program).
|
|
(3)
|
|
Reflects matching
charitable contributions made by the ADP Foundation in an amount not to
exceed $20,000 in a calendar year in respect of any given named executive
officers charitable contributions for that calendar year.
|
|
(4)
|
|
Pursuant to the
provisions of his separation agreement, Mr. Reidy was paid a total of
$1,497,276 in fiscal year 2013 comprised of: $281,206 in separation
payments; $457,000 which is the equivalent of Mr. Reidys target annual
bonus for fiscal year 2013; and $759,000 which is the cash equivalent of
13,000 shares of ADP common stock on the date of his separation. Mr. Reidy
was also allowed to keep the company car leased to him, which had a value
of $27,616.
|
37
GRANTS
OF PLAN-
BASED
AWARDS
TABLE
FOR
FISCAL
YEAR 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Future Payouts
|
|
Number
|
|
Number of
|
|
Exercise
or
|
|
Grant
Date
|
|
|
|
|
|
Estimated
Future Payouts Under
|
|
Under Equity
Incentive Plan
|
|
of Shares
|
|
Securities
|
|
Base
Price
|
|
Fair
Value
|
|
|
|
Plan Under
|
|
Non-Equity Incentive Plan
Awards
|
|
Awards
|
|
of Stock
|
|
Underlying
|
|
of
Option
|
|
of
Stock
|
|
Grant
|
|
which
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
or Units
|
|
Options
|
|
Awards
|
|
and Option
|
Name
|
|
Date
|
|
was Made
|
|
$
|
|
$
|
|
$
|
|
#
|
|
#
|
|
#
|
|
#
|
|
#
|
|
($/Share)
|
|
Awards
|
(a)
|
|
(b)
|
|
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
(k)
|
|
(l)
|
Carlos A. Rodriguez
|
|
|
Cash Bonus
|
|
$0
|
|
$
|
1,360,000
|
|
$
|
2,720,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/19/2012
|
|
PBRS
|
|
|
|
|
|
|
|
|
|
0
|
|
|
38,900
|
|
|
58,350
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,223,135
|
|
1/25/2013
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162,000
|
|
|
$
|
59.89
|
|
|
$
|
1,396,440
|
|
Jan
Siegmund
|
|
|
Cash Bonus
|
|
$0
|
|
$
|
420,000
|
|
$
|
735,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/19/2012
|
|
PBRS
|
|
|
|
|
|
|
|
|
|
0
|
|
|
7,500
|
|
|
11,250
|
|
|
|
|
|
|
|
|
|
|
|
$
|
428,625
|
|
1/25/2013
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
$
|
59.89
|
|
|
$
|
215,500
|
|
Regina R. Lee
|
|
|
Cash Bonus
|
|
$0
|
|
$
|
413,000
|
|
$
|
722,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/19/2012
|
|
PBRS
|
|
|
|
|
|
|
|
|
|
0
|
|
|
12,000
|
|
|
18,000
|
|
|
|
|
|
|
|
|
|
|
|
$
|
685,800
|
|
1/25/2013
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
$
|
59.89
|
|
|
$
|
215,500
|
|
Steven J. Anenen
|
|
|
Cash Bonus
|
|
$0
|
|
$
|
323,700
|
|
$
|
566,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/19/2012
|
|
PBRS
|
|
|
|
|
|
|
|
|
|
0
|
|
|
9,000
|
|
|
13,500
|
|
|
|
|
|
|
|
|
|
|
|
$
|
514,350
|
|
1/25/2013
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
$
|
59.89
|
|
|
$
|
155,160
|
|
Dermot J. OBrien
|
|
|
Cash Bonus
|
|
$0
|
|
$
|
332,500
|
|
$
|
581,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/19/2012
|
|
PBRS
|
|
|
|
|
|
|
|
|
|
0
|
|
|
8,500
|
|
|
12,750
|
|
|
|
|
|
|
|
|
|
|
|
$
|
485,775
|
|
1/25/2013
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
$
|
59.89
|
|
|
$
|
155,160
|
|
Christopher R. Reidy
|
|
|
Cash Bonus
|
|
$0
|
|
$
|
457,000
|
|
$
|
799,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/19/2012
|
|
PBRS
|
|
|
|
|
|
|
|
|
|
0
|
|
|
13,000
|
|
|
19,500
|
|
|
|
|
|
|
|
|
|
|
|
$
|
742,950
|
38
In the foregoing Grants of
Plan-Based Awards Table, PBRS refers to our performance-based restricted stock
program under our 2008 Omnibus Award Plan. Stock options were also granted under
the companys 2008 Omnibus Award Plan.
The grant dates shown in column (b)
of the table were determined pursuant to FASB ASC Topic 718. We computed the
grant date fair value of each restricted stock award and option grant shown in
column (l) in accordance with FASB ASC Topic 718, disregarding estimates of
forfeitures related to service-based vesting conditions. For additional
information about the assumptions used in these calculations, see Note 10 to our
audited consolidated financial statements for the fiscal year ended June 30,
2013 included in our annual report on Form 10-K for the fiscal year ended June
30, 2013.
Mr. Rodriguezs Employment
Agreement
Mr. Rodriguez entered into an
employment agreement with the company on December 14, 2011. Mr. Rodriguezs
employment agreement provides for a three year term that begins November 8, 2011
and expires November 7, 2014. The employment agreement provides Mr. Rodriguez
with an annual base salary of at least $800,000, and an annual target bonus of
at least 160% of the base salary (without any proration for the companys 2012
fiscal year). The actual bonus paid to Mr. Rodriguez will be based upon
accomplishment of performance goals established by the compensation committee
each year.
Pursuant to the employment
agreement, on January 26, 2012, Mr. Rodriguez received a stock option grant of
40,000 shares that was determined by the compensation committee prior to his
promotion to chief executive officer as part of his fiscal 2012 long-term
incentive compensation, plus an additional special stock option grant of 150,000
shares in recognition of his promotion to chief executive officer. Each stock
option grant is scheduled to vest in four equal annual installments of 25% each,
commencing one year after the grant date.
Mr. Rodriguezs employment agreement
also contains provisions related to his involuntary termination from the
company, which are summarized on page 53 of this proxy statement under
Potential Payments to Named Executive Officers Upon Termination or Change In
Control.
In addition, Mr. Rodriguezs
employment agreement provides that he is entitled to participate in all of the
companys pension, 401(k), medical and health, life, accident, disability and
other insurance programs, equity plans and other compensation and benefits plans
and arrangements that are generally available to other company executives, such
as the companys Pension Retirement Plan and Supplemental Officers Retirement
Plan, which are described on page 49 of this proxy statement under Automatic
Data Processing, Inc. Pension Retirement Plan and Supplemental Officers
Retirement Plan.
Mr. OBriens Employment
Agreement
Mr. OBrien entered into an
employment agreement with the company on March 15, 2012. The employment
agreement provides Mr. OBrien with an initial annual base salary of $475,000,
and an annual target bonus of 70% of the base salary (prorated for fiscal year
2012 to reflect the full number of months of employment with the company prior
to June 30, 2012). The actual bonus paid to Mr. OBrien will be based upon
accomplishment of performance goals established by the chief executive officer
each year, provided that his actual bonus for fiscal year 2012 and fiscal year
2013 will be no less than his target bonus for such years so long as his
employment is not terminated by the company for cause, due to disability, due
to death or by Mr. OBrien without good reason (each as defined in his
employment agreement). Pursuant to the employment agreement, Mr. OBrien also
received a cash sign-on bonus of $50,000, payable 75 days after his effective
start date.
Pursuant to the employment
agreement, on April 30, 2012, Mr. OBrien received a grant of 15,000 shares of
time-based restricted stock, the restrictions on which lapsed as to 8,000 shares
on March 1, 2013, and lapse as to 4,000 shares on May 1, 2014, and 3,000 shares
on May 1, 2015. He is also eligible to participate in the fiscal year 2013 PBRS
program with a target of 8,500 shares of restricted stock if the applicable
performance objectives are achieved, with the actual number of shares earned to
be based on performance in accordance with the terms of the PBRS program. If
awarded, the restricted stock would be scheduled to vest in March 2014. Pursuant
to the employment agreement, Mr. OBrien was offered an initial stock option
grant of 30,000 shares at the next meeting of the compensation committee
following his start date, scheduled to vest in four equal annual installments of
25% each commencing one year after the grant date.
39
Mr. OBriens employment agreement
also contains provisions related to his involuntary termination from the company
(including participation in the Change in Control Severance Plan for Corporate
Officers), which are summarized on page 54 of this proxy statement under
Potential Payments to Named Executive Officers Upon Termination or Change In
Control.
In addition, Mr. OBriens
employment agreement provides that he is entitled to participate in all of the
companys pension, 401(k), medical and health, life, accident, disability and
other insurance programs, equity plans and other compensation and benefits plans
and arrangements that are generally available to other company executives, such
as the companys Pension Retirement Plan and Supplemental Officers Retirement
Plan, which are described on page 49 of this proxy statement under Automatic
Data Processing, Inc. Pension Retirement Plan and Supplemental Officers
Retirement Plan.
Mr. OBriens employment agreement
also provides that he has continuing rights for indemnification under the
companys charter or bylaws or other policies and procedures in effect on March
15, 2012 including coverage by directors and officers liability insurance,
should the company provide such insurance for senior management and whether
through an independent or captive insurer and under any indemnification
trust.
Mr. Reidys Employment
Agreement
Mr. Reidy entered into an employment
agreement with the company on August 1, 2006. The employment agreement was
superseded in its entirety by Mr. Reidys separation agreement entered into in
connection with his separation from the company on January 2, 2013. Mr. Reidys
separation agreement is summarized on page 58 of this proxy statement.
Mr. Reidys employment agreement
provided for an annual base salary of at least $500,000, and an annual target
bonus of at least $400,000. The actual bonus paid to Mr. Reidy was based upon
his accomplishment of pre-established performance goals determined by the
compensation committee. The agreement also provided that Mr. Reidy would be
granted stock options for a minimum of 20,000 shares of common stock each fiscal
year during the term of the employment agreement commencing in 2008.
In addition, Mr. Reidys employment
agreement provided that he was entitled to participate in all other programs
that are generally available to other corporate officers, such as the companys
Pension Retirement Plan and Supplemental Officers Retirement Plan, which are
described on page 49 of this proxy statement under Automatic Data Processing,
Inc. Pension Retirement Plan and Supplemental Officers Retirement
Plan.
Restricted Stock
We currently grant restricted stock
under our 2008 Omnibus Award Plan. Restricted stock awards granted in connection
with our performance-based restricted stock program vest 12 months following
issuance. Other restricted stock awards vest over periods determined by our
compensation committee. Holders of shares of restricted stock are entitled to
receive dividends paid only with respect to shares of restricted stock that have
been earned. We require that executives agree to be bound by a restrictive
covenant containing non-compete, non-solicitation, and confidentiality
obligations as a condition to the grant.
Beginning in February 2009,
restricted stock awards under our 2008 Omnibus Award Plan allow the compensation
committee to cause a recipients award to be forfeited, and to require the
recipient to pay to us any gain realized on the award (the fair market value, on
the applicable vesting date, of the shares delivered to the participant), if the
recipient engages in an activity that is in conflict with or adverse to our
interests, including but not limited to fraud or conduct contributing to any
financial restatements or irregularities, or if the recipient violates a
restrictive covenant.
40
Stock Options
We currently grant stock options
under our 2008 Omnibus Award Plan with an exercise price equal to our closing
stock price on the date of grant, although options outstanding under our 2000
Stock Option Plan have an exercise price equal to the average of the high and
the low sales prices of our stock on the day of grant. Stock options have a term
of up to ten years from the date of grant. No option may be exercised after the
expiration of its ten-year term. We require that executives agree to be bound by
a restrictive covenant containing non-compete, non-solicitation, and
confidentiality obligations as a condition to the grant.
Stock options granted in April 2008
and thereafter generally vest over four years. Stock options granted prior to
April 2008 generally vest over a five-year period, beginning on the second
anniversary of the grant date (for all key executives of the company), or the
first anniversary of the grant date (for all other option holders).
Stock options granted under our 2008
Omnibus Award Plan become fully vested and exercisable upon the death or
disability of an option holder who (i) is an active employee, (ii) satisfied the
companys retirement criteria and retired on or after age 55 with ten years of
service (Normal Retirement), or (iii) retired in the previous twelve months on
or after age 55 with between five and ten years of service. Stock options will
continue to vest following a Normal Retirement that occurs after the first
anniversary of an options grant date.
Vested options granted under our
2008 Omnibus Award Plan may generally be exercised for up to 60 days following
an option holders termination of employment with the company, provided
that:
-
option holders who retire on or after Normal
Retirement will have 37 months following retirement to
exercise their vested options (subject to extension in the case of
subsequent death);
-
option holders who retire on or after age 55 with
between five and ten years of service will have
twelve months following retirement to exercise their vested options
(subject to extension in the case of
subsequent
death);
-
option holders who die or become disabled on or
after eligibility for Normal Retirement will have 36
months following their death or disability to exercise their vested
options (subject to extension in the case
of
subsequent death following a disability); and
-
option holders who were not eligible for Normal
Retirement on the date of death or disability will have
twelve months following their death or disability to
exercise their vested options (subject to extension in
the case of subsequent death following a disability).
Beginning in February 2009, stock
option awards under our 2008 Omnibus Award Plan allow the compensation committee
to cause a recipients award to be forfeited, and to require the recipient to
pay to us any option gain, if the recipient engages in an activity that is in
conflict with or adverse to our interests, including but not limited to fraud or
conduct contributing to any financial restatements or irregularities, or if the
recipient violates a restrictive covenant.
41
OUTSTANDING EQUITY AWARDS FOR FISCAL
YEAR-END 2013
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Market
or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Payout
Value
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
of Unearned
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
Number
|
|
Value
of
|
|
Shares,
|
|
Shares,
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
|
of Shares
|
|
Shares or
|
|
Units or
|
|
Units
or
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
|
|
|
|
|
|
or Units of
|
|
Units of
|
|
Other
|
|
Other
|
|
|
|
|
Options
|
|
Options
|
|
Option
|
|
|
|
Stock That
|
|
Stock That
|
|
Rights
|
|
Rights
That
|
|
|
|
|
(#)
|
|
(#)
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
That Have
|
|
Have Not
|
|
|
Grant
|
|
(Exercisable)
|
|
(Unexercisable)
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
Not Vested
|
|
Vested
|
Name
|
|
|
Date (1)
|
|
(2)
|
|
(2)
|
|
($) (2)
|
|
Date
|
|
(#)
|
|
($) (3)
|
|
(#)
|
|
($)
|
(a)
|
|
|
|
|
(b)
|
|
(c)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
Carlos A. Rodriguez
|
|
4/25/2007
|
|
|
12,000
|
|
|
|
|
|
|
$
|
44.91
|
|
|
4/24/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/2008
|
|
|
|
|
|
|
3,400
|
|
|
$
|
40.28
|
|
|
1/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2010
|
|
|
|
|
|
|
4,250
|
|
|
$
|
40.70
|
|
|
2/8/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/8/2011
|
|
|
|
|
|
|
10,000
|
|
|
$
|
49.52
|
|
|
2/7/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/26/2012
|
|
|
47,500
|
|
|
|
142,500
|
|
|
$
|
55.82
|
|
|
1/25/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/25/2013
|
|
|
|
|
|
|
162,000
|
|
|
$
|
59.89
|
|
|
1/24/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,500
|
|
|
$
|
585,310
|
|
|
|
|
|
|
3/3/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
$
|
103,290
|
|
|
|
|
|
|
9/3/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,900
|
|
|
$
|
2,678,654
|
|
|
|
|
|
Jan
Siegmund
|
|
1/26/2007
|
|
|
13,170
|
|
|
|
|
|
|
$
|
42.94
|
|
|
1/25/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/2007
|
|
|
15,000
|
|
|
|
|
|
|
$
|
44.91
|
|
|
4/24/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/2008
|
|
|
9,600
|
|
|
|
2,400
|
|
|
$
|
40.28
|
|
|
1/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/2009
|
|
|
12,000
|
|
|
|
|
|
|
$
|
37.58
|
|
|
2/9/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2010
|
|
|
9,000
|
|
|
|
3,000
|
|
|
$
|
40.70
|
|
|
2/8/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/8/2011
|
|
|
5,000
|
|
|
|
5,000
|
|
|
$
|
49.52
|
|
|
2/7/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/26/2012
|
|
|
3,750
|
|
|
|
11,250
|
|
|
$
|
55.82
|
|
|
1/25/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/25/2013
|
|
|
|
|
|
|
25,000
|
|
|
$
|
59.89
|
|
|
1/24/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,250
|
|
|
$
|
361,515
|
|
|
|
|
|
|
9/3/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
$
|
516,450
|
|
|
|
|
|
Regina R. Lee
|
|
1/27/2006
|
|
|
13,170
|
|
|
|
|
|
|
$
|
40.70
|
|
|
1/26/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/26/2007
|
|
|
18,657
|
|
|
|
|
|
|
$
|
42.94
|
|
|
1/25/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/2007
|
|
|
30,000
|
|
|
|
|
|
|
$
|
44.91
|
|
|
4/24/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/2008
|
|
|
13,600
|
|
|
|
3,400
|
|
|
$
|
40.28
|
|
|
1/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/2009
|
|
|
17,000
|
|
|
|
|
|
|
$
|
37.58
|
|
|
2/9/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2010
|
|
|
12,750
|
|
|
|
4,250
|
|
|
$
|
40.70
|
|
|
2/8/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/8/2011
|
|
|
10,000
|
|
|
|
10,000
|
|
|
$
|
49.52
|
|
|
2/7/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/26/2012
|
|
|
5,000
|
|
|
|
15,000
|
|
|
$
|
55.82
|
|
|
1/25/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/25/2013
|
|
|
|
|
|
|
25,000
|
|
|
$
|
59.89
|
|
|
1/24/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,500
|
|
|
$
|
585,310
|
|
|
|
|
|
|
3/3/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
$
|
103,290
|
|
|
|
|
|
|
9/3/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
$
|
826,320
|
|
|
|
|
|
Steven J. Anenen
|
|
1/27/2006
|
|
|
18,657
|
|
|
|
|
|
|
$
|
40.70
|
|
|
1/26/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/26/2007
|
|
|
18,657
|
|
|
|
|
|
|
$
|
42.94
|
|
|
1/25/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/2008
|
|
|
13,600
|
|
|
|
3,400
|
|
|
$
|
40.28
|
|
|
1/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/2009
|
|
|
17,000
|
|
|
|
|
|
|
$
|
37.58
|
|
|
2/9/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2010
|
|
|
12,750
|
|
|
|
4,250
|
|
|
$
|
40.70
|
|
|
2/8/2020
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
|
Grant
Date
(1)
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
(Exercisable)
(2)
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
(Unexercisable)
(2)
|
|
Option
Exercise
Price
($) (2)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or Units of
Stock That
Have
Not
Vested
(#)
|
|
Market
Value of
Shares or
Units of
Stock That
Have
Not
Vested
($) (3)
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
|
(a)
|
|
|
|
|
|
(b)
|
|
|
(c)
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
(h)
|
|
|
(i)
|
|
(j)
|
|
|
2/8/2011
|
|
|
7,500
|
|
|
|
7,500
|
|
|
$
|
49.52
|
|
|
|
2/7/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/26/2012
|
|
|
3,750
|
|
|
|
11,250
|
|
|
$
|
55.82
|
|
|
|
1/25/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/25/2013
|
|
|
|
|
|
|
18,000
|
|
|
$
|
59.89
|
|
|
|
1/24/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
$
|
344,300
|
|
|
|
|
|
|
|
9/3/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
$
|
619,740
|
|
|
|
|
|
|
Dermot J. OBrien
|
|
6/7/2012
|
|
|
7,500
|
|
|
|
22,500
|
|
|
$
|
53.15
|
|
|
|
6/6/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/25/2013
|
|
|
|
|
|
|
18,000
|
|
|
$
|
59.89
|
|
|
|
1/24/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/30/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
$
|
482,020
|
|
|
|
|
|
|
|
9/3/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,500
|
|
$
|
585,310
|
|
|
|
|
|
|
Christopher R. Reidy
|
|
1/31/2008
|
|
|
|
|
|
|
4,000
|
|
|
$
|
40.28
|
|
|
|
1/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2010
|
|
|
|
|
|
|
5,000
|
|
|
$
|
40.70
|
|
|
|
2/8/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/8/2011
|
|
|
|
|
|
|
10,000
|
|
|
$
|
49.52
|
|
|
|
2/7/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/26/2012
|
|
|
|
|
|
|
15,000
|
|
|
$
|
55.82
|
|
|
|
1/25/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
$
|
0
|
|
|
|
|
|
____________________
(1)
|
We have included in the table
awards under our one-year performance-based restricted stock program for
fiscal year 2013. Such awards were formally made on September 3,
2013.
|
|
|
(2)
|
The option awards and exercise
price of options granted prior to March 30, 2007 have been adjusted to
reflect the spin-off of our former Brokerage Services Group business on
March 30, 2007.
|
|
(3)
|
Market value based on June 28,
2013 closing price of our common stock of $68.86 per
share.
|
43
OUTSTANDING EQUITY VESTING SCHEDULE
FOR FISCAL YEAR-END 2013
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
Grant or
|
|
|
|
|
Grant Date
|
|
Vesting from
Grant Date
|
|
Award Date
|
|
Vesting
Schedule
|
Carlos A. Rodriguez
|
|
|
4/25/2007
|
|
|
20% vested on 4/25/2011
|
|
|
2/10/2009
|
|
|
100% vests on 2/10/2014
|
|
|
|
|
|
|
40% vested on 4/25/2012
|
|
|
3/3/2010
|
|
|
53% vested on 3/3/2011
|
|
|
|
|
|
|
40% vested on 4/25/2013
|
|
|
|
|
|
16% vested on 3/3/2012
|
|
|
|
1/31/2008
|
|
|
20% vested on 1/31/2010
|
|
|
|
|
|
16% vested on 3/3/2013
|
|
|
|
|
|
|
20% vested on 1/31/2011
|
|
|
|
|
|
15% vests on 3/3/2014
|
|
|
|
|
|
|
20% vested on 1/31/2012
|
|
|
9/3/2013
|
|
|
100% vests on 9/3/2014
|
|
|
|
|
|
|
20% vested on 1/31/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vests on 1/31/2014
|
|
|
|
|
|
|
|
|
|
2/9/2010
|
|
|
25% vested on 2/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on 2/9/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on 2/9/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on 2/9/2014
|
|
|
|
|
|
|
|
|
|
2/8/2011
|
|
|
25% vested on 2/8/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on 2/8/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on 2/8/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on 2/8/2015
|
|
|
|
|
|
|
|
|
|
1/26/2012
|
|
|
25% vested on 1/26/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on 1/26/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on 1/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on 1/26/2016
|
|
|
|
|
|
|
|
|
|
1/25/2013
|
|
|
25% vests on 1/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on 1/25/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on 1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on 1/25/2017
|
|
|
|
|
|
|
|
Jan Siegmund
|
|
|
1/26/2007
|
|
|
20% vested on 1/26/2009
|
|
|
2/10/2009
|
|
|
100% vests 2/10/2014
|
|
|
|
|
|
|
20% vested on 1/26/2010
|
|
|
9/3/2013
|
|
|
100% vests on 9/3/2014
|
|
|
|
|
|
|
20% vested on 1/26/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on 1/26/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on 1/26/2013
|
|
|
|
|
|
|
|
|
|
4/25/2007
|
|
|
20% vested on 4/25/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
40% vested on 4/25/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
40% vested on 4/25/2013
|
|
|
|
|
|
|
|
|
|
1/31/2008
|
|
|
20% vested on 1/31/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on 1/31/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on 1/31/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on 1/31/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vests on 1/31/2014
|
|
|
|
|
|
|
|
|
|
2/10/2009
|
|
|
25% vested on 2/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on 2/10/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on 2/10/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on 2/10/2013
|
|
|
|
|
|
|
|
|
|
2/9/2010
|
|
|
25% vested on 2/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on 2/9/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on 2/9/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on 2/9/2014
|
|
|
|
|
|
|
|
|
|
2/8/2011
|
|
|
25% vested on 2/8/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on 2/8/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on 2/8/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on 2/8/2015
|
|
|
|
|
|
|
44
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
Grant or
|
|
|
|
|
Grant Date
|
|
Vesting from Grant Date
|
|
Award Date
|
|
Vesting Schedule
|
|
|
|
1/26/2012
|
|
|
25% vested on
1/26/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/26/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/26/2016
|
|
|
|
|
|
|
|
|
|
1/25/2013
|
|
|
25% vests on
1/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/25/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/25/2017
|
|
|
|
|
|
|
|
Regina R. Lee
|
|
|
1/27/2006
|
|
|
20% vested on
1/27/2008
|
|
|
2/10/2009
|
|
|
100% vests on
2/10/2014
|
|
|
|
|
|
|
20% vested on
1/27/2009
|
|
|
3/3/2010
|
|
|
53% vested on
3/3/2011
|
|
|
|
|
|
|
20% vested on
1/27/2010
|
|
|
|
|
|
16% vested on
3/3/2012
|
|
|
|
|
|
|
20% vested on
1/27/2011
|
|
|
|
|
|
16% vested on
3/3/2013
|
|
|
|
|
|
|
20% vested on
1/27/2012
|
|
|
|
|
|
15% vests on
3/3/2014
|
|
|
|
1/26/2007
|
|
|
20% vested on
1/26/2009
|
|
|
9/3/2013
|
|
|
100% vests on
9/3/2014
|
|
|
|
|
|
|
20% vested on
1/26/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/26/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/26/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/26/2013
|
|
|
|
|
|
|
|
|
|
4/25/2007
|
|
|
20% vested on
4/25/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
40% vested on
4/25/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
40% vested on
4/25/2013
|
|
|
|
|
|
|
|
|
|
1/31/2008
|
|
|
20% vested on
1/31/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/31/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/31/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/31/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vests on
1/31/2014
|
|
|
|
|
|
|
|
|
|
2/10/2009
|
|
|
25% vested on
2/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/10/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/10/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/10/2013
|
|
|
|
|
|
|
|
|
|
2/9/2010
|
|
|
25% vested on
2/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/9/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/9/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
2/9/2014
|
|
|
|
|
|
|
|
|
|
2/8/2011
|
|
|
25% vested on
2/8/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/8/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
2/8/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
2/8/2015
|
|
|
|
|
|
|
|
|
|
1/26/2012
|
|
|
25% vested on
1/26/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/26/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/26/2016
|
|
|
|
|
|
|
|
|
|
1/25/2013
|
|
|
25% vests on
1/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/25/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/25/2017
|
|
|
|
|
|
|
|
Steven J. Anenen
|
|
|
1/27/2006
|
|
|
20% vested on
1/27/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/27/2010
|
|
|
2/10/2009
|
|
|
17% vested
2/10/2013
|
|
|
|
|
|
|
20% vested on
1/27/2011
|
|
|
|
|
|
83% vests
2/10/2014
|
|
|
|
|
|
|
20% vested on
1/27/2012
|
|
|
9/3/2013
|
|
|
100% vests on
9/3/2014
|
45
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
Grant or
|
|
|
|
|
Grant Date
|
|
Vesting from Grant Date
|
|
Award Date
|
|
Vesting Schedule
|
|
|
|
1/26/2007
|
|
|
20% vested on
1/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/26/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/26/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/26/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/26/2013
|
|
|
|
|
|
|
|
|
|
1/31/2008
|
|
|
20% vested on
1/31/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/31/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/31/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/31/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vests on
1/31/2014
|
|
|
|
|
|
|
|
|
|
2/10/2009
|
|
|
25% vested on
2/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/10/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/10/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/10/2013
|
|
|
|
|
|
|
|
|
|
2/9/2010
|
|
|
25% vested on
2/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/9/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/9/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
2/9/2014
|
|
|
|
|
|
|
|
|
|
2/8/2011
|
|
|
25% vested on
2/8/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/8/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
2/8/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
2/8/2015
|
|
|
|
|
|
|
|
|
|
1/26/2012
|
|
|
25% vested on
1/26/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/26/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/26/2016
|
|
|
|
|
|
|
|
|
|
1/25/2013
|
|
|
25% vests on
1/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/25/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/25/2017
|
|
|
|
|
|
|
|
Dermot J.
OBrien
|
|
|
6/7/2012
|
|
|
25% vested on
6/7/2013
|
|
|
4/30/2012
|
|
|
57% vests on
5/1/2014
|
|
|
|
|
|
|
25% vests on
6/7/2014
|
|
|
|
|
|
43% vests on
5/1/2015
|
|
|
|
|
|
|
25% vests on
6/7/2015
|
|
|
9/3/2013
|
|
|
100% vests on
9/3/2014
|
|
|
|
|
|
|
25% vests on
6/7/2016
|
|
|
|
|
|
|
|
|
|
1/25/2013
|
|
|
25% vests on
1/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/25/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/25/2017
|
|
|
|
|
|
|
|
Christopher R.
Reidy
|
|
|
1/31/2008
|
|
|
20% vested on
1/31/2010
|
|
|
2/10/2009
|
|
|
20% vested
2/10/2013
|
|
|
|
|
|
|
20% vested on
1/31/2011
|
|
|
|
|
|
80% vests
2/10/2014
|
|
|
|
|
|
|
20% vested on
1/31/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vested on
1/31/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
20% vests on
1/31/2014
|
|
|
|
|
|
|
|
|
|
2/9/2010
|
|
|
25% vested on
2/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/9/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/9/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
2/9/2014
|
|
|
|
|
|
|
|
|
|
2/8/2011
|
|
|
25% vested on
2/8/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vested on
2/8/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
2/8/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
2/8/2015
|
|
|
|
|
|
|
|
|
|
1/26/2012
|
|
|
25% vested on
1/26/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/26/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
25% vests on
1/26/2016
|
|
|
|
|
|
|
46
OPTION EXERCISES AND STOCK VESTED
TABLE FOR FISCAL YEAR 2013
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number
|
|
|
|
|
Number
|
|
|
|
|
|
|
of Shares
|
|
Value
|
|
of Shares
|
|
Value
|
|
|
Acquired on
|
|
Realized
on
|
|
Acquired on
|
|
Realized
on
|
Name
|
|
|
Exercise
|
|
Exercise
|
|
Vesting
|
|
Vesting
|
(a)
|
|
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
Carlos A. Rodriguez(1)
|
|
|
63,513
|
|
|
$
|
1,322,845
|
|
|
30,000
|
|
|
$
|
1,875,440
|
|
Jan Siegmund(2)
|
|
|
0
|
|
|
$
|
0
|
|
|
12,750
|
|
|
$
|
804,248
|
|
Regina R. Lee(3)
|
|
|
41,704
|
|
|
$
|
887,412
|
|
|
22,000
|
|
|
$
|
1,380,800
|
|
Steven J.
Anenen(4)
|
|
|
18,657
|
|
|
$
|
466,449
|
|
|
14,000
|
|
|
$
|
886,760
|
|
Dermot J. OBrien(5)
|
|
|
0
|
|
|
$
|
0
|
|
|
8,000
|
|
|
$
|
493,200
|
|
Christopher R.
Reidy(6)
|
|
|
148,312
|
|
|
$
|
2,882,872
|
|
|
17,000
|
|
|
$
|
1,066,740
|
|
____________________
(1)
|
Mr. Rodriguez exercised options
to purchase 63,513 shares on March 12, 2013 with a weighted average
exercise price of $43.01 and a market price of $63.83. He acquired 2,500
shares with a market price of $56.93 on January 1, 2013, 1,500 shares with
a market price of $61.65 on March 3, 2013, 20,000 shares with a market
price of $61.83 on March 4, 2013, and 6,000 shares with a market price of
$67.34 on April 30, 2013, each upon lapse of restrictions.
|
|
|
(2)
|
Mr. Siegmund acquired 1,250
shares with a market price of $56.93 on January 1, 2013, 7,500 shares with
a market price of $61.83 on March 4, 2013, and 4,000 shares with a market
price of $67.34 on April 30, 2013, each upon lapse of
restrictions.
|
|
(3)
|
Ms. Lee exercised options to
purchase 18,657 shares on September 4, 2012 with a weighted average
exercise price of $32.85 and a market price of $57.50, 12,072 shares on
January 4, 2013 with an exercise price of $42.30 and a market price of
$59.00, 10,975 shares on January 29, 2013 with an exercise price of $39.40
and a market price of $60.00. She acquired 2,500 shares with a market
price of $56.93 on January 1, 2013, 1,500 shares with a market price of
$61.65 on March 3, 2013, 12,000 shares with a market price of $61.83 on
March 4, 2013, and 6,000 shares with a market price of $67.34 on April 30,
2013, each upon lapse of restrictions.
|
|
(4)
|
Mr. Anenen exercised options to
purchase 18,657 shares on March 14, 2013 with an exercise price of $39.40
and a market price of $64.40. He acquired 1,000 shares with a market price
of $60.93 on February 10, 2013, 9,000 shares with a market price of $61.83
on March 4, 2013, and 4,000 shares with a market price of $67.34 on April
30, 2013, each upon lapse of restrictions.
|
|
(5)
|
Mr. OBrien acquired 8,000 shares
with a market price of $61.65 on March 1, 2013, upon lapse of
restrictions.
|
|
(6)
|
Mr. Reidy exercised options to
purchase 138,312 shares on February 20, 2013 with a weighted average
exercise price of $42.85 and a market price of $61.50, 5,000 shares on May
9, 2013 with an exercise price of $37.58 and a market price of $69.56, and
5,000 shares on May 9, 2013 with an exercise price of $40.70 and a market
price of $69.50. He acquired 1,000 shares with a market price of $60.93 on
February 11, 2013, 13,000 shares with a market price of $61.83 on March 4,
2013, and 3,000 shares with a market price of $67.34 on April 30, 2013,
each upon lapse of restrictions.
|
47
PENSION BENEFITS FOR FISCAL YEAR
2013
|
|
|
|
Number of
|
|
Present
Value
|
|
Payments
|
|
|
|
|
Years Credited
|
|
of
Accumulated
|
|
During
Last
|
Name
|
|
|
Plan Name
|
|
Service (1)
|
|
Benefit (2)(3)(4)
|
|
Fiscal Year
|
(a)
|
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
Carlos A. Rodriguez
|
|
Automatic Data Processing,
Inc.
|
|
|
12.50
|
|
|
$
|
116,159
|
|
|
$0
|
|
|
Pension Retirement
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Officers
|
|
|
10.08
|
|
|
$
|
1,482,648
|
|
|
$0
|
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
Jan Siegmund
|
|
Automatic Data Processing, Inc.
|
|
|
13.50
|
|
|
$
|
123,893
|
|
|
$0
|
|
|
Pension Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Officers
|
|
|
8.58
|
|
|
$
|
731,827
|
|
|
$0
|
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
Regina R. Lee
|
|
Automatic Data Processing,
Inc.
|
|
|
30.50
|
|
|
$
|
331,591
|
|
|
$0
|
|
|
Pension Retirement
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Officers
|
|
|
8.58
|
|
|
$
|
1,647,030
|
|
|
$0
|
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
Steven J. Anenen
|
|
Automatic Data Processing, Inc.
|
|
|
36.50
|
|
|
$
|
439,580
|
|
|
$0
|
|
|
Pension Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Officers
|
|
|
14.08
|
|
|
$
|
2,666,888
|
|
|
$0
|
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
Dermot J. OBrien
|
|
Automatic Data Processing,
Inc.
|
|
|
0.50
|
|
|
$
|
3,363
|
|
|
$0
|
|
|
Pension Retirement
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Officers
|
|
|
1.17
|
|
|
$
|
67,886
|
|
|
$0
|
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
Christopher R.
Reidy
|
|
Automatic Data Processing, Inc.
|
|
|
5.00
|
|
|
$
|
44,610
|
|
|
$0
|
|
|
Pension Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Officers
|
|
|
6.08
|
|
|
$
|
917,082
|
|
|
$0
|
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
____________________
(1)
|
|
Consists of the number
of years of service credited as of June 30, 2013 for the purpose of
determining benefit service under the applicable pension plan. Credited
service is defined in the Supplemental Officers Retirement Plan as the
number of months elapsed from the later of a participants entry into the
plan and January 1, 1989 and subject, in the case of vesting, to a
schedule set forth in the Supplemental Officers Retirement Plan.
Executives must be selected for participation in the Supplemental Officers
Retirement Plan. Credited service under the Pension Retirement Plan is
defined as elapsed time of employment with the company starting on January
1 following the completion of six months of service.
|
|
(2)
|
|
The Pension Retirement
Plan and Supplemental Officers Retirement Plan provide benefits in the
form of a lump sum and/or an annuity. We calculated a present value of the
executives benefit using an interest crediting rate, a discount rate and
a mortality assumption. We calculated the actuarial present values of
accumulated benefits as of June 30, 2013 under the Pension Retirement Plan
and the Supplemental Officers Retirement Plan using the RP-2000 white
collar mortality table (projected to 2020) and a 4.50% discount rate. For
the Pension Retirement Plan only, we also used a 3.25% interest crediting
rate.
|
|
(3)
|
|
Cash balances under
the Pension Retirement Plan are included in the present values shown for
the Pension Retirement Plan in column (d) and, at June 30, 2013 are as
follows: Mr. Rodriguez, $140,975; Mr. Siegmund, $150,145; Ms. Lee, $
348,244; Mr. Anenen, $416,434; Mr. OBrien, $4,161 and Mr. Reidy,
$49,373.
|
|
(4)
|
|
The present values of
accumulated benefits for the Pension Retirement Plan and the Supplemental
Officers Retirement Plan were determined based on the retirement at age of
65 (normal retirement age under these Plans), except for Mr. Reidy who
separated from the company and is required to commence receiving
distributions under the Supplemental Officers Retirement Plan at age
60.
|
48
Automatic Data Processing, Inc.
Pension Retirement Plan
The Pension
Retirement Plan is a tax-qualified defined benefit plan covering substantially
all U.S. employees of the company. Under the Pension Retirement Plan, the
company credits participants notional accounts with annual contributions, which
are determined based upon base salary and years of service. The contributions
range from 2.1% to 10% of base salary and the accounts earn interest based upon
the ten-year U.S. Treasury constant maturity rates. Compensation used to
determine the benefits in any given year is limited to calendar year base salary
up to the Internal Revenue Service compensation limit in effect for the plan
year. A participant must have three years of service to receive any
benefit.
Supplemental Officers Retirement
Plan
The company sponsors a Supplemental Officers Retirement Plan, which is a
non-qualified defined benefit plan that pays a lump sum and/or an annuity upon
retirement. Eligible participants include the named executive officers and other
officers of the company with titles of corporate vice president and
above.
On August 14, 2008, our board of directors approved amendments to the
Supplemental Officers Retirement Plan. These amendments included changes to the
Supplemental Officers Retirement Plan benefits formula and the early retirement
factors, in each case, used for any active employee not already earning a
benefit by January 1, 2008 or any participant who had not attained age 50 by
January 1, 2009 (we refer to such participants as non-grandfathered
participants, and to all other participants as grandfathered participants),
as well as changes relating to the forms of benefit available for all current
and future participants.
On November 10, 2009, our board of directors approved additional
amendments effective January 1, 2010 to (1) exclude performance-based restricted
stock awards from the definition of final average compensation of grandfathered
participants, (2) change the formulas used to compute benefits for grandfathered
participants after 2009, (3) provide that for both benefit accrual and vesting
credit, service will be determined based on the number of months elapsed from
the later of a participants entry into the plan and January 1, 1989 and
subject, in the case of vesting, to a schedule set forth in the Supplemental
Officers Retirement Plan, and (4) provide that effective after December 31,
2009, our chief executive officer will no longer be able to grant service credit
in his discretion to Supplemental Officers Retirement Plan participants who are
involuntarily terminated or who receive severance from the company.
All participants must have at least five years of service to receive any
benefit under the Supplemental Officers Retirement Plan. After ten years of
service, a participant will qualify for the full annual benefit. We refer to the
percentage of the benefit that has been earned by a participant as the vested
percentage. The vested percentage is determined using a schedule set forth in
the Supplemental Officers Retirement Plan.
Supplemental Officers Retirement Plan benefits begin on the earliest of
(i) the later of attainment of age 60 and the first day of the seventh month
following separation from service, (ii) disability, or (iii) death. Participants
can receive their benefits in the form of a single life annuity, a 25%, 50%, 75%
or 100% joint and survivor annuity with a beneficiary, or a ten year certain and
life annuity. Subject to rules required under Section 409A of the Internal
Revenue Code, participants may generally also elect to have either 25% or 50% of
their benefits paid in a single lump sum. A participant who terminates
employment by reason of disability is eligible to receive an unreduced benefit
payable as of the participants termination. Upon the death of a participant,
the participants surviving spouse or other designated beneficiary is eligible
to receive a 50% survivor benefit, payable as a life annuity, or if elected, a
guaranteed payment for 120 months only. Under certain circumstances, annual
benefits are subject to reduction for payments from social security, the Pension
Retirement Plan and the Retirement and Savings Plan, and any retirement benefits
from a former or subsequent employer of the participant.
For grandfathered participants, prior to January 1, 2010, the amount of
the annual benefit is determined by taking the average annual compensation of a
participant for the five full consecutive calendar years during which he or she
received the highest amount of compensation (we refer to such average annual
compensation as final average annual pay), and then multiplying that amount by
a factor of 1.5%, the number of years of service and his or her vested
percentage. The maximum annual plan benefit which may be paid to grandfathered
participants was limited to 25% of a participants final average annual pay
(which we express as a maximum service period of 16.67 years).
49
Since January 1, 2010, the Supplemental Officers Retirement Plan benefits
of Ms. Lee and Messrs. Anenen and Reidy, who are grandfathered participants, are
equal to the product of (i) the participants final average annual pay, (ii)
future service period up to 18.75 years, (ii) 2.4%, and (iv) the participants
vested percentage. The annual plan benefit for each of Ms. Lee and Messrs.
Anenen and Reidy cannot exceed 45% of the participants final average annual
pay.
A grandfathered participants benefit under the Supplemental Officers
Retirement Plan will not be less than the participants benefit determined as of
December 31, 2009, taking into account the participants actual vesting service
through the date of his or her termination of employment.
Early retirement benefits for grandfathered participants will be
calculated using the factors applicable to non-grandfathered participants,
except when determining the protected early retirement benefit accrued as of
December 31, 2009.
For grandfathered participants, compensation covered under the
Supplemental Officers Retirement Plan includes base salary and bonus amounts
(paid or deferred) and, for periods before January 1, 2010, compensation
realized from restricted stock vesting during the fiscal year. A grandfathered
participant whose benefit payments begin before the first day of the month on or
after the participants 65th birthday will receive payments which are reduced at
a rate of 5/12 of 1% per month for each full month by which the participants
benefit commencement precedes the participants 65th birthday.
For non-grandfathered participants (Messrs. Rodriguez, Siegmund, and
OBrien), the amount of the annual benefit is determined by taking such
participants final average annual pay, and then multiplying that amount by a
factor of 2%, the number of years of service (up to 20 years), and his or her
vested percentage. For non-grandfathered participants with more than 20 years of
service only, added to that first amount will be an amount equal to such
participants final average annual pay, multiplied by 1%, up to five additional
years of service, and his or her vested percentage. Final average annual pay for
non-grandfathered participants will be based on salary, bonuses, and incentive
payment awards, excluding restricted stock and other stock-based awards. The
maximum annual plan benefit which may be paid to non-grandfathered participants
will be limited to 45% of a participants final average annual pay. A
non-grandfathered participant whose benefit payments begin before the first day
of the month on or after the participants 65th birthday will receive payments
which are reduced at a rate of 4/12 of 1% per month for each month (up to 36
months) by which the participants benefit commencement precedes the
participants 65th birthday, and, if applicable, further reduced at a rate of
5/12 of 1% for each month by which the benefit commencement precedes the
participants 62nd birthday. Non-grandfathered participants cannot receive a
benefit less than the benefit they had accrued on December 31, 2008 under the
formula applicable to grandfathered participants.
If any participant within 24 months after his or her employment
terminates violates the non-competition provisions of any agreement such
participant has entered into with the company, such participant will forfeit all
of his or her benefits under the Supplemental Officers Retirement
Plan.
Deferred Compensation
Program
Under the ADP Deferred Compensation Plan, all U.S. executives of the
company (including the named executive officers) can defer all or a portion of
their annual cash bonuses and/or performance-based restricted stock into a
deferred compensation account. They can choose two investment options for their
cash bonus deferrals: a fixed income fund or a fund designed to track the
performance of the Standard & Poors index of 500 leading U.S. companies.
The fixed fund rate is adjusted each fiscal year. For fiscal year 2013, the
fixed fund rate was 1.25%. The company does not match deferrals by its named
executive officers or otherwise contribute any amounts to the named executive
officers deferred compensation accounts.
The program does not allow changes to the investment fund choice once the
annual deferral is made to the account. Each participant has the option of
making a one-time election changing the timing and/or the form of distributions
from his or her account. Any such change is required to comply with the
redeferral rules in effect under Section 409A of the Internal Revenue Code and
may only be used to delay the timing and/or change the number of payments to be
received.
50
Participants may elect to receive payments of their deferred funds or
stock either in a lump sum payment or in installments. However, in the event of
death, disability or termination of employment prior to age 65 or age 55 with 10
years of service, payments are made in a lump sum regardless of a participants
election. Deferred funds and the earnings on such deferrals made for fiscal year
2005 and later may be distributed to a participant following separation from
service only after a six-month delay. Distributions are subject to federal,
state and local income taxes on both the principal amount and investment
earnings at the ordinary income rate in the year in which such payments are
made.
NON-QUALIFIED DEFERRED COMPENSATION
FOR FISCAL YEAR 2013
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
Executive
|
|
Aggregate
|
|
Withdrawals/
|
|
Aggregate
|
|
|
Contributions
in
|
|
Earnings
in
|
|
Distributions
|
|
Balance
at
|
Name
|
|
|
2013(1)
|
|
2013(2)
|
|
in 2013
|
|
June 30, 2013(3)
|
(a)
|
|
|
(b)
|
|
(d)
|
|
(e)
|
|
(f)
|
Carlos A. Rodriguez
|
|
$
|
0
|
|
|
$
|
50,976
|
|
|
$0
|
|
$
|
469,982
|
|
Jan Siegmund
|
|
$
|
107,550
|
|
|
$
|
127,656
|
|
|
$0
|
|
$
|
948,383
|
|
Regina R. Lee
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$0
|
|
$
|
0
|
|
Steven J. Anenen
|
|
$
|
186,500
|
|
|
$
|
140,383
|
|
|
$0
|
|
$
|
1,794,923
|
|
Dermot J. OBrien
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$0
|
|
$
|
0
|
|
Christopher R.
Reidy
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$0
|
|
$
|
0
|
|
____________________
(1)
|
|
The amounts listed in
column (b) reflect 30%, and 50% of the annual bonuses for fiscal year 2012
that were payable in fiscal year 2013, but which were deferred by Messrs.
Siegmund and Anenen, respectively; the amounts for Messrs. Siegmund and
Anenen were reported as compensation in the Summary Compensation Table for
fiscal year 2012. In addition, 25% and 50% of the annual bonuses earned
for fiscal year 2013 by Messrs. Siegmund ($121,170) and Anenen ($166,363)
that were paid in August 2013 were also deferred by Messrs. Siegmund and
Anenen; these amounts were reported as compensation in the Summary
Compensation Table for fiscal year 2013. As the amount in respect of the
fiscal year 2013 bonus was not deferred until after we concluded fiscal
year 2013, such amount is not included in columns (b) and
(f).
|
|
(2)
|
|
The earnings amounts
are not reported as compensation in fiscal year 2013 in the Summary
Compensation Table, as they do not represent above-market or preferential
earnings on deferred compensation.
|
|
(3)
|
|
The following amounts
were previously reported as compensation in the Summary Compensation Table
for previous years: Mr. Siegmund, $107,550 and Mr. Anenen,
$413,150.
|
51
POTENTIAL PAYMENTS TO NAMED EXECUTIVE
OFFICERS UPON TERMINATION
OR CHANGE IN CONTROL
Change in Control Severance Plan for
Corporate Officers
We maintain
the Automatic Data Processing, Inc. Change in Control Severance Plan for
Corporate Officers, which provides for the payment of specified benefits to
officers selected by the board of directors if their employment terminates under
certain circumstances after a change in control of the company. All named
executive officers of the company participate in the change in control plan. As
of June 30, 2013, there were 28 eligible participants in the change in control
plan.
The change in control plan provides that:
-
Participants who are involuntarily terminated by
the company without cause or who leave for good reason during the two-year
period following the occurrence of a change in control will
receive:
-
A lump sum payment equal to 150% of such
participants current total annual compensation;
-
Full vesting of his or her stock
options;
-
Full vesting of restricted shares issued under
the time-based restricted stock program, to the extent such vesting
restrictions would otherwise have lapsed within two years after the date of
termination; and
-
The number of restricted shares the participant
would have been entitled to receive under the then ongoing performance-based
restricted stock programs had the performance goals been achieved at 100%
target rate.
-
Participants who are involuntarily terminated by
the company without cause or who leave for good reason during the third year
following the occurrence of a change in control will receive:
-
A lump sum payment equal to 100% of such
participants current total annual compensation;
-
Full vesting of his or her stock options, to the
extent that such options would have otherwise vested within one year after
the date of termination; and
-
Full vesting of restricted shares issued under
the time-based restricted stock program, to the extent such vesting
restrictions would otherwise have lapsed within one year after the date of
termination.
A participants current total annual compensation equals his or her
highest rate of annual salary during the calendar year in which his or her
employment terminates or the year immediately prior to the year of such
termination, plus his or her average annual bonus compensation earned in respect
of the two most recent calendar years immediately preceding the calendar year in
which his or her employment terminates.
The change in control plan defines good reason as the occurrence of any
of the following events after a change in control without the participants
written consent:
-
material diminution in the value and importance of
a participants position, duties, responsibilities or
authority as of the date immediately prior to the change in control;
or
-
a reduction in a participants aggregate
compensation or benefits; or
-
a failure of any successor of the company to
assume in writing the obligations under the change in control
plan.
The change in control plan defines cause as:
-
gross negligence or willful misconduct by a
participant, which is materially injurious to the company,
monetarily or otherwise;
-
misappropriation or fraud with regard to the
company or its assets; or
-
conviction of, or the pleading of guilty or nolo
contendere to, a felony involving the assets or business of
the company.
52
The change in
control payments potentially due to Ms. Lee and Messrs. Anenen and Siegmund are
payable solely pursuant to the terms of the change in control plan. However,
Messrs. Rodriguez and OBrien are each entitled to receive the greater of the
benefits and payments provided under the change in control plan and/or their
employment agreements. Certain terms of Messrs. Rodriguezs and OBriens
employment agreement are summarized below and on page 39 of this proxy
statement.
A change in control will have occurred under the change in control plan
if:
-
any person (as defined in Section 3(a)(9) of the
Exchange Act), excluding the company, any subsidiary
of the company, or any employee benefit plan sponsored or maintained by
the company (including any
trustee of any such
plan acting in its capacity as trustee), becomes the beneficial owner (as
defined in
Rule 13d-3 under the Exchange Act)
of securities of the company representing 35% or more of the total
combined voting power of the companys then
outstanding securities;
-
there occurs a merger, consolidation or other
business combination of the company (a transaction),
other than a transaction immediately following which the stockholders
of the company, immediately prior
to the
transaction, continue to be the beneficial owners of securities of the
resulting entity representing
more than 65% of
the voting power in the resulting entity, in substantially the same
proportions as their
ownership of company
voting securities immediately prior to the transaction; or
-
there occurs the sale of all or substantially all
of the companys assets, other than a sale immediately
following which the stockholders of the company immediately prior to
the sale are the beneficial owners
of
securities of the purchasing entity representing more than 65% of the voting
power in the purchasing
entity, in
substantially the same proportions as their ownership of company voting
securities immediately
prior to the
transaction.
If instructed by a participant, the company will reduce payments under
the change in control plan to avoid the application of excise taxes pursuant to
Section 4999 of the Internal Revenue Code.
Employment Agreement with Mr.
Rodriguez
Mr. Rodriguez entered into an employment agreement with the company on
December 14, 2011. The employment agreement provides that the companys
obligation to make payments to Mr. Rodriguez will cease on the date he is
terminated for cause,
i.e.
, if he has:
-
been convicted of or pled nolo contendere to a
criminal act for which the punishment under applicable law
may be imprisonment for more than one year;
-
willfully or recklessly failed or refused to
perform his material obligations as president and chief executive
officer;
-
committed any act or omission of gross negligence
in the performance of his material duties under the
employment agreement;
-
committed any act of willful or reckless
misconduct;
-
violated any of his restrictive covenants;
or
-
violated either the companys code of business
conduct and ethics, or the companys code of ethics for
principal executive officer and senior financial
officers.
If Mr. Rodriguezs employment is terminated for any reason other than for
cause (as described above), and other than due to death or permanent or serious
disability or his resignation from the company for any reason, Mr. Rodriguez
will receive (subject to his delivery of an irrevocable release of claims
against the company):
-
an amount (in addition to any previously accrued
but unpaid amounts) equal to 2.6 times his annual salary
for the fiscal year of termination, payable in monthly
installments over 12 months; and
-
a bonus for the fiscal year of termination that he
would have otherwise received if his employment
had not been terminated, based upon his (and to the extent applicable,
the companys) actual full-year
performance, as
determined by the compensation committee, prorated to reflect the portion of
the fiscal
year worked through the date of
termination.
53
If Mr. Rodriguez dies or becomes permanently and seriously disabled,
either physically or mentally, so that he is absent from his office due to such
disability and otherwise unable substantially to perform his services under the
employment agreement, the company may terminate his employment. Under such
circumstances, the company will continue to pay Mr. Rodriguezs full
compensation up to and including the effective date of his termination upon his
death or for disability.
If Mr. Rodriguez elects to voluntarily resign from the company for any
reason, the company will continue to pay Mr. Rodriguezs full compensation up to
the date his employment ends.
Mr. Rodriguezs employment agreement provides that he will continue to
participate in the change in control plan described above. Following a change in
control of ADP, as defined under the plan, and a subsequent termination of Mr.
Rodriguezs employment by the company without cause, or by Mr. Rodriguez for
good reason, Mr. Rodriguez will be entitled to the greater of the benefits and
payments under the change in control plan (based on a severance benefit multiple
of 200%, reduced to 150% if the termination occurs during the third year after
the change in control) and his employment agreement.
Mr. Rodriguez has also agreed to comply with certain restrictive
covenants, including non-competition, non-solicitation, and non-hire covenants
that apply for two years following termination of his employment.
Employment Agreement with Mr.
OBrien
Mr. OBrien entered into an employment agreement with the company on
March 15, 2012. The employment agreement provides that the companys obligation
to make payments to Mr. OBrien will cease on the date he is terminated for
cause, i.e., if he has:
-
been convicted of or pled nolo contendere to a
criminal act for which the punishment under applicable law
may be imprisonment for more than one year;
-
willfully or recklessly failed or refused to
perform his material obligations as corporate vice president of
human resources;
-
committed any act or omission of gross negligence
in the performance of his material duties under the
employment agreement;
-
committed any act of willful or reckless
misconduct in the performance of his material duties under the
employment agreement;
-
violated any of his restrictive covenants;
or
-
violated the companys code of business conduct
and ethics.
If Mr. OBriens employment is terminated by the company for any reason
other than for cause (as described above), or by his resignation from the
company for good reason (as described below), Mr. OBrien will receive (subject
to his delivery of an irrevocable release of claims against the company):
-
an amount (in addition to any previously accrued
but unpaid amounts) equal to the sum of his annual
salary and target bonus, payable within 10 days after the effective
date of the release of claims; and
-
a bonus for the fiscal year of termination that he
would have otherwise received if his employment
had not been terminated, based upon his (and to the extent applicable,
the companys) actual full-year
performance, as
determined by the compensation committee, prorated to reflect the portion of
the fiscal
year worked through the date of
termination.
Mr. OBriens employment agreement defines good reason as the
occurrence of any of the following events:
-
a material diminution in Mr. OBriens base salary
that is not part of a general reduction of base salary of
the senior management team, applied proportionately;
-
a change in Mr. OBriens reporting line such that
he reports to someone other than the
chief
executive officer;
54
-
a change in Mr. OBriens duties and authority
such that he no longer presides as the most senior executive
with overall responsibility for Human Resources;
-
a reduction in Mr. OBriens pay grade level;
or
-
a material breach by the company of Mr. OBriens
employment agreement or any other agreement to
which he is a party.
In addition, if such termination without cause, or resignation for good
reason, becomes effective prior to May 1, 2015, then any unvested shares of his
initial grant of time-based restricted stock and shares of restricted stock
granted in respect of the companys fiscal year 2013 PBRS program, as well as
the unvested portion of his initial grant of stock options, shall accelerate and
vest in full, provided that any vested options must be exercised within 60 days
of the date of acceleration.
If Mr. OBrien dies or becomes permanently and seriously disabled, either
physically or mentally, so that he is absent from his office due to such
disability and otherwise unable substantially to perform his services under the
employment agreement, the company may terminate his employment. Under such
circumstances, the company will continue to pay Mr. OBriens full compensation
up to and including the effective date of his termination upon his death or for
disability.
If Mr. OBrien elects to voluntarily resign from the company for any
reason (other than good reason), the company will continue to pay Mr. OBriens
full compensation up to the date his employment ends.
Mr. OBriens employment agreement provides that he will participate in
the change in control plan described above, and, as noted above, in the event of
a change in control of ADP, as defined under the plan, Mr. OBrien will be
entitled to the greater of the benefits and payments under the change in control
plan and his employment agreement.
Mr. OBrien has also agreed to comply with certain restrictive covenants,
including non-competition, non-solicitation, and non-hire covenants that apply
for two years following termination of his employment.
Health Coverage
Certain executives, including named executive officers, who terminate
employment with the company after they have attained age 55 and been credited
with ten years of service are eligible to participate in our executive retiree
medical plan.
Deferred Compensation
Under the ADP Deferred Compensation Plan, all U.S. executives of the
company (including the named executive officers) can defer all or a portion of
their annual cash bonuses and/or performance-based restricted stock into a
deferred compensation account payable following separation from the company. For
a description of the ADP Deferred Compensation Plan and aggregate deferred
compensation for our named executive officers at June 30, 2013, see Deferred
Compensation Program on page 50 of this proxy statement.
Termination and Change in Control
Tables
The following tables set forth the payments that each of our named
executive officers who were serving as executive officers as of June 30, 2013
would have received under various termination scenarios on June 30, 2013.
Pension benefits, which are described on page 48 of this proxy statement, and
deferred compensation balances, which are described on page 51 of this proxy
statement, are not included in the tables below in accordance with applicable
proxy statement disclosure requirements except to the extent of any incremental
value payable in any of such termination scenarios. With regard to the payments
on a change in control, the amounts detailed below presume that each named
executive officers employment was terminated by the company without cause or by
the executive for good reason within two years following the change in control
occurring on June 30, 2013.
55
Potential Payments upon Termination
or Change in Control for
Carlos A. Rodriguez
|
|
Termination
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
Following Change
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
Payment Elements
|
|
|
in Control
|
|
Death
|
|
Disability
|
|
Without Cause
|
|
Retirement
|
Termination Payment
|
|
|
$
|
4,158,060
|
(1)
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
3,647,520
|
(2)
|
|
|
$0
|
|
Stock Options
(3)
|
|
|
$
|
3,721,592
|
|
|
$
|
3,721,592
|
|
$
|
3,721,592
|
|
|
$
|
0
|
|
|
|
$0
|
|
Restricted Stock (4)
|
|
|
$
|
3,367,254
|
|
|
$
|
2,678,654
|
|
$
|
2,678,654
|
|
|
$
|
0
|
|
|
|
$0
|
|
Supplemental Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
Plan
|
|
|
$
|
0
|
|
|
$
|
0
|
|
$
|
2,664,278
|
(5)
|
|
$
|
0
|
|
|
|
$0
|
|
Total
|
|
|
$
|
11,246,906
|
|
|
$
|
6,400,246
|
|
$
|
9,064,524
|
|
|
$
|
3,647,520
|
|
|
|
$0
|
|
____________________
(1)
|
|
Represents payment of
two times each of (i) highest rate of annual salary during the calendar
year in which employment terminates or the year immediately prior to the
termination ($850,000) and (ii) average annual bonus for the two most
recently completed calendar years ($1,229,030).
|
|
(2)
|
|
Represents an amount
equal to 2.6 times annual salary ($850,000) and actual annual bonus
($1,437,520).
|
|
(3)
|
|
Assumes all unvested
options immediately vested and were exercised on June 30, 2013 when the
last closing price of a share of common stock of the company on the NASDAQ
Global Select Market was $68.86 per share.
|
|
(4)
|
|
Amount in the
Termination Following Change in Control column includes $688,600
attributable to the vesting of time-based restricted stock and $2,678,654
attributable to the one-year performance-based restricted stock program
for fiscal year 2013, and assumes that performance goals of this program
will be achieved at 100% target rate. Amounts in Death and Disability
columns are attributable to the fiscal year 2013 one-year performance-based restricted stock program and assume that performance goals will be
achieved at 100% target rate.
|
|
(5)
|
|
Represents present
value of the incremental benefit using the RP-2000 white collar mortality
table (projected to 2020) and a 4.50% discount rate, assuming a disability
occurring on June 30, 2013.
|
Potential Payments upon Termination
or Change in Control for
Jan Siegmund
|
Termination
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
Following Change
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
Payment
Elements
|
|
in Control
|
|
Death
|
|
Disability
|
|
Without Cause
|
|
Retirement
|
Termination Payment
|
|
$
|
1,393,718
|
(1)
|
|
$
|
0
|
|
$
|
0
|
|
|
|
$0
|
|
|
|
$0
|
|
Stock Options (2)
|
|
$
|
620,722
|
|
|
$
|
620,722
|
|
$
|
620,722
|
|
|
|
$0
|
|
|
|
$0
|
|
Restricted Stock (3)
|
|
$
|
877,965
|
|
|
$
|
516,450
|
|
$
|
516,450
|
|
|
|
$0
|
|
|
|
$0
|
|
Supplemental Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plan
|
|
$
|
0
|
|
|
$
|
0
|
|
$
|
1,422,368
|
(4)
|
|
|
$0
|
|
|
|
$0
|
|
Total
|
|
$
|
2,892,405
|
|
|
$
|
1,137,172
|
|
$
|
2,559,540
|
|
|
|
$0
|
|
|
|
$0
|
|
____________________
(1)
|
|
Represents payment of
one and one-half times each of (i) highest rate of annual salary during
the calendar year in which employment terminates or the year immediately
prior to the termination ($525,000) and (ii) average annual bonus for the
two most recently completed calendar years ($404,145).
|
|
(2)
|
|
Assumes all unvested
options immediately vested and were exercised on June 30, 2013 when the
last closing price of a share of common stock of the company on the NASDAQ
Global Select Market was $68.86 per share.
|
|
(3)
|
|
Amount in the
Termination Following Change in Control column includes $361,515
attributable to the vesting of time-based restricted stock and $516,450
attributable to the one-year performance-based restricted stock program
for fiscal year 2013, and assumes that performance goals of this program
will be achieved at 100% target rate. Amounts in Death and Disability
columns are attributable to the fiscal year 2013 one-year
performance-based restricted stock program and assume that performance
goals will be achieved at 100% target rate.
|
|
(4)
|
|
Represents present
value of the incremental benefit using the RP-2000 white collar mortality
table (projected to 2020) and a 4.50% discount rate, assuming a disability
occurring on June 30, 2013.
|
56
Potential Payments upon Termination
or Change in Control for
Regina R. Lee
|
|
Termination
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
Following Change
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Payment Elements
|
|
|
in Control
|
|
Death
|
|
Disability
|
|
Without Cause
|
|
Retirement
|
Termination Payment
|
|
|
$
|
1,497,726
|
(1)
|
|
$
|
0
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
Stock Options
(2)
|
|
|
$
|
830,102
|
|
|
$
|
830,102
|
|
$
|
830,102
|
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
Restricted Stock (3)
|
|
|
$
|
1,514,920
|
|
|
$
|
826,320
|
|
$
|
826,320
|
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
Supplemental
Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
Plan
|
|
|
$
|
0
|
|
|
$
|
0
|
|
$
|
1,404,744
|
(4)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
Health Coverage (5)
|
|
|
$
|
174,000
|
|
|
$
|
0
|
|
$
|
174,000
|
|
|
|
$
|
174,000
|
|
|
|
$
|
174,000
|
|
Total
|
|
|
$
|
4,016,748
|
|
|
$
|
1,656,422
|
|
$
|
3,235,166
|
|
|
|
$
|
174,000
|
|
|
|
$
|
174,000
|
|
____________________
(1)
|
|
Represents payment of
one and one-half times each of (i) highest rate of annual salary during
the calendar year in which employment terminates or the year immediately
prior to the termination ($516,254) and (ii) average annual bonus for the
two most recently completed calendar years ($482,230).
|
|
(2)
|
|
Assumes all unvested
options immediately vested and were exercised on June 30, 2013 when the
last closing price of a share of common stock of the company on the NASDAQ
Global Select Market was $68.86 per share. If Ms. Lees employment is
terminated due to retirement, then any stock options granted to her under
our 2008 Omnibus Award Plan more than one year prior to such retirement
shall remain outstanding and shall become exercisable on their regularly
scheduled vesting dates as if her employment had not
terminated.
|
|
(3)
|
|
Amount in the
Termination Following Change in Control column includes $688,600
attributable to the vesting of time-based restricted stock and $826,320
attributable to the one-year performance-based restricted stock program
for fiscal year 2013, and assumes that performance goals of this program
will be achieved at 100% target rate. Amounts in Death and Disability
columns are attributable to the fiscal year 2013 one-year performance-based restricted stock program and assume that performance goals will be
achieved at 100% target rate.
|
|
(4)
|
|
Represents present
value of the incremental benefit using the RP-2000 white collar mortality
table (projected to 2020) and a 4.50% discount rate, assuming a disability
occurring on June 30, 2013.
|
|
(5)
|
|
Represents the present
value of Ms. Lees health coverage under our retiree medical plan using a
discount rate of 3.13% and a medical inflation rate beginning at 7.35% for
2013-2014 and ultimately settling at 4.50% by
2028.
|
Potential Payments upon Termination
or Change in Control for
Stephen J. Anenen
|
Termination
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
Following Change
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Payment Elements
|
|
in Control
|
|
Death
|
|
Disability
|
|
Without Cause
|
|
Retirement
|
Termination Payment
|
|
$
|
1,268,074
|
(1)
|
|
$
|
0
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
Stock Options
(2)
|
|
$
|
670,062
|
|
|
$
|
670,062
|
|
$
|
670,062
|
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
Restricted Stock (3)
|
|
$
|
964,040
|
|
|
$
|
619,740
|
|
$
|
619,740
|
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
Supplemental
Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
Plan
|
|
$
|
0
|
|
|
$
|
0
|
|
$
|
668,235
|
(4)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
Health Coverage (5)
|
|
$
|
104,000
|
|
|
$
|
0
|
|
$
|
104,000
|
|
|
|
$
|
104,000
|
|
|
|
$
|
104,000
|
|
Total
|
|
$
|
3,006,176
|
|
|
$
|
1,289,802
|
|
$
|
2,062,037
|
|
|
|
$
|
104,000
|
|
|
|
$
|
104,000
|
|
____________________
(1)
|
|
Represents payment of
one and one-half times each of (i) highest rate of annual salary during
the calendar year in which employment terminates or the year immediately
prior to the termination ($462,376) and (ii) average annual bonus for the
two most recently completed calendar years ($383,007).
|
|
(2)
|
|
Assumes all unvested
options immediately vested and were exercised on June 30, 2013 when the
last closing price of a share of common stock of the company on the NASDAQ
Global Select Market was $68.86 per share. If Mr. Anenens employment is
terminated due to retirement, then any stock options granted to him under
our 2008 Omnibus Award Plan more than one year prior to such retirement
shall remain outstanding and shall become exercisable on their regularly
scheduled vesting dates as if his employment had not
terminated.
|
57
(3)
|
Amount in the Termination
Following Change in Control column includes $344,300 attributable to the
vesting of time-based restricted stock and $619,740 attributable to the
one-year performance-based restricted stock program for fiscal year 2013,
and assumes that performance goals of this program will be achieved at
100% target rate. Amounts in Death and Disability columns are attributable
to the fiscal year 2013 one-year performance-based restricted stock
program and assume that performance goals will be achieved at 100% target
rate.
|
|
(4)
|
Represents present value of the
incremental benefit using the RP-2000 white collar mortality table
(projected to 2020) and a 4.50% discount rate, assuming a disability
occurring on June 30, 2013.
|
|
(5)
|
Represents the present value of
Mr. Anenens health coverage under our retiree medical plan using a
discount rate of 3.13% and a medical inflation rate beginning at 7.35% for
2013-2014 and ultimately settling at 4.50% by
2028.
|
Potential Payments upon Termination
or Change in Control for
Dermot J. OBrien
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
Following Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
Payment
Elements
|
|
|
in Control
|
|
Death
|
|
Disability
|
|
Without
Cause
|
|
Retirement
|
Termination Payment
|
|
|
|
$
|
1,059,190
|
(1)
|
|
|
|
$
|
0
|
|
|
|
|
|
$
|
0
|
|
|
|
|
|
$
|
807,500
|
(2)
|
|
|
|
$0
|
|
Stock Options (3)
|
|
|
|
$
|
514,935
|
|
|
|
|
$
|
514,935
|
|
|
|
|
|
$
|
514,935
|
|
|
|
|
|
$
|
514,935
|
|
|
|
|
$0
|
|
Restricted Stock (4)
|
|
|
|
$
|
1,067,330
|
|
|
|
|
$
|
585,310
|
|
|
|
|
|
$
|
585,310
|
|
|
|
|
|
$
|
1,067,330
|
|
|
|
|
$0
|
|
Supplemental Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plan
|
|
|
|
$
|
0
|
|
|
|
|
$
|
0
|
|
|
|
|
|
$
|
217,802
|
(5)
|
|
|
|
|
$
|
0
|
|
|
|
|
$0
|
|
Total
|
|
|
|
$
|
2,641,455
|
|
|
|
|
$
|
1,100,245
|
|
|
|
|
|
$
|
1,318,047
|
|
|
|
|
|
$
|
2,389,765
|
|
|
|
|
$0
|
|
____________________
(1)
|
Represents payment of one and
one-half times each of (i) highest rate of annual salary during the
calendar year in which employment terminates or the year immediately prior
to the termination ($475,000) and (ii) average annual bonus for the two
most recently completed calendar years ($231,127).
|
|
(2)
|
Represents an amount equal to one
times annual salary ($475,000) and target bonus ($332,500).
|
|
(3)
|
Assumes all unvested options
immediately vested and were exercised on June 30, 2013 when the last
closing price of a share of common stock of the company on the NASDAQ
Global Select Market was $68.86 per share.
|
|
(4)
|
Amount in the Termination
Following Change in Control and Involuntary Termination Without Cause
columns includes $482,020 attributable to the vesting of time-based
restricted stock and $585,310 attributable to the one-year
performance-based restricted stock program for fiscal year 2013, and
assumes that performance goals of this program will be achieved at 100%
target rate. Amounts in Death and Disability columns are attributable to
the fiscal year 2013 one-year performance-based restricted stock program
and assume that performance goals will be achieved at 100% target
rate.
|
|
(5)
|
Represents present value of the
incremental benefit using the RP-2000 white collar mortality table
(projected to 2020) and a 4.50% discount rate, assuming a disability
occurring on June 30, 2013.
|
Mr. Reidys Separation
Agreement
Mr. Reidy
ceased to be an officer of the company effective on November 2, 2012 and
separated from the company on January 2, 2013. In connection with his
separation, Mr. Reidy entered into a separation agreement with the company on
November 12, 2012.
In exchange for a general release of claims by Mr. Reidy, the company
agreed to provide the following payments and benefits to Mr. Reidy:
-
a separation payment in the amount of $571,200,
payable in 12 equal monthly installments;
-
a payment in the amount of $457,000, which is the
equivalent of Mr. Reidys target annual bonus for fiscal
year 2013, payable on the companys regular January 2013 pay
date; and
-
a payment in the amount of $759,070, which is the
cash value of the equivalent of 13,000 shares of
company common stock based on the per share closing trading price of
company common stock on
January 2, 2013.
58
The foregoing
payments and benefits were made pursuant to the termination provisions of Mr.
Reidys employment agreement. In addition, the separation agreement provides
that:
-
all of the time-based restricted stock held by Mr.
Reidy that was scheduled to vest prior to January 2, 2014
in accordance with the original vesting schedule applicable
to such shares will continue to be retained by
him, and the restrictions thereon will continue to lapse in the same
manner as would have been the case
had he
continued to be an employee of the company. As of January 2, 2013, Mr. Reidy
held 4,000 shares
of time-based restricted
stock, which had a value of $233,560 based on the closing price of a share
of
common stock of the company on the NASDAQ
Global Select Market on January 2, 2013;
-
Mr. Reidy was allowed to keep the 13,000 shares of
restricted stock awarded to him under the fiscal year
2012 PBRS program, which restrictions were scheduled to lapse on March
4, 2013, and the restrictions on
such shares
continued to lapse in the same manner as would have been the case had he
continued to be
an employee of the company.
Such restricted stock had a value of $759,070 based on the closing price
of
a share of common stock of the company on
the NASDAQ Global Select Market on January 2, 2013;
-
Mr. Reidy forfeited the target grant of 13,000
shares of restricted stock under the fiscal year 2013
PBRS program;
-
all of Mr. Reidys outstanding unvested stock
options shall continue to vest through January 2, 2014. The
excess of the closing price of a share of common stock of
the company on the NASDAQ Global Select
Market
on January 2, 2013 over the exercise price of these stock options was
$322,140. Mr. Reidy may
exercise all vested
company stock options by January 2, 2015 (but in no event later than their
original
expiration date), after which they
shall be cancelled;
-
Mr. Reidy was allowed to keep his company car
(which had a value of $27,616);
-
Mr. Reidy was provided access to a 12-month
outplacement assistance program selected by the company
and at the companys expense; and
-
Mr. Reidy will receive his accrued benefits under
the companys Supplemental Officers Retirement Plan
pursuant to the terms of the plan.
The separation agreement also required the company to:
-
pay Mr. Reidy for his accrued and unused vacation
as of January 2, 2013; and
-
reimburse Mr. Reidy for outstanding expenses
incurred through January 2, 2013, in accordance with the
companys existing policy.
The separation agreement also provides that Mr. Reidy is subject to the
following restrictive covenants, the violation of which will result in
forfeiture and a requirement to return to the company all the cash payments
(other than accrued benefits) described above as well as the benefit of the
vesting of any rights or lapsing of any restrictions on company equity that he
would otherwise expect to receive under the separation agreement described
above:
-
Mr. Reidy is bound by confidentiality,
non-disclosure, and non-disparagement obligations; and
-
Mr. Reidy is bound by non-competition,
non-solicitation and non-hire obligations until January 2, 2015.
In addition, Mr. Reidy is bound by non-competition restrictions
applicable to any agreements executed by him in connection with his prior grants
of stock options and restricted stock, which will not terminate until 24 months
after January 2, 2013.
59
AUDIT COMMITTEE REPORT
The audit
committee oversees the financial management of the company, the companys
independent auditors and financial reporting procedures of the company on behalf
of the board of directors. In fulfilling its oversight responsibilities, the
committee reviewed and discussed the companys audited financial statements with
management, which has primary responsibility for the preparation of the
financial statements. In performing its review, the committee discussed the
propriety of the application of accounting principles by the company, the
reasonableness of significant judgments and estimates used in the preparation of
the financial statements, and the clarity of disclosures in the financial
statements. Management represented to the audit committee that the companys
financial statements were prepared in accordance with generally accepted
accounting principles. The committee also reviewed and discussed the companys
audited financial statements with Deloitte & Touche LLP, an independent
registered public accounting firm, the companys independent auditors for fiscal
year 2013, which is responsible for expressing an opinion on the conformity of
the companys audited financial statements with generally accepted accounting
principles in accordance with standards of the Public Company Accounting
Oversight Board.
During the course of fiscal year 2013, management completed the
documentation, testing and evaluation of the companys system of internal
control over financial reporting in response to the requirements set forth in
Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. The audit
committee was kept apprised of the progress of the evaluation and provided
oversight and advice to management during the process. In connection with this
oversight, the audit committee received periodic updates provided by management
and Deloitte & Touche LLP at each audit committee meeting. At the conclusion
of the process, management provided the audit committee with, and the audit
committee reviewed, a report on the effectiveness of the companys internal
control over financial reporting. The audit committee also reviewed the report
of management contained in the annual report on Form 10-K for the fiscal year
ended June 30, 2013 filed with the SEC, as well as Deloitte & Touche LLPs
Report of Independent Registered Public Accounting Firm included in the annual
report on Form 10-K for the fiscal year ended June 30, 2013 related to its audit
of the consolidated financial statements and financial statement schedule, and
the effectiveness of internal control over financial reporting. The audit
committee continues to oversee the companys efforts related to its internal
control over financial reporting and managements preparations for the
evaluation in fiscal year 2014.
The audit committee has discussed with Deloitte & Touche LLP the
matters that are required to be discussed by Statement on Auditing Standards No.
61 (Codification of Statements on Auditing Standards, AU § 380) and the SEC Rule
207. Deloitte & Touche LLP has provided to the committee the written
disclosures and the letter required by applicable requirements of the Public
Company Accounting Oversight Board regarding Deloitte & Touche LLPs
communications with the audit committee concerning independence, and the
committee discussed with Deloitte & Touche LLP the firms independence,
including the matters in those written disclosures. The committee also
considered whether Deloitte & Touche LLPs provision of non-audit services
to the company and its affiliates and the fees and costs billed and expected to
be billed by Deloitte & Touche LLP for those services, is compatible with
Deloitte & Touche LLPs independence. The audit committee has discussed with
the companys internal auditors and with Deloitte & Touche LLP, with and
without management present, their respective evaluations of the companys
internal accounting controls and the overall quality of the companys financial
reporting.
In addition, the committee discussed with management, and took into
consideration when issuing this report, the Auditor Independence Policy, which
prohibits the company or any of its affiliates from entering into most non-audit
related consulting arrangements with its independent auditors. The Auditor
Independence Policy is discussed in further detail below under Independent
Registered Public Accounting Firms Fees.
Based on the considerations referred to above, the audit committee
recommended to the board of directors that the audited financial statements be
included in our annual report on Form 10-K for the fiscal year ended June 30,
2013. In addition, the committee appointed Deloitte & Touche LLP as the
independent auditors for the company for the fiscal year 2014, subject to the
ratification by the stockholders at the 2013 Annual Meeting of
Stockholders.
|
Audit Committee
|
|
of the Board of Directors
|
|
|
|
Eric C. Fast, Chairman
|
|
Gregory D. Brenneman
|
|
Richard T. Clark
|
|
Linda R. Gooden
|
|
R. Glenn
Hubbard
|
60
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRMS FEES
In addition to retaining Deloitte & Touche LLP to audit the
consolidated financial statements for fiscal year 2013, the audit committee
retained Deloitte & Touche LLP to provide various services in fiscal year
2013 and fiscal year 2012. The aggregate fees billed by Deloitte & Touche
LLP in fiscal year 2013 and fiscal year 2012 for these various services
were:
Type of
Fees
|
|
|
FY
2013
|
|
FY
2012
|
|
|
($ in thousands)
|
Audit Fees
|
|
$
|
8,148
|
|
|
|
$
|
7,859
|
Audit-Related Fees
|
|
|
1,784
|
|
|
|
|
1,966
|
Tax Fees
|
|
|
1,541
|
|
|
|
|
1,431
|
All Other Fees
|
|
|
242
|
|
|
|
|
84
|
Total
|
|
$
|
11,715
|
|
|
|
$
|
11,340
|
In the above
table, in accordance with the SEC definitions, audit fees are fees we paid
Deloitte & Touche LLP for professional services for the audit of the
companys consolidated financial statements included in our annual report on
Form 10-K and review of financial statements included in our quarterly reports
on Form 10-Q, services that are normally provided by Deloitte & Touche LLP
in connection with statutory and regulatory filings or engagements or any other
services performed by Deloitte & Touche LLP to comply with generally
accepted auditing standards; audit-related fees are fees billed by Deloitte
& Touche LLP for assurance and related services that are typically performed
by the independent public accountant (e.g., due diligence services, employee
benefit plan audits and internal control reviews); tax fees are fees for tax
compliance, tax advice and tax planning; and all other fees are fees billed by
Deloitte & Touche LLP to the company for any services not included in the
first three categories.
The board of directors has adopted an auditor independence policy that
prohibits our independent auditors from providing:
-
bookkeeping or other services related to the
accounting records or financial statements of the company;
-
financial information systems design and
implementation services;
-
appraisal or valuation services, fairness opinions
or contribution-in-kind reports;
-
actuarial services;
-
internal audit outsourcing services;
-
management functions or human resources
services;
-
broker or dealer, investment adviser or investment
banking services;
-
legal services and expert services unrelated to
the audit; and
-
any other service that the Public Company
Accounting Oversight Board or the Securities and Exchange
Commission determines, by regulation, is
impermissible.
The audit committee has adopted a policy requiring that all audit,
audit-related and non-audit services be pre-approved by the audit committee. All
services provided to us by the independent auditors in fiscal year 2013 and
fiscal year 2012 were pre-approved by the audit committee. The independent
auditors may only perform non-prohibited non-audit services that have been
specifically approved in advance by the audit committee, regardless of the
dollar value of the services to be provided. In addition, before the audit
committee will consider granting its approval, the companys management must
have determined that such specific non-prohibited non-audit services can be best
performed by the independent auditors based on its in-depth knowledge of our
business, processes and policies. The audit committee, as part of its approval
process, considers the potential impact of any proposed work on the independent
auditors independence.
61
PROPOSAL 3
APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
At the Annual
Meeting, stockholders will vote on the ratification of the appointment by the
audit committee of Deloitte & Touche LLP, an independent registered public
accounting firm, as the independent certified public accountants to audit the
accounts of the company and its subsidiaries for the fiscal year that began on
July 1, 2013. Deloitte & Touche LLP is a member of the SEC Practice Section
of the American Institute of Certified Public Accountants. A representative of
Deloitte & Touche LLP will be present at the Annual Meeting and will have an
opportunity to make a statement if he or she desires. He or she will be
available to answer appropriate questions.
Stockholder Approval
Required
The affirmative vote of the holders of a majority of the shares present
in person or by proxy and entitled to vote thereon at the meeting of
stockholders is required to ratify Deloitte & Touche LLPs appointment as
the companys independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR
THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
COMPANYS INDEPENDENT AUDITORS.
PROPOSAL 4
RE-APPROVAL OF THE PERFORMANCE-BASED
PROVISIONS OF THE
2008 OMNIBUS AWARD PLAN
Background
The purpose of the 2008 Omnibus Award Plan is to provide a means through
which the company and its affiliates may attract and retain key personnel and to
provide a means whereby directors, officers, employees, consultants and advisors
of the company and its affiliates can acquire and maintain an equity interest in
the company, or be paid incentive compensation, including incentive compensation
measured by reference to the value of the companys common stock, thereby
strengthening their commitment to the success of the company and its affiliates
and aligning their interests with those of the companys
stockholders.
The 2008 Omnibus Award Plan is generally intended to provide incentive
compensation and performance compensation awards that may qualify as
performance-based compensation within the meaning of Section 162(m) of Internal
Revenue Code of 1986, as amended (the Code), and the applicable regulations
(which we refer to collectively as Section 162(m)). Section 162(m) generally
does not allow publicly held companies to obtain tax deductions for compensation
of more than $1 million paid in any year to their chief executive officer, or
any of their other three most highly compensated executive officers (other than
the chief financial officer), unless such payments are performance-based in
accordance with conditions specified under Section 162(m). One of the
requirements of performance-based compensation for purposes of Section 162(m) is
that the material terms of the performance goals under which compensation may be
paid be disclosed to and approved by stockholders. With respect to the 2008
Omnibus Award Plan, Section 162(m) requires that the stockholders re-approve
these provisions every five years. For purposes of Section 162(m), the material
terms include the employees eligible to receive compensation, a description of
the business criteria on which the performance goal is based, and the maximum
amount of compensation that can be paid to an employee under the performance
goal. We refer to these as the performance-based provisions of the 2008
Omnibus Award Plan. With respect to awards under the 2008 Omnibus Award Plan,
each of these performance-based provisions is discussed below, and stockholder
approval of the performance-based provisions of the 2008 Omnibus Award Plan will
constitute re-approval of the material terms of the 2008 Omnibus Award Plan for
purposes of the approval requirements of Section 162(m).
62
Proposal
Our
stockholders are being asked to re-approve the performance-based provisions
under the Automatic Data Processing, Inc. 2008 Omnibus Award Plan. The board of
directors adopted the 2008 Omnibus Award Plan on August 14, 2008, and our
stockholders approved it on November 11, 2008. The 2008 Omnibus Award Plan has
not been amended since it was originally approved by stockholders in 2008. We
are not asking the stockholders to approve any revisions or changes to the 2008
Omnibus Award Plan. You are being asked to re-approve the performance-based
provisions of the 2008 Omnibus Award Plan so that compensation in respect of
payments and awards made under the 2008 Omnibus Award Plan may continue to
qualify as performance-based compensation for purposes of Section 162(m).
However, nothing in this proposal precludes the company or the plan
administrator from granting awards that do not qualify for tax deductibility
under Section 162(m), nor is there any guarantee that awards intended to qualify
for tax deductibility under Section 162(m) will ultimately be viewed as so
qualifying by the Internal Revenue Service.
Stockholder Approval
Required
The affirmative vote of the holders of a majority of the shares present
in person or by proxy and entitled to vote thereon at the meeting of
stockholders is required to approve the performance-based provisions of the 2008
Omnibus Award Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR
THE APPROVAL OF THE PERFORMANCE-BASED PROVISIONS OF THE 2008 OMNIBUS AWARD
PLAN.
Summary Description of the 2008
Omnibus Award Plan
A copy of the 2008 Omnibus Award Plan is attached hereto as Appendix A.
The following summary of the material features of the 2008 Omnibus Award Plan is
qualified in its entirety by reference to the complete text of the 2008 Omnibus
Award Plan.
Administration
.
Our 2008 Omnibus Award Plan is administered by a committee (which we refer to as
the Committee) approved by our board of directors (or, if no Committee has
been appointed, by the board of directors). Our compensation committee currently
administers the 2008 Omnibus Award Plan. The Committee has the authority to
determine the terms and conditions of any agreements evidencing any awards
granted under our 2008 Omnibus Award Plan and to establish, amend, suspend or
waive any rules and regulations relating to our 2008 Omnibus Award Plan. The
Committee has full discretion to administer and interpret the 2008 Omnibus Award
Plan and to determine, among other things, the time or times at which the awards
may be exercised and whether and under what circumstances an award may be
exercised.
Eligibility
. Any
of our employees, directors, officers, consultants or advisors and those of our
affiliates are eligible for awards under the 2008 Omnibus Award Plan. The
Committee has the sole authority to determine who will be granted an award under
the 2008 Omnibus Award Plan.
Number of Shares Authorized
. The 2008 Omnibus Award Plan provides for an aggregate of
5,000,000 shares of our common stock plus the number of shares of our common
stock that remained available for awards under each of the Automatic Data
Processing, Inc. 2000 Stock Option Plan, the Automatic Data Processing, Inc.
2003 Director Stock Plan, the Automatic Data Processing, Inc. Key Employees
Restricted Stock Plan, and the Automatic Data Processing, Inc. Amended and
Restated Executive Incentive Compensation Plan (which we refer to collectively
as the Prior Plans) on the day the 2008 Omnibus Award Plan was originally
approved by the stockholders (which was an aggregate of 31,561,702 shares of our
common stock). No participant may be granted awards of options and stock
appreciation rights with respect to more than 3,000,000 shares of our common
stock in any consecutive 36-month period. No more than 300,000 shares of our
common stock may be granted under our 2008 Omnibus Award Plan with respect to
performance compensation awards to any single participant for a single fiscal
year during a performance period or, if the award is paid in cash, other
securities or other awards under the 2008 Omnibus Award Plan, no more than the
fair market value of 300,000 shares of our common stock on the last day of the
performance period to which the award relates. The maximum amount payable to a
participant pursuant to a cash bonus under our 2008 Omnibus Award Plan for any
single fiscal year during a performance period is $5,000,000. No more than an
aggregate of 5,000,000 shares of our common stock, plus the number of shares of
our common stock that remained available for
63
awards under the Prior Plans on the day
the 2008 Omnibus Award Plan was originally approved by the stockholders (i.e.,
an aggregate of 31,561,702 shares of our common stock), may be issued in the
aggregate in respect of incentive stock options under our 2008 Omnibus Award
Plan. All of the shares of our common stock available for awards under the 2008
Omnibus Award Plan are available for incentive stock options. If any award
granted under the 2008 Omnibus Award Plan expires, terminates, is canceled or
forfeited without being settled or exercised, or if a stock appreciation right
is settled in cash or otherwise without the issuance of shares, shares of our
common stock subject to such award will again be made available for future
grant. In addition, if any shares are surrendered or tendered to pay the
exercise price of an award or to satisfy withholding taxes owed, such shares
will again be available for grant under the 2008 Omnibus Award Plan. If there is
any change in our corporate capitalization, the Committee in its sole discretion
may make substitutions or adjustments to the number of shares reserved for
issuance under our 2008 Omnibus Award Plan, the number of shares covered by
awards then outstanding under our 2008 Omnibus Award Plan, the limitations on
awards under our 2008 Omnibus Award Plan, the exercise price of outstanding
options and such other equitable substitution or adjustments as it may determine
to be equitable.
The 2008
Omnibus Award Plan has a term of ten years from its original effective date
(i.e., ending November 11, 2018) and no further awards may be granted after that
date.
Awards Available for Grant
. The Committee may grant awards of nonqualified stock
options, incentive (qualified) stock options, stock appreciation rights,
restricted stock awards, restricted stock units, other stock-based awards,
performance compensation awards (including cash bonus awards) or any combination
of the foregoing.
Options
. The
Committee is authorized to grant options to purchase shares of common stock that
are either qualified, meaning they are intended to satisfy the requirements of
Section 422 of Code for incentive stock options, or nonqualified, meaning they
are not intended to satisfy the requirements of Section 422 of the Code. Options
granted under our 2008 Omnibus Award Plan will be subject to the terms and
conditions established by the Committee. Under the terms of our 2008 Omnibus
Award Plan, the exercise price of the options will not be less than the fair
market value of our common stock at the time of grant. Options granted under the
2008 Omnibus Award Plan will be subject to such terms, including the exercise
price and the conditions and timing of exercise, as may be determined by the
Committee and specified in the applicable award agreement. The maximum term of
an option granted under the 2008 Omnibus Award Plan is ten years from the date
of grant (or five years in the case of a qualified option granted to a 10%
stockholder). Payment in respect of the exercise of an option may be made in
cash or by check, by surrender of unrestricted shares (at their fair market
value on the date of exercise), through a net exercise, or the Committee may,
in its discretion and to the extent permitted by law, allow such payment to be
made through a broker-assisted cashless exercise mechanism or by such other
method as the Committee may determine to be appropriate. The Committee may, in
its sole discretion, accelerate the exercisability of a stock option upon a
change in control, death, disability, retirement or any other termination of a
participants employment.
In-the-money options that have not been exercised by the options
expiration date will be automatically exercised by means of a net
exercise.
Stock Appreciation Rights
. The Committee is authorized to award stock appreciation
rights (referred to in this proxy statement as SARs) under the 2008 Omnibus
Award Plan. SARs will be subject to the terms and conditions established by the
Committee and reflected in the award agreement. A SAR is a contractual right
that allows a participant to receive, either in the form of cash, shares or any
combination of cash and shares, the appreciation, if any, in the value of a
share over a certain period of time. An option granted under the 2008 Omnibus
Award Plan may include SARs, and SARs may also be awarded to a participant
independent of the grant of an option. SARs granted in connection with an option
shall be subject to terms similar to the option corresponding to such SARs. The
Committee may, in its sole discretion, accelerate the exercisability of a SAR
upon a change in control, death, disability, retirement or any other termination
of a participants employment.
In-the-money SARs that have not been exercised by the SARs expiration
date will be automatically settled at that time.
Restricted Stock
. The Committee is authorized to award restricted stock under the 2008
Omnibus Award Plan. Awards of restricted stock will be subject to the terms and
conditions established by the Committee. Restricted stock is common stock that
is subject to such restrictions as may be determined by the Committee for a
specified period. If any dividends in respect of restricted stock have been
withheld by the company during the restricted period, those
64
dividends will be paid in cash or, at
the discretion of the Committee, in common stock when the restricted period
ends, unless the restricted stock has previously been forfeited. The Committee
will determine the treatment of any unvested portion of a restricted stock award
upon termination of a participants employment or service (and may, in its sole
discretion, accelerate the lapse of any or all restrictions upon a change in
control, death, disability, retirement or any other termination of a
participants employment).
Restricted Stock Unit Awards
. The Committee is authorized to award restricted stock unit awards.
Restricted stock unit awards will be subject to the terms and conditions
established by the Committee. At the election of the Committee, the participant
will receive a number of shares of common stock equal to the number of units
earned or an amount in cash equal to the fair market value of that number of
shares at the expiration of the period over which the units are to be earned or
at a later date selected by the Committee. If a restricted stock unit award
agreement so provides, the restricted stock unit award will be credited with
dividend equivalents in respect of the common stock underlying the restricted
stock units. Any such dividend equivalents will be paid in cash or, at the
discretion of the Committee, in common stock when the restricted period ends,
unless the restricted stock unit has previously been forfeited. The Committee
will determine the treatment of any unvested portion of restricted stock unit
awards upon termination of a participants employment or service (and may, in
its sole discretion, accelerate the lapse of any or all restrictions upon a
change in control, death, disability, retirement or any other termination of a
participants employment).
Other Stock-Based Awards
. The Committee is authorized to award unrestricted common stock, and
restricted stock under our Performance-Based Restricted Stock Program or other
incentive programs that we may maintain from time to time. These awards may be
granted either alone or in tandem with other awards with such terms and
conditions as the Committee may determine.
Deferred Stock Units
. Our non-employee directors will be granted deferred stock units.
Deferred stock units entitle the director to receive a number of shares of our
common stock on a deferred basis that are equal in value to the portion of the
directors annual retainer set by the board to be paid in deferred stock units.
The board of directors may also permit directors to defer payment of any portion
of the remainder of their annual retainers. In addition, directors will be
allowed to defer payment of any portion of their meeting fees or fees they earn
for serving as a board committee chairperson. Directors may choose to have
meeting fees so deferred credited as cash or deferred stock units. Each of our
directors will be credited with deferred stock units equal to the fixed portion
of the retainer to be deferred and any elective portion the director has elected
to defer. Directors deferred stock unit accounts will be credited with dividend
equivalents whenever we pay dividends on our common stock. Dividend equivalents
will accrue interest, and meeting fees deferred by our directors will also be
credited with interest. Deferred stock units, meeting fees and dividend
equivalents will all be paid to the directors 30 days after they cease serving
as a member of our board of directors.
Performance Compensation Awards
. The Committee may grant any award other than a stock option
or a SAR under the 2008 Omnibus Award Plan in the form of a performance
compensation award by conditioning the vesting of the award on the satisfaction
of certain performance goals. The Committee may establish these performance
goals with reference to one or more of the following:
-
net earnings or net income (before or after
taxes);
-
basic or diluted earnings per share (before or
after taxes);
-
net revenue or net revenue growth;
-
gross revenue, gross revenue growth;
-
gross profit or gross profit growth;
-
net operating profit (before or after
taxes);
-
return measures (including, but not limited to,
return on investment, assets, capital, invested capital,
equity or sales);
-
cash flow measures (including, but not limited to,
operating cash flow, free cash flow and cash flow
return on capital);
65
-
earnings before or after taxes, interest,
depreciation, and/or amortization;
-
gross or operating margins;
-
productivity ratios;
-
share price (including, but not limited to, growth
measures and total stockholder return);
-
expense targets;
-
operating efficiency;
-
objective measures of customer
satisfaction;
-
working capital targets;
-
measures of economic value added;
-
inventory control;
-
stockholder return;
-
sales;
-
enterprise value;
-
client retention;
-
competitive market metrics;
-
employee retention;
-
timely completion of new product rollouts;
-
timely launch of new facilities; and
-
objective measures of personal targets, goals or
completion of projects (including, but not limited to,
succession and hiring projects, completion of specific acquisitions,
reorganizations or other corporate
transactions, expansions of specific business operations and meeting
divisional or project budgets); or
-
any combination of the foregoing.
Transferability
. Each award
may be exercised during the participants lifetime only by the participant or,
if permissible under applicable law, by the participants legal guardian or
representative and may not be otherwise transferred or encumbered by a
participant other than by will or by the laws of descent and distribution,
except that awards (other than incentive stock options) may in the sole
discretion of the Committee be transferred without consideration and on such
other terms and conditions as set forth by the Committee.
Amendment
. Our
board of directors may amend, suspend or terminate our 2008 Omnibus Award Plan
at any time; however, stockholder approval to amend our 2008 Omnibus Award Plan
may be necessary if the law so requires. Also, we would need stockholder
approval if the Committee intended to amend an award agreement in a way that
would either reduce the exercise price or strike price of a stock option or SAR,
or cancel and replace an outstanding stock option or SAR with a new option or
SAR or other award or cash in a way that would constitute a repricing for
financial statement reporting purposes or otherwise fail to qualify for equity
accounting treatment, or take any other action that is considered a repricing
for purposes of any stockholder approval rules of any securities exchange or
inter-dealer quotation system on which our securities are listed or quoted, and
in either case was not otherwise permitted by the provisions of the plan
relating to adjustments of awards in the case of changes in our capital
structure and similar events. No amendment, suspension or termination will
materially and adversely affect the rights of any participant or recipient of
any award without the consent of the participant or recipient.
66
U.S. Federal Income Tax
Consequences
The following
is a general summary of the material U.S. federal income tax consequences of the
grant and exercise and vesting of awards under our 2008 Omnibus Award Plan and
the disposition of shares acquired pursuant to the exercise of such awards and
is intended to reflect the current provisions of the Code and the regulations
thereunder. This summary is not intended to be a complete statement of
applicable law, nor does it address foreign, state, local and payroll tax
considerations. Moreover, the U.S. federal income tax consequences to any
particular participant may differ from those described herein by reason of,
among other things, the particular circumstances of such participant.
Options
. The
Code requires that, for treatment of an option as a qualified option, shares of
our common stock acquired through the exercise of a qualified option cannot be
disposed of before the later of (i) two years from the date of grant of the
option, or (ii) one year from the date of exercise. Holders of qualified options
will generally incur no federal income tax liability at the time of grant or
upon exercise of those options. However, the spread at exercise will be an item
of tax preference, which may give rise to alternative minimum tax liability
for the taxable year in which the exercise occurs. If the holder does not
dispose of the shares before two years following the date of grant and one year
following the date of exercise, the difference between the exercise price and
the amount realized upon disposition of the shares will constitute long-term
capital gain or loss, as the case may be. Assuming both holding periods are
satisfied, no deduction will be allowed to us for federal income tax purposes in
connection with the grant or exercise of the qualified option. If, within two
years following the date of grant or within one year following the date of
exercise, the holder of shares acquired through the exercise of a qualified
option disposes of those shares, the participant will generally realize taxable
compensation at the time of such disposition equal to the difference between the
exercise price and the lesser of the fair market value of the share on the date
of exercise or the amount realized on the subsequent disposition of the shares,
and that amount will generally be deductible by us for federal income tax
purposes, subject to the possible limitations on deductibility under Sections
280G and 162(m) of the Code for compensation paid to executives designated in
those Sections. Finally, if an otherwise qualified option becomes first
exercisable in any one year for shares having an aggregate value in excess of
$100,000 (based on the grant date value), the portion of the qualified option in
respect of those excess shares will be treated as a non-qualified stock option
for federal income tax purposes. No income will be realized by a participant
upon grant of a non-qualified stock option. Upon the exercise of a non-qualified
stock option, the participant will recognize ordinary compensation income in an
amount equal to the excess, if any, of the fair market value of the underlying
exercised shares over the option exercise price paid at the time of exercise. We
will be able to deduct this same amount for U.S. federal income tax purposes,
but such deduction may be limited under Sections 280G and 162(m) of the Code for
compensation paid to certain executives designated in those Sections.
Restricted Stock
. A participant will not be subject to tax upon the grant of an award of
restricted stock unless the participant otherwise elects to be taxed at the time
of grant pursuant to Section 83(b) of the Code. On the date an award of
restricted stock becomes transferable or is no longer subject to a substantial
risk of forfeiture, the participant will have taxable compensation equal to the
difference between the fair market value of the shares on that date over the
amount the participant paid for such shares, if any, unless the participant made
an election under Section 83(b) of the Code to be taxed at the time of grant. If
the participant made an election under Section 83(b), the participant will have
taxable compensation at the time of grant equal to the difference between the
fair market value of the shares on the date of grant over the amount the
participant paid for such shares, if any. (Special rules apply to the receipt
and disposition of restricted shares received by officers and directors who are
subject to Section 16(b) of the Securities Exchange Act of 1934). We will be
able to deduct, at the same time as it is recognized by the participant, the
amount of taxable compensation to the participant for U.S. federal income tax
purposes, but such deduction may be limited under Sections 280G and 162(m) of
the Code for compensation paid to certain executives designated in those
Sections.
Deferred Stock Units and Restricted Stock
Units
. A participant will not be
subject to tax upon the grant of a deferred stock unit award or a restricted
stock unit award. Rather, upon the delivery of shares or cash pursuant to a
deferred stock unit award or a restricted stock unit award, the participant will
have taxable compensation equal to the fair market value of the number of shares
(or the amount of cash) he actually receives with respect to the award. We will
be able to deduct the amount of taxable compensation to the participant for U.S.
federal income tax purposes, but the deduction may be limited under Sections
280G and 162(m) of the Code for compensation paid to certain executives
designated in those Sections.
67
SARs
. No income will be
realized by a participant upon grant of a SAR. Upon the exercise of a SAR, the
participant will recognize ordinary compensation income in an amount equal to
the fair market value of the payment received in respect of the SAR. We will be
able to deduct this same amount for U.S. federal income tax purposes, but such
deduction may be limited under Sections 280G and 162(m) of the Code for
compensation paid to certain executives designated in those Sections.
Other Stock-Based Awards
. A participant will have taxable compensation equal to the difference
between the fair market value of the shares on the date the award is settled
(whether in shares or cash, or both) over the amount the participant paid for
such shares, if any. We will be able to deduct, at the same time as it is
recognized by the participant, the amount of taxable compensation to the
participant for U.S. federal income tax purposes, but such deduction may be
limited under Sections 280G and 162(m) of the Code for compensation paid to
certain executives designated in those Sections.
Section 162(m)
.
In general, Section 162(m) of the Code denies a publicly held corporation a
deduction for U.S. federal income tax purposes for compensation in excess of
$1,000,000 per year per person to its chief executive officer and the three
other officers besides the chief financial officer whose compensation is
disclosed in its proxy statement, subject to certain exceptions. The 2008
Omnibus Award Plan is intended to satisfy an exception with respect to grants of
options and SARs to covered employees. In addition, the 2008 Omnibus Award Plan
is designed to permit certain awards of restricted stock, restricted stock
units, cash bonus awards and other awards to be awarded as performance
compensation awards intended to qualify under the performance-based
compensation exception to Section 162(m) of the Code.
New Plan
Benefits
Awards under the 2008 Omnibus Award Plan will be determined by the
compensation committee in its discretion, and it is, therefore, not possible to
predict the awards that will be made to particular officers in the future;
however, we intend to make the following grants of deferred stock units to our
non-employee directors during fiscal year 2014, which include the portion of the
annual retainer for non-employee directors paid in the form of deferred stock
units and also the portion of the annual retainer that non-employee directors
can elect to receive either in cash or deferred stock units, which such
non-employee directors have elected to receive in the form of deferred stock
units:
|
|
Dollar
|
Name and Position
|
|
Value of
Deferred
|
Non-Executive Director Group
|
|
|
Stock Units
|
Ellen R. Alemany
|
|
$220,000
|
Gregory D. Brenneman
|
|
$220,000
|
Leslie A. Brun
|
|
$370,000
|
Richard T. Clark
|
|
$220,000
|
Eric C. Fast
|
|
$235,000
|
Linda R. Gooden
|
|
$220,000
|
R. Glenn Hubbard
|
|
$220,000
|
John P. Jones
|
|
$230,000
|
Gregory L. Summe
|
|
$220,000
|
Existing Stock Option
Grants
The stock
options previously granted under the 2008 Omnibus Award Plan as of June 30, 2013
are as follows: Mr. Rodriguez, 406,000; Mr. Siegmund, 74,000; Ms. Lee, 99,000;
Mr. Anenen, 82,000; Mr. OBrien, 48,000; and Mr. Reidy 80,000; all outside
directors as a group, 75,000; all executive officers as a group, 1,122,800; and
all employees as a group, 4,368,333.
Equity Compensation Plan
Information
See Equity Compensation Plan Information on page 18 of this proxy
statement regarding compensation plans under which the companys equity
securities are authorized for issuance.
68
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
We believe that
during the fiscal year ended June 30, 2013, all filing requirements under
Section 16(a) of the Exchange Act applicable to our non-employee directors and
beneficial owners have been complied with. We also believe that during the
fiscal year ended June 30, 2013, all such filing requirements applicable to our
officers have been complied with, except that there was an inadvertent omission
to timely file a Form 4 on behalf of Mr. Dermot OBrien, which was subsequently
remedied by filing a Form 4 in March 2013.
STOCKHOLDER PROPOSALS
If a stockholder intends to submit any proposal for inclusion in the
companys proxy statement for the companys 2014 Annual Meeting of Stockholders
in accordance with Rule 14a-8 under Exchange Act, the proposal must be received
by the corporate secretary of the company no later than May 29, 2014. To be
eligible to submit such a proposal for inclusion in the companys proxy
materials for an annual meeting of stockholders pursuant to Rule 14a-8, a
stockholder must be a holder of either: (1) at least $2,000 in market value or
(2) 1% of the companys shares of common stock entitled to be voted on the
proposal, and must have held such shares for at least one year, and continue to
hold those shares through the date of such annual meeting. Such proposal must
also meet the other requirements of the rules of the Securities and Exchange
Commission relating to stockholders proposals, including Rule 14a-8, including
the permissible number and length of proposals, the circumstances in which the
company is permitted to exclude proposals and other matters governed by such
rules and regulations.
Separate from the requirements of Rule 14a-8, relating to the inclusion
of a stockholders proposal in the companys proxy statement, the companys
amended and restated by-laws require advance notice for a stockholder to bring
nominations of directors or any other business to be considered at any annual
meeting of stockholders. Specifically, our amended and restated by-laws require
that stockholders wishing to nominate candidates for election as directors or
propose any other business to be considered at our 2014 Annual Meeting of
Stockholders must notify the company of their intent in a written notice
delivered to the company in care of the companys corporate secretary at our
principal executive offices not less than 90 nor more than 120 days before the
first anniversary of the date of the 2013 Annual Meeting of Stockholders, or
November 12, 2014.
As a result, in order for the notice given by a stockholder to comply
with our amended and restated by-laws, it must be received no earlier than July
15, 2014, and no later than the close of business (5:30 p.m. Eastern Daylight
Time) on August 14, 2014, unless the date of our 2014 Annual Meeting of
Stockholders occurs more than 30 days before or 60 days after the first
anniversary of the 2013 Annual Meeting of Stockholders. In that case, our
amended and restated bylaws provide that we must receive the notice no earlier
than the close of business on the 120
th
day prior to the date of the
2014 Annual Meeting of Stockholders and not later than the close of business on
the later of the 90
th
day prior to the date of the 2014 Annual
Meeting of Stockholders or the tenth (10) day following the day on which we
first make a public announcement of the date of the meeting. To be in proper
form, a stockholders notice must also include the specified information
described in our amended and restated bylaws. You may contact our corporate
secretary at our principal executive offices for a copy of the relevant bylaw
provisions regarding the requirements for making stockholder proposals and
nominating director candidates.
If a stockholders nomination or proposal is not in compliance with the
requirements set forth in our amended and restated by-laws, the company may
disregard such nomination or proposal.
69
ELECTRONIC DELIVERY OF FUTURE
STOCKHOLDER COMMUNICATIONS
If you receive
this proxy statement and our annual report on Form 10-K for the fiscal year
ended June 30, 2013 by mail, we strongly encourage you to elect to view future
proxy statements and annual reports over the Internet and save the company the
cost of producing and mailing these documents. If you vote your shares over the
Internet this year, you will be given the opportunity to choose electronic
access at the time you vote. You can also choose electronic access by visiting
the Investor Relations section of our website at www.adp.com, or following the
instructions that you will receive in connection with next years annual meeting
of stockholders. Stockholders who choose electronic access will receive an
e-mail next year containing the Internet address to use to access the proxy
statement and annual report on Form 10-K. Your choice will remain in effect
until you cancel it. You do not have to elect Internet access each
year.
|
For the Board of Directors
|
|
|
|
Michael A. Bonarti
|
|
Secretary
|
Roseland, New Jersey
September 26,
2013
70
ANNEX A
AUTOMATIC DATA PROCESSING,
INC.
2008 OMNIBUS AWARD PLAN
1. Purpose.
The purpose of the Automatic Data Processing, Inc. 2008 Omnibus Award
Plan is to provide a means through which the Company and its Affiliates may
attract and retain key personnel and to provide a means whereby directors,
officers, employees, consultants and advisors (and prospective directors,
officers, employees, consultants and advisors) of the Company and its Affiliates
can acquire and maintain an equity interest in the Company, or be paid incentive
compensation, including incentive compensation measured by reference to the
value of Common Stock, thereby strengthening their commitment to the welfare of
the Company and its Affiliates and aligning their interests with those of the
Companys stockholders. This Plan document is an omnibus document which
includes, in addition to the Plan, separate sub-plans (
Sub Plans
) that permit
offerings of grants to employees of certain Designated Foreign Subsidiaries and
other special purpose grants in connection with certain transactions. Offerings
under the Sub Plans may be made in particular locations outside the United
States of America and shall comply with local laws applicable to offerings in
such foreign jurisdictions. The Plan shall be a separate and independent plan
from the Sub Plans, but the total number of shares of Common Stock authorized to
be issued under the Plan applies in the aggregate to both the Plan and the Sub
Plans.
2. Definitions.
The following definitions shall be applicable throughout the
Plan.
(a)
Absolute Share Limit
has the meaning given such term in Section
5(b).
(b)
Account
means the bookkeeping account established and maintained by the Company for each
Participant under Section 10(b) of the Plan.
(c)
Affiliate
means (i) any person or entity that directly or
indirectly controls, is controlled by or is under common control with the
Company and/or (ii) to the extent provided by the Committee, any person or
entity in which the Company has a significant interest. The term control
(including, with correlative meaning, the terms controlled by and under
common control with), as applied to any person or entity, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person or entity, whether through the ownership
of voting or other securities, by contract or otherwise.
(d)
Annual Retainer
means the annual retainer for Non-Employee
Directors, as set from time to time by the Board.
(e)
Annual Retainer Dollar Amount
means a dollar amount established by
the Board from time to time as the amount of the Annual Retainer that shall be
paid in the form of Deferred Stock Units.
(f)
Award
means, individually or collectively, any Incentive Stock
Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock,
Restricted Stock Unit, Other Stock-Based Award and Performance Compensation
Award granted under the Plan. For purposes of Section 5(c) of the Plan, Award
and Award under the Plan shall also mean any stock-based award granted under a
Prior Plan and outstanding on the Effective Date.
(g)
Board
means the Board of Directors of the Company.
(h)
Cause
means, in the case of a particular Award, unless the
applicable Award agreement states otherwise, (i) the Company or an Affiliate
having cause to terminate a Participants employment or service, as defined in
any employment or consulting agreement between the Participant and the Company
or an Affiliate in effect at the time of such termination or (ii) in the absence
of any such employment or consulting agreement (or the absence of any definition
of Cause contained therein), (A) the good faith determination by the Committee
that the Participant has ceased to perform his or her duties to the Company or
an Affiliate (other than as a result of his or her incapacity due to physical or
mental illness or injury), which failure amounts to an intentional and extended
neglect of his or her duties to such party, provided that no such failure shall
constitute Cause unless the Participant has been given notice of such failure
and (if cure is reasonably possible) has not cured such act or omission within
15 days following receipt of such notice, (B) the Committees good faith
determination that the Participant has engaged or is about to engage in conduct
injurious to the Company or an Affiliate, (C) the Participant having been
convicted of, or plead guilty or no contest to, a felony or any crime involving
as a material element fraud or
A-1
dishonesty, (D) the consistent failure of
the Participant to follow the lawful instructions of the Board or his or her
direct superiors, which failure amounts to an intentional and extended neglect
of his or her duties to the Company or an Affiliate thereof, or (E) in the case
of a Participant who is a Non-Employee Director, the Participant engaging in any
of the activities described in clauses (A) through (D) above. Any determination
of whether Cause exists shall be made by the Committee in its sole
discretion.
(i)
Change in
Control
shall, in the case of a particular Award, unless the applicable Award
agreement states otherwise or contains a different definition of Change in
Control, be deemed to occur upon: (A) any Person (as defined in Section
3(a)(9) of the Exchange Act), excluding the Company, any Subsidiary of the
Company, or any employee benefit plan sponsored or maintained by the Company
(including any trustee of any such plan acting in his or her capacity as
trustee), becoming the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of securities of the Company representing 35% or more of the total
combined voting power of the Companys then outstanding securities; (B) the
merger, consolidation or other business combination of the Company (a
Transaction), other than a Transaction immediately following which the
stockholders of the Company immediately prior to the Transaction continue to be
the beneficial owners of securities of the resulting entity representing more
than 65% of the voting power in the resulting entity, in substantially the same
proportions as their ownership of Company voting securities immediately prior to
the Transaction; or (C) the sale of all or substantially all of the Companys
assets, other than a sale immediately following which the stockholders of the
Company immediately prior to the sale are the beneficial owners of securities of
the purchasing entity representing more than 65% of the voting power in the
purchasing entity, in substantially the same proportions as their ownership of
Company voting securities immediately prior to the Transaction.
(j)
Code
means the Internal Revenue Code of 1986, as amended, and any
successor thereto. Reference in the Plan to any section of the Code shall be
deemed to include any regulations or other interpretative guidance under such
section, and any amendments or successor provisions to such section, regulations
or guidance.
(k)
Committee
means a committee of at least two people as the Board may
appoint to administer the Plan or, if no such committee has been appointed by
the Board, the Board.
(l)
Committee Retainer
means the retainer paid to Non-Employee
Directors in respect of service on a committee of the Board.
(m)
Common Stock
means the common stock, par value $0.10 per share, of
the Company (and any stock or other securities into which such common stock may
be converted or into which it may be exchanged).
(n)
Company
means Automatic Data Processing, Inc., a Delaware
corporation, and any successor thereto.
(o)
Date of Grant
means the date on which the granting of an Award is
authorized, or such other date as may be specified in such
authorization.
(p)
Deferred Stock Units
has the meaning given such term in Section
10(b)(i) of the Plan.
(q)
Designated Foreign Subsidiaries
means all Affiliates organized
under the laws of any jurisdiction or country other than the United States of
America that may be designated by the Board or the Committee from time to
time.
(r)
Disability
means, unless in the case of a particular Award the
applicable Award agreement states otherwise, the Company or an Affiliate having
cause to terminate a Participants employment or service on account of
disability, as defined in any then-existing employment, consulting or other
similar agreement between the Participant and the Company or an Affiliate or, in
the absence of such an employment, consulting or other similar agreement, a
condition entitling the Participant to receive benefits under a long-term
disability plan of the Company or an Affiliate, or, in the absence of such a
plan, the complete and permanent inability by reason of illness or accident to
perform the duties of the occupation at which a Participant was employed or
served when such disability commenced, as determined by the Committee based upon
medical evidence acceptable to it.
(s)
Distribution Date
means, with respect to each Participant (or his
beneficiary, if the Participant dies before distribution of his Account), the
date on which distribution in respect of his Account interests in accordance
with Section 10(b)(viii) commences. A Participants Distribution Date shall be
on the thirtieth day following the date of such Participants Separation From
Service.
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(t)
Dividend
Equivalents
means, with respect to each Deferred Stock Unit, an amount equal to
the cash dividends, if any, which would have been paid with respect to such
Deferred Stock Unit, if such Deferred Stock Unit were a share of Common
Stock.
(u)
Effective Date
means the date on which the Plan is approved by the
stockholders of the Company.
(v)
Elective Amount
means the portion or portions
of the Annual Retainer and/or the Committee Retainer determined under Section
10(b)(ii) of the Plan in respect of services for any particular year which may
be paid to the Non-Employee Director either in cash or in Deferred Stock Units
at the election of the Non-Employee Director.
(w)
Eligible Director
means a person who is (i) a non-employee
director within the meaning of Rule 16b-3 under the Exchange Act, (ii) an
outside director within the meaning of Section 162(m) of the Code and (iii) an
independent director under the rules of the NYSE or any other securities
exchange or inter-dealer quotation system on which the Common Stock is listed or
quoted, or a person meeting any similar requirement under any successor rule or
regulation.
(x)
Eligible Person
means any (i) individual employed by the Company or
an Affiliate, or any former employee of the Company or an Affiliate who was an
employee of the Company or an Affiliate at the time a Performance Compensation
Award was granted and at the conclusion of the corresponding Performance Period;
provided, however, that no such employee covered by a collective bargaining
agreement shall be an Eligible Person unless and to the extent that such
eligibility is set forth in such collective bargaining agreement or in an
agreement or instrument relating thereto; (ii) director or officer of the
Company or an Affiliate; (iii) consultant or advisor to the Company or an
Affiliate who may be offered securities registrable pursuant to a registration
statement on Form S-8 under the Securities Act; or (iv) any prospective
employees, directors, officers, consultants or advisors who have accepted offers
of employment or consultancy from the Company or its Affiliates (and would
satisfy the provisions of clauses (i) through (iii) above once he or she begins
employment with or providing services to the Company or its Affiliates), who, in
the case of each of clauses (i) through (iv) above has entered into an Award
agreement or who has received written notification from the Committee or its
designee that they have been selected to participate in the Plan.
(y)
Exchange Act
means the Securities Exchange Act of 1934, as amended,
and any successor thereto. Reference in the Plan to any section of (or rule
promulgated under) the Exchange Act shall be deemed to include any rules,
regulations or other interpretative guidance under such section or rule, and any
amendments or successor provisions to such section, rules, regulations or
guidance.
(z)
Exercise Price
has the meaning given such term in Section 7(b) of
the Plan.
(aa)
Fair Market Value
means, on a given date, (i) if the Common Stock
is listed on a national securities exchange, the closing sales price of the
Common Stock reported on the primary exchange on which the Common Stock is
listed and traded on such date, or, if there is no such sale on that date, then
on the last preceding date on which such a sale was reported; (ii) if the Common
Stock is not listed on any national securities exchange but is quoted in an
inter-dealer quotation system on a last sale basis, the average between the
closing bid price and ask price reported on such date, or, if there is no such
sale on that date, then on the last preceding date on which a sale was reported;
or (iii) if the Common Stock is not listed on a national securities exchange or
quoted in an inter-dealer quotation system on a last sale basis, the amount
determined by the Committee in good faith to be the fair market value of the
Common Stock.
(bb)
Immediate Family Members
shall have the meaning set forth in
Section 14(b).
(cc)
Incentive Stock Option
means an Option which is designated by the
Committee as an incentive stock option as described in Section 422 of the Code
and otherwise meets the requirements set forth in the Plan.
(dd)
Indemnifiable Person
shall have the meaning set forth in Section
4(e) of the Plan.
(ee)
Meeting Fees
shall mean fees a Non-Employee Director earns for
attendance at Board meetings and committee meetings, as well as fees a
Non-Employee Director earns for serving as the chairperson of a committee of the
Board.
(ff)
Negative Discretion
shall mean the discretion authorized by the
Plan to be applied by the Committee to eliminate or reduce the size of a
Performance Compensation Award consistent with Section 162(m) of the Code.
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(gg)
Nonqualified Stock Option
means an Option which is not designated by the
Committee as an Incentive Stock Option.
(hh)
Non-Employee Director
means a member of the Board who is not an
employee of the Company or any Affiliate.
(ii)
NYSE
means the New York Stock Exchange.
(jj)
Option
means an Award granted under Section 7 of the
Plan.
(kk)
Option Period
has the meaning given such term in Section 7(c) of
the Plan.
(ll)
Other Stock-Based Award
means an Award granted under Section 10
of the Plan.
(mm)
Participant
means an Eligible Person who has been selected by the
Committee to participate in the Plan and to receive an Award.
(nn)
Payment Date
means an annual date established by the Board from
time to time for the crediting of the annual retainer to Non-Employee Directors
in the form of Deferred Stock Units.
(oo)
Performance Compensation Award
shall mean any Award designated by
the Committee as a Performance Compensation Award pursuant to Section 11 of the
Plan.
(pp)
Performance Criteria
shall mean the criterion or criteria that the
Committee shall select for purposes of establishing the Performance Goal(s) for
a Performance Period with respect to any Performance Compensation Award under
the Plan.
(qq)
Performance Formula
shall mean, for a Performance Period, the one
or more objective formulae applied against the relevant Performance Goal to
determine, with regard to the Performance Compensation Award of a particular
Participant, whether all, some portion but less than all, or none of the
Performance Compensation Award has been earned for the Performance
Period.
(rr)
Performance Goals
shall mean, for a Performance Period, the one or
more goals established by the Committee for the Performance Period based upon
the Performance Criteria.
(ss)
Performance Period
shall mean the one or more periods of time of
not less than 12 months, as the Committee may select, over which the attainment
of one or more Performance Goals will be measured for the purpose of determining
a Participants right to, and the payment of, a Performance Compensation
Award.
(tt)
Permitted Transferee
shall have the meaning set forth in Section
14(b) of the Plan.
(uu)
Person
has the meaning given such term in the definition of
Change in Control.
(vv)
Plan
means this Automatic Data Processing, Inc. 2008 Omnibus Award
Plan.
(ww)
Prior Plan
shall mean each of the Automatic Data Processing, Inc.
2000 Stock Option Plan, the Automatic Data Processing, Inc. 2003 Director Stock
Plan, the Automatic Data Processing, Inc. Key Employees Restricted Stock Plan,
and the Automatic Data Processing, Inc. Amended and Restated Executive Incentive
Compensation Plan.
(xx)
Restricted Period
means the period of time determined by the
Committee during which an Award is subject to restrictions or, as applicable,
the period of time within which performance is measured for purposes of
determining whether an Award has been earned.
(yy)
Restricted Stock
means Common Stock, subject to certain specified
restrictions (including, without limitation, a requirement that the Participant
remain continuously employed or provide continuous services for a specified
period of time), granted under Section 9 of the Plan.
(zz)
Restricted Stock Unit
means an unfunded and unsecured promise to
deliver shares of Common Stock, cash, other securities or other property,
subject to certain restrictions (including, without limitation, a requirement
that the Participant remain continuously employed or provide continuous services
for a specified period of time), granted under Section 9 of the Plan.
(aaa)
SAR Period
has the meaning given such term in Section 8(c) of the
Plan.
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(bbb)
Securities
Act
means the Securities Act of 1933, as amended, and any successor thereto.
Reference in the Plan to any section of (or rule promulgated under) the
Securities Act shall be deemed to include any rules, regulations or other
interpretative guidance under such section or rule, and any amendments or
successor provisions to such section, rules, regulations or guidance.
(ccc)
Separation From Service
shall have the meaning set forth in
Section 409A(a)(2)(A)(i) of the Code.
(ddd)
Specified Employee
means a Participant who meets the definition
of specified employee, as defined in Section 409A(a)(2)(B)(i) of the
Code.
(eee)
Stock Appreciation Right
or
SAR
means an Award granted under
Section 8 of the Plan.
(fff)
Strike Price
has the meaning given such term in Section 8(b) of
the Plan.
(ggg)
Subsidiary
means, with respect to any specified Person:
(1) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Company voting securities (without regard to the
occurrence of any contingency and after giving effect to any voting agreement or
stockholders agreement that effectively transfers voting power) is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person (or a combination thereof); and
(2) any
partnership (or any comparable foreign entity) (a) the sole general partner (or
functional equivalent thereof) or the managing general partner of which is such
Person or Subsidiary of such Person or (b) the only general partners (or
functional equivalents thereof) of which are that Person or one or more
Subsidiaries of that Person (or any combination thereof).
(hhh)
Substitute Award
has the meaning given such term in Section
5(e).
(iii)
Sub Plans
has the meaning given such term in Section
1.
(jjj)
Transaction
has the meaning given such term in the definition of
Change in Control.
3. Effective Date;
Duration.
The Plan shall be effective as of
the Effective Date. The expiration date of the Plan, on and after which date no
Awards may be granted hereunder, shall be the tenth anniversary of the Effective
Date;
provided
,
however
, that such expiration shall not affect Awards then
outstanding, and the terms and conditions of the Plan shall continue to apply to
such Awards.
4. Administration.
(a) The Committee shall administer the Plan. To the extent
required to comply with the provisions of Rule 16b-3 promulgated under the
Exchange Act (if the Board is not acting as the Committee under the Plan) or
necessary to obtain the exception for performance-based compensation under
Section 162(m) of the Code, as applicable, it is intended that each member of
the Committee shall, at the time he or she takes any action with respect to an
Award under the Plan, be an Eligible Director. However, the fact that a
Committee member shall fail to qualify as an Eligible Director shall not
invalidate any Award granted by the Committee that is otherwise validly granted
under the Plan.
(b) Subject to the provisions of the Plan and applicable law, the
Committee shall have the sole and plenary authority, in addition to other
express powers and authorizations conferred on the Committee by the Plan, to:
(i) designate Participants; (ii) determine the type or types of Awards to be
granted to a Participant; (iii) determine the number of shares of Common Stock
to be covered by, or with respect to which payments, rights, or other matters
are to be calculated in connection with, Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, shares of Common
Stock, other securities, other Awards or other property, or canceled, forfeited,
or suspended and the method or methods by which Awards may be settled,
exercised, canceled, forfeited, or suspended; (vi) determine whether, to what
extent, and under what circumstances the delivery of cash, Common Stock, other
securities, other Awards or other property and other amounts payable with
respect to an Award shall be deferred either automatically or at the election of
the Participant or of the Committee; (vii) compute the number of Deferred Stock
Units to be credited to the Accounts of Participants; (viii) interpret,
administer, reconcile any inconsistency in, correct any defect in and/or supply
any omission in the Plan and any instrument or agreement relating to, or Award
granted under, the Plan; (ix) establish, amend, suspend, or waive any rules and
regulations and appoint
A-5
such agents as the Committee shall deem
appropriate for the proper administration of the Plan; (x) accelerate the
vesting or exercisability of, payment for or lapse of restrictions on, Awards
(including previously deferred Awards), and accelerate and determine payouts, if
any, in respect of Awards with incomplete Performance Periods, in each case upon
a Change in Control, death, Disability or retirement (or on any other
termination of employment) of a Participant; and (xi) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan.
(c) Except to the
extent prohibited by applicable law or the applicable rules and regulations of
any securities exchange or inter-dealer quotation system on which the securities
of the Company are listed or traded, the Committee may allocate all or any
portion of its responsibilities and powers to any one or more of its members and
may delegate all or any part of its responsibilities and powers to any person or
persons selected by it. Any such allocation or delegation may be revoked by the
Committee at any time. Without limiting the generality of the foregoing, the
Committee may delegate to one or more officers of the Company or any Affiliate
the authority to act on behalf of the Committee with respect to any matter,
right, obligation, or election which is the responsibility of or which is
allocated to the Committee herein, and which may be so delegated as a matter of
law, except for grants of Awards to persons (i) subject to Section 16 of the
Exchange Act or (ii) who are, or who are reasonably expected to be, covered
employees for purposes of Section 162(m) of the Code.
(d) Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Award or any documents evidencing Awards granted pursuant to the
Plan shall be within the sole discretion of the Committee, may be made at any
time and shall be final, conclusive and binding upon all persons or entities,
including, without limitation, the Company, any Affiliate, any Participant, any
holder or beneficiary of any Award, and any stockholder of the
Company.
(e) No member of the Board, the Committee or any employee or agent of the
Company (each such person, an
Indemnifiable Person
) shall be liable for any
action taken or omitted to be taken or any determination made with respect to
the Plan or any Award hereunder (unless constituting bad faith, fraud or a
willful criminal act or omission). Each Indemnifiable Person shall be
indemnified and held harmless by the Company against and from any loss, cost,
liability, or expense (including attorneys fees) that may be imposed upon or
incurred by such Indemnifiable Person in connection with or resulting from any
action, suit or proceeding to which such Indemnifiable Person may be a party or
in which such Indemnifiable Person may be involved by reason of any action taken
or omitted to be taken or determination made under the Plan or any Award
agreement and against and from any and all amounts paid by such Indemnifiable
Person with the Companys approval, in settlement thereof, or paid by such
Indemnifiable Person in satisfaction of any judgment in any such action, suit or
proceeding against such Indemnifiable Person, provided that the Company shall
have the right, at its own expense, to assume and defend any such action, suit
or proceeding and once the Company gives notice of its intent to assume the
defense, the Company shall have sole control over such defense with counsel of
the Companys choice. The foregoing right of indemnification shall not be
available to an Indemnifiable Person to the extent that a final judgment or
other final adjudication (in either case not subject to further appeal) binding
upon such Indemnifiable Person determines that the acts or omissions or
determinations of such Indemnifiable Person giving rise to the indemnification
claim resulted from such Indemnifiable Persons bad faith, fraud or willful
criminal act or omission or that such right of indemnification is otherwise
prohibited by law or by the Companys Certificate of Incorporation or Bylaws.
The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such Indemnifiable Persons may be entitled
under the Companys Certificate of Incorporation or Bylaws, as a matter of law,
or otherwise, or any other power that the Company may have to indemnify such
Indemnifiable Persons or hold them harmless.
(f) Notwithstanding anything to the contrary contained in the Plan, the
Board may, in its sole discretion, at any time and from time to time, grant
Awards and administer the Plan with respect to such Awards. In any such case,
the Board shall have all the authority granted to the Committee under the
Plan.
5. Grant of Awards; Shares Subject to
the Plan; Limitations.
(a) The Committee may,
from time to time, grant Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Other Stock-Based Awards and/or Performance Compensation
Awards to one or more Eligible Persons.
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(b) Awards
granted under the Plan shall be subject to the following limitations: (i)
subject to Section 12 of the Plan, no more than the sum of (A) 5,000,000 shares
of Common Stock plus (B) the number of shares of Common Stock remaining
available for issuance or delivery under the Prior Plans and not subject to
outstanding awards under the Prior Plans as of the Effective Date, may be
delivered in the aggregate pursuant to Awards granted under the Plan (such
aggregate total, the
Absolute Share Limit
); (ii) subject to Section 12 of the
Plan, grants of Options or SARs under the Plan in respect of no more than
3,000,000 shares of Common Stock may be made to any single Participant during
any consecutive 36-month period; (iii) subject to Section 12 of the Plan, no
more than the number of shares of Common Stock equal to the Absolute Share Limit
may be delivered in the aggregate pursuant to the exercise of Incentive Stock
Options granted under the Plan; (iv) subject to Section 12 of the Plan, no more
than 300,000 shares of Common Stock may be delivered in respect of Performance
Compensation Awards granted pursuant to Section 11 of the Plan to any single
Participant for a single fiscal year during a Performance Period, or in the
event such Performance Compensation Award is paid in cash, other securities,
other Awards or other property, no more than the Fair Market Value of such
shares of Common Stock on the last day of the Performance Period to which such
Award relates; and (v) the maximum amount that can be paid to any single
Participant for a single fiscal year during a Performance Period pursuant to a
cash bonus Award described in Section 11(a) of the Plan shall be
$5,000,000.
(c) Shares of Common Stock shall be deemed to have been used in
settlement of Awards whether or not they are actually delivered or the Fair
Market Value equivalent of such shares is paid in cash;
provided
,
however
, that
in the case of a SAR settled in shares of Common Stock, only the net shares
actually delivered in respect of an Award shall be deemed to have been used in
settlement of the Award, and
that
no shares shall be deemed to have been used in
settlement of a SAR that settles only in cash;
provided
, further, that if shares
of Common Stock issued upon exercise, vesting or settlement of an Award, or
shares of Common Stock owned by a Participant are surrendered or tendered to the
Company (either directly or by means of attestation) in payment of the Exercise
Price of an Award or any taxes required to be withheld in respect of an Award,
in each case, in accordance with the terms and conditions of the Plan and any
applicable Award agreement, such surrendered or tendered shares shall again
become available for other Awards under the Plan; provided, further, that in no
event shall such shares increase the number of shares of Common Stock that may
be delivered pursuant to Incentive Stock Options granted under the Plan. If and
to the extent an Award under the Plan expires, terminates or is canceled or
forfeited for any reason whatsoever, the shares covered by such Award shall
again become available for other Awards under the Plan.
(d) Shares of Common Stock delivered by the Company in settlement of
Awards may be authorized and unissued shares, shares held in the treasury of the
Company, shares purchased on the open market or by private purchase, or a
combination of the foregoing.
(e) Awards may, in the sole discretion of the Committee, be granted under
the Plan in assumption of, or in substitution for, outstanding awards previously
granted by an entity acquired directly or indirectly by the Company or with
which the Company combines (Substitute Awards). Substitute Awards shall not be
counted against the Absolute Share Limit; provided, that Substitute Awards
issued in connection with the assumption of, or in substitution for, outstanding
options intended to qualify as incentive stock options within the meaning of
Section 422 of the Code shall be counted against the aggregate number of shares
of Common Stock available for Awards of Incentive Stock Options under the
Plan.
(f) Following the Effective Date, no new awards shall be granted under
the Prior Plans. For purposes of the preceding sentence, awards under the Prior
Plans with performance periods that commenced prior to the Effective Date and
end after the Effective Date shall not be deemed new awards granted following
the Effective Date.
6. Eligibility.
Participation shall be limited to Eligible
Persons.
7. Options.
(a)
Generally
. Each Option granted under the Plan shall be evidenced by
an Award agreement. Each Option so granted shall be subject to the conditions
set forth in this Section 7, and to such other conditions not inconsistent with
the Plan as may be reflected in the applicable Award agreement. All Options
granted under the Plan shall be Nonqualified Stock Options unless the applicable
Award agreement expressly states that the Option is intended to be an Incentive
Stock Option. Incentive Stock Options shall be granted only to Eligible Persons
who are employees of the Company and its Affiliates, and no Incentive Stock
Option shall be granted to any Eligible Person who is ineligible to receive an
Incentive Stock Option under the Code. No Option shall be treated
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as an Incentive Stock Option unless the
Plan has been approved by the stockholders of the Company in a manner intended
to comply with the stockholder approval requirements of Section 422(b)(1) of the
Code, provided that any Option intended to be an Incentive Stock Option shall
not fail to be effective solely on account of a failure to obtain such approval,
but rather such Option shall be treated as a Nonqualified Stock Option unless
and until such approval is obtained. In the case of an Incentive Stock Option,
the terms and conditions of such grant shall be subject to and comply with such
rules as may be prescribed by Section 422 of the Code. If for any reason an
Option intended to be an Incentive Stock Option (or any portion thereof) shall
not qualify as an Incentive Stock Option, then, to the extent of such
nonqualification, such Option or portion thereof shall be regarded as a
Nonqualified Stock Option appropriately granted under the Plan.
(b)
Exercise
Price
.
Except as otherwise provided by the Committee in the case of Substitute
Awards, the exercise price (
Exercise Price
) per share of Common Stock for each
Option shall not be less than 100% of the Fair Market Value of such share
(determined as of the Date of Grant); provided, however, that in the case of an
Incentive Stock Option granted to an employee who, at the time of the grant of
such Option, owns stock representing more than 10% of the voting power of all
classes of stock of the Company or any Affiliate, the Exercise Price per share
shall be no less than 110% of the Fair Market Value per share on the Date of
Grant.
(c)
Vesting and Expiration
. Options shall vest and become exercisable in
such manner and on such date or dates determined by the Committee and shall
expire after such period, not to exceed ten years, as may be determined by the
Committee (the
Option Period
);
provided
,
however
, that the Option Period shall
not exceed five years from the Date of Grant in the case of an Incentive Stock
Option granted to a Participant who on the Date of Grant owns stock representing
more than 10% of the voting power of all classes of stock of the Company or any
Affiliate; provided, further, that notwithstanding any vesting dates set by the
Committee, and consistent with the Committees power under Section 4(b), the
Committee may, in its sole discretion, accelerate the exercisability of any
Option upon a Change in Control, death, Disability or retirement (or on any
other termination of employment) of a Participant, which acceleration shall not
affect the terms and conditions of such Option other than with respect to
exercisability.
(d)
Method of Exercise and Form of Payment
. No shares of Common Stock
shall be delivered pursuant to any exercise of an Option until payment in full
of the Exercise Price therefor is received by the Company and the Participant
has paid to the Company an amount equal to any Federal, state, local and
non-U.S. income and employment taxes required to be withheld. Options which have
become exercisable may be exercised by delivery of written or electronic notice
of exercise to the Company in accordance with the terms of the Option
accompanied by payment of the Exercise Price. The Exercise Price shall be
payable (i) in cash, check, cash equivalent and/or shares of Common Stock valued
at the Fair Market Value at the time the Option is exercised (including,
pursuant to procedures approved by the Committee, by means of attestation of
ownership of a sufficient number of shares of Common Stock in lieu of actual
delivery of such shares to the Company);
provided
, that such shares of Common
Stock are not subject to any pledge or other security interest; (ii) a net
exercise procedure effected by withholding the minimum number of shares of
Common Stock otherwise deliverable in respect of an Option that are needed to
pay the Exercise Price and all applicable required withholding taxes; (iii) by
such other method as the Committee may permit in its sole discretion, including
without limitation: (A) in other property having a fair market value on the date
of exercise equal to the Exercise Price or (B) if there is a public market for
the shares of Common Stock at such time, by means of a broker-assisted cashless
exercise pursuant to which the Company is delivered a copy of irrevocable
instructions to a stockbroker to sell the shares of Common Stock otherwise
deliverable upon the exercise of the Option and to deliver promptly to the
Company an amount equal to the Exercise Price. Notwithstanding the foregoing, if
on the last day of the Option Period, the Fair Market Value exceeds the Exercise
Price, the Participant has not exercised the Option, and the Option has not
expired, such Option shall be deemed to have been exercised by the Participant
on such last day by means of a net exercise and the Company shall deliver to the
Participant the number of shares of Common Stock for which the Option was deemed
exercised less such number of shares of Common Stock required to be withheld to
cover the payment of the Exercise Price and all applicable required withholding
taxes. Any fractional shares of Common Stock shall be settled in
cash.
(e)
Notification upon Disqualifying Disposition of an Incentive Stock
Option
. Each Participant awarded an Incentive Stock Option under the Plan shall
notify the Company in writing immediately after the date he or she makes a
disqualifying disposition of any Common Stock acquired pursuant to the exercise
of such Incentive
A-8
Stock Option. A disqualifying disposition
is any disposition (including, without limitation, any sale) of such Common
Stock before the later of (A) two years after the Date of Grant of the Incentive
Stock Option or (B) one year after the date of exercise of the Incentive Stock
Option. The Company may, if determined by the Committee and in accordance with
procedures established by the Committee, retain possession, as agent for the
applicable Participant, of any Common Stock acquired pursuant to the exercise of
an Incentive Stock Option until the end of the period described in the preceding
sentence, subject to complying with any instructions from such Participant as to
the sale of such Common Stock.
(f)
Compliance
With Laws, etc
. Notwithstanding the foregoing, in no event shall a Participant
be permitted to exercise an Option in a manner which the Committee determines
would violate the Sarbanes-Oxley Act of 2002, or any other applicable law or the
applicable rules and regulations of the Securities and Exchange Commission or
the applicable rules and regulations of any securities exchange or inter-dealer
quotation system on which the securities of the Company are listed or
traded.
8. Stock Appreciation
Rights.
(a)
Generally
. Each SAR granted under
the Plan shall be evidenced by an Award agreement. Each SAR so granted shall be
subject to the conditions set forth in this Section 8, and to such other
conditions not inconsistent with the Plan as may be reflected in the applicable
Award agreement. Any Option granted under the Plan may include tandem SARs. The
Committee also may award SARs to Eligible Persons independent of any Option.
(b)
Strike Price
.
Except as otherwise provided by the Committee in the case of
Substitute Awards, the strike price (
Strike Price
) per share of Common Stock
for each SAR shall not be less than 100% of the Fair Market Value of such share
(determined as of the Date of Grant). Notwithstanding the foregoing, a SAR
granted in tandem with (or in substitution for) an Option previously granted
shall have a Strike Price at least equal to the Exercise Price of the
corresponding Option.
(c)
Vesting and Expiration
. A SAR granted in connection with an Option
shall become exercisable and shall expire according to the same vesting schedule
and expiration provisions as the corresponding Option. A SAR granted independent
of an Option shall vest and become exercisable and shall expire in such manner
and on such date or dates determined by the Committee and shall expire after
such period, not to exceed ten years, as may be determined by the Committee (the
SAR Period
);
provided
,
however
, that notwithstanding any vesting dates set by
the Committee, and consistent with the Committees power under Section 4(b) the
Committee may, in its sole discretion, accelerate the exercisability of any SAR
upon a Change in Control, death, Disability or retirement (or on any other
termination of employment) of a Participant, which acceleration shall not affect
the terms and conditions of such SAR other than with respect to exercisability.
(d)
Method of Exercise
. SARs which have become exercisable may be
exercised by delivery of written or electronic notice of exercise to the Company
in accordance with the terms of the Award, specifying the number of SARs to be
exercised and the date on which such SARs were awarded. Notwithstanding the
foregoing, if on the last day of the Option Period (or in the case of a SAR
independent of an option, the SAR Period), the Fair Market Value exceeds the
Strike Price, the Participant has not exercised the SAR or the corresponding
Option (if applicable), and neither the SAR nor the corresponding Option (if
applicable) has expired, such SAR shall be deemed to have been exercised by the
Participant on such last day and the Company shall make the appropriate payment
therefor.
(e)
Payment
. Upon the exercise of a SAR, the Company shall pay to the
Participant an amount equal to the number of shares subject to the SAR that are
being exercised multiplied by the excess, if any, of the Fair Market Value of
one share of Common Stock on the exercise date over the Strike Price, less an
amount equal to any Federal, state, local and non-U.S. income and employment
taxes required to be withheld. The Company shall pay such amount in cash, in
shares of Common Stock valued at Fair Market Value, or any combination thereof,
as determined by the Committee. Any fractional shares of Common Stock shall be
settled in cash.
(f)
Substitution of SARs for Nonqualified Stock Options
. The Committee
shall have the authority in its sole discretion to substitute, without the
consent of the affected Participant or any holder or beneficiary of SARs, SARs
settled in shares of Common Stock (or settled in shares or cash in the sole
discretion of the Committee) for outstanding Nonqualified Stock Options,
provided that (i) the substitution shall not otherwise result in a modification
of the terms of any such Nonqualified Stock Option, (ii) the number of shares of
Common Stock
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underlying the substituted SARs shall be the same as the number of shares
of Common Stock underlying such Nonqualified Stock Options and (iii) the Strike Price of the substituted SARs shall be equal to
the Exercise Price of such Nonqualified Stock Options;
provided
,
however
, that if, in the opinion of the Companys
independent public auditors, the foregoing provision creates adverse accounting consequences for the Company, such provision shall
be considered null and void.
9. Restricted Stock and Restricted Stock Units.
(a)
Generally
.
Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award agreement. Each Restricted Stock and
Restricted Stock Unit grant shall be subject to the conditions set forth in this Section 9, and to such other conditions not inconsistent
with the Plan as may be reflected in the applicable Award agreement.
(b)
Stock Certificates and Book Entry;
Escrow or Similar Arrangement
. Upon the grant of Restricted Stock, the Committee shall cause a stock certificate registered
in the name of the Participant to be issued or shall cause share(s) of Common Stock to be registered in the name of the Participant
and held in book-entry form subject to the Companys directions and, if the Committee determines that the Restricted Stock
shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the applicable restrictions,
the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory
to the Committee, if applicable, and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock
covered by such agreement. If a Participant shall fail to execute an agreement evidencing an Award of Restricted Stock and, if
applicable, an escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be
null and void. Subject to the restrictions set forth in this Section 9 and the applicable Award agreement, the Participant generally
shall have the rights and privileges of a stockholder as to such Restricted Stock, including without limitation the right to vote
such Restricted Stock. To the extent shares of Restricted Stock are forfeited, any stock certificates issued to the Participant
evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder
with respect thereto shall terminate without further obligation on the part of the Company.
(c)
Vesting; Acceleration of Lapse of Restrictions
. The Restricted Period with respect to Restricted Stock and Restricted Stock
Units shall lapse in such manner and on such date or dates determined by the Committee and the Committee shall determine the treatment
of the unvested portion of Restricted Stock and Restricted Stock Units upon termination of employment or service of the Participant
granted the applicable Award. Consistent with the Committees power under Section 4(b), the Committee may in its sole discretion
accelerate the lapse of any or all of the restrictions on the Restricted Stock and Restricted Stock Units upon a Change in Control,
death, Disability or retirement (or on any other termination of employment) of a Participant, which acceleration shall not affect
any other terms and conditions of such Awards.
(d)
Delivery of Restricted Stock and Settlement of Restricted Stock Units
. (i) Upon the expiration of the Restricted Period
with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award agreement shall be of no further
force or effect with respect to such shares, except as set forth in the applicable Award agreement. If an escrow arrangement is
used, upon such expiration, the Company shall deliver to the Participant, or his or her beneficiary, without charge, the stock
certificate (or, if applicable, a notice evidencing a book entry notation) evidencing the shares of Restricted Stock which have
not then been forfeited and with respect to which the Restricted Period has expired (rounded down to the nearest full share).
Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall
be distributed to the Participant in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair
Market Value equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited,
the Participant shall have no right to such dividends.
(ii)
Unless otherwise provided by the Committee in an Award agreement, upon the expiration of the Restricted Period with respect to
any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or his or her beneficiary, without charge,
one share of Common Stock (or other securities or other property, as applicable) for each such outstanding Restricted Stock Unit;
provided
,
however
, that the Committee may, in its sole discretion, elect to (i) pay cash or part cash and part Common
Stock in lieu of delivering only shares of Common Stock in respect of such Restricted Stock Units or (ii) defer the delivery of
Common Stock (or cash or part Common Stock and part cash, as the case may be) beyond the expiration of the Restricted Period.
If a cash payment is made in lieu of delivering shares of Common Stock, the amount
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of such payment shall be equal to the
Fair Market Value of the Common Stock as of the date on which the Restricted
Period lapsed with respect to such Restricted Stock Units. To the extent
provided in an Award agreement, the holder of outstanding Restricted Stock Units
shall be entitled to be credited with dividend equivalent payments (upon the
payment by the Company of dividends on shares of Common Stock) either in cash
or, at the sole discretion of the Committee, in shares of Common Stock having a
Fair Market Value equal to the amount of such dividends, upon the release of
restrictions on such Restricted Stock Units, and, if such Restricted Stock Units
are forfeited, the Participant shall have no right to such dividend equivalent
payments.
(e)
Legends on Restricted Stock
.
Each certificate representing Restricted Stock awarded under the Plan, if any, shall bear a legend substantially in the form of
the following, in addition to any other information the Company deems appropriate, until the lapse of all restrictions with respect
to such Common Stock:
TRANSFER OF THIS CERTIFICATE AND THE
SHARES REPRESENTED HEREBY IS RESTRICTED
PURSUANT
TO THE TERMS OF THE AUTOMATIC DATA PROCESSING, INC. 2008 OMNIBUS AWARD PLAN AND
A RESTRICTED STOCK AWARD AGREEMENT, BETWEEN AUTOMATIC DATA PROCESSING, INC. AND
PARTICIPANT. A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF AUTOMATIC DATA PROCESSING, INC.
10. Other Stock-Based Awards.
(a)
Generally
. The Committee
may issue unrestricted Common Stock, rights under the Companys Performance-Based Restricted Stock Program or other incentive
programs that, subject to the terms and conditions thereof, provide for the right to receive grants of Awards at a future date,
or other Awards denominated in Common Stock, under the Plan to Eligible Persons, alone or in tandem with other Awards, in such
amounts as the Committee shall from time to time in its sole discretion determine. Each Other Stock-Based Award granted under
the Plan shall be evidenced by an Award agreement. Each Other Stock-Based Award so granted shall be subject to such conditions
not inconsistent with the Plan as may be reflected in the applicable Award agreement.
(b)
Non-Employee Director Deferrals
.
(i)
Generally
. Non-Employee Directors may be granted Other Stock-Based Awards in the form of deferred stock units (
Deferred
Stock Units
) in accordance with the provisions of this Section 10, and references to Participant in this
Section 10(b) shall be deemed to refer only to Non-Employee Directors. Pursuant to this Section 10(b), Participants (A) shall
receive non-elective payment of the Annual Retainer Dollar Amount in the form of Deferred Stock Units that entitle the Participants
to receive, under the terms and conditions described herein, shares of Common Stock, (B) may defer receipt of all or part of the
Elective Amount and (C) may defer receipt of all or a part of the Meeting Fees.
(ii)
Elections to Defer Annual Retainer and Committee Retainer
. The Board shall determine the Elective Amount in its sole discretion
from time to time. A Participant who wishes to have any part of the Elective Amount for any given calendar year paid as Deferred
Stock Units on his or her Distribution Date shall irrevocably elect such medium of payment prior to the commencement of the calendar
year during which the Elective Amount is to be earned. Such election shall be made in accordance with procedures and rules promulgated
by the Board or its delegee for such purpose. Any election made under this Section 10(b)(ii) shall apply to the Participants
Elective Amount earned in future calendar years unless and until the Participant makes a later election in accordance with the
terms of this Section 10(b)(ii).
(iii)
Elections to Defer Meeting Fees
. A Participant who wishes to have all or any part of his Meeting Fees for a given calendar
year deferred and paid to him on his Distribution Date shall irrevocably elect payment of such Meeting Fees on a deferred basis
prior to the commencement of the calendar year during which the Meeting Fees are to be earned. Such election shall be made in
accordance with procedures established by the Board or its delegee for such purpose. Any election made under this Section 10(b)(iii)
shall apply to Meeting Fees earned in future calendar years unless and until the Participant makes a later election in accordance
with the terms of this Section 10(b)(iii). Such election shall indicate the portion, if any, of deferred Meeting Fees to be paid
in cash and the portion, if any, to be paid as Deferred Stock Units and shall also include an irrevocable designation of the form
of payment to be used when such deferred Meeting Fees that are to be payable in cash are distributed on the Distribution Date.
A Participant shall elect distribution of any deferred Meeting Fees payable in cash either in the form of a single lump sum payment
or in the form of substantially equal annual payments to be made over a period of two to ten years. If the Participant has not
designated
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a form of payment prior to the beginning
of the calendar year in which the Meeting Fees subject to such election are
earned, such Participant shall be deemed to have irrevocably elected to receive
payment of such deferred Meeting Fees in a single lump sum on his Distribution
Date.
(iv)
Crediting of Deferred Stock Units
.
On each Payment Date, the Account of each Participant shall be credited with that number of Deferred Stock Units (rounded down
to the nearest whole share) in respect of a number of shares of Common Stock with a Fair Market Value equal to (A) the Participants
Annual Retainer Dollar Amount and (B) the portion of the Participants Elective Amount payable in Deferred Stock Units, determined
as of the relevant Payment Date. As soon as administratively practicable following the Board or applicable committee meeting at
which Meeting Fees are earned, the Account of each Participant who has elected to have a portion of his Meeting Fees paid in Deferred
Stock Units shall be credited with that number of Deferred Stock Units (rounded down to the nearest whole share) in respect of
a number of shares of Common Stock with a Fair Market Value equal to the dollar amount of the portion of such Meeting Fees that
such Participant has elected to receive in Deferred Stock Units, determined as of the date of the relevant meeting in respect
of which the Meeting Fees were earned.
(v)
Vesting
. The interest of each Participant in any benefit payable with respect to an Account hereunder shall be at all times
fully vested and non-forfeitable. Notwithstanding the previous sentence, a Participants interest in his Account constitutes
an unsecured promise of the Company, and a Participant shall have only the rights of a general unsecured creditor of the Company
with respect to his Account.
(vi)
Dividend Equivalents
. Each Account shall be credited with Dividend Equivalents on each date a dividend is paid on Common
Stock, in respect of the Deferred Stock Units credited to such Account on such payment date. Dividend Equivalents credited to
an Account shall accrue interest (compounding annually) from the date of such crediting through the Distribution Date, with the
applicable interest rate for each twelve month period beginning on November 1 during such period, or any applicable portion thereof,
being the rate for five-year U.S. Treasury Notes published in The Wall Street Journal (or, in the absence of such reference, such
alternate publication as the Board may select from time to time) on the first business day of November of such twelve month period
plus 0.50%, rounded up to the nearest 0.25%.
(vii)
Crediting of Meeting Fees Payable in Cash
. Deferrals of Meeting Fees to be paid in cash shall be credited to the Account
of the Participant as soon as administratively practicable following the Board or applicable committee meeting at which such Meeting
Fees were earned. The portion of a Participants Account attributable to deferrals of Meeting Fees with respect to which
the Participant elected under Section 10(b)(iii) a distribution in cash on his Distribution Date shall be adjusted by crediting
such portion of the Account with interest quarterly in the manner set forth in Section 10(b)(vi).
(viii)
Distributions
. Except as otherwise provided in this Section 10(b)(viii), on his Distribution Date, each Participant shall
receive (i) a number of shares of Common Stock equal to the number of Deferred Stock Units in such Participants Account,
(ii) a cash payment equal to the accrued Dividend Equivalents, plus interest thereon as of the Distribution Date and (iii) a cash
payment (or series of payments as determined in accordance with Section 10(b)(iii)) equal to the credited Meeting Fees with respect
to which the Participant elected under Section 10(b)(iii) a distribution in cash on his Distribution Date plus interest thereon
as of the Distribution Date. Solely to the extent required by Section 409A of the Code, a distribution in respect of an Account
to a Participant who is determined to be a Specified Employee shall not be actually paid before the date which is 6 months after
the Specified Employees Separation From Service (or, if earlier, the date of death of the Specified Employee). Any distribution
to any Participant or beneficiary in accordance with the provisions of this Section 10(b)(viii) shall be in full satisfaction
of all claims under the Plan against the Company and the Board. The Board may require any Participant or beneficiary, as a condition
to payment, to execute a receipt and release to such effect.
11. Performance Compensation Awards.
(a)
Generally
. The
Committee shall have the authority, at the time of grant of any Award described in Sections 9 and 10 of the Plan, to designate
such Award as a Performance Compensation Award intended to qualify as performance-based compensation under Section
162(m) of the Code. The Committee shall also have the authority to make an award of a cash bonus to any Participant and designate
such Award as a Performance Compensation Award intended to qualify as performance-based compensation under Section
162(m) of the Code. Notwithstanding anything in the Plan to the contrary, if the Company
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determines that a Participant who has been
granted an Award designated as a Performance Compensation Award is not (or is no
longer) a covered employee (within the meaning of Section 162(m) of the Code),
the terms and conditions of such Award may be modified without regard to any
restrictions or limitations set forth in this Section 11 (but subject otherwise
to the provisions of Section 13 of the Plan).
(b)
Discretion of Committee with Respect
to Performance Compensation Awards
. With regard to a particular Performance Period, the Committee shall have sole discretion
to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance
Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goals(s) that
is (are) to apply and the Performance Formula. Within the first 90 days of a Performance Period (or, within any other maximum
period allowed under Section 162(m) of the Code), the Committee shall, with regard to the Performance Compensation Awards to be
issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately
preceding sentence and record the same in writing.
(c)
Performance Criteria
. The Performance Criteria that will be used to establish the Performance Goal(s) may be based on the
attainment of specific levels of performance of the Company (and/or one or more Affiliates, divisions or operational units, or
any combination of the foregoing) and shall be limited to the following: (i) net earnings or net income (before or after taxes);
(ii) basic or diluted earnings per share (before or after taxes); (iii) net revenue or net revenue growth; (iv) gross revenue,
gross revenue growth, gross profit or gross profit growth; (v) net operating profit (before or after taxes); (vi) return measures
(including, but not limited to, return on investment, assets, capital, invested capital, equity, or sales); (vii) cash flow measures
(including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital); (viii) earnings before
or after taxes, interest, depreciation and/or amortization; (ix) gross or operating margins; (x) productivity ratios; (xi) share
price (including, but not limited to, growth measures and total stockholder return); (xii) expense targets; (xiii) operating efficiency;
(xiv) objective measures of customer satisfaction; (xv) working capital targets; (xvi) measures of economic value added; (xvii)
inventory control; (xviii) enterprise value; (xix) sales; (xx) stockholder return; (xxi); client retention; (xxii) competitive
market metrics; (xxiii) employee retention; (xxiv) timely completion of new product rollouts; (xxv) timely launch of new facilities;
(xxvi) objective measures of personal targets, goals or completion of projects (including, but not limited to, succession and
hiring projects, completion of specific acquisitions, reorganizations or other corporate transactions, expansions of specific
business operations and meeting divisional or project budgets); or (xxvii) any combination of the foregoing. Any one or more of
the Performance Criteria may be used on an absolute or relative basis to measure the performance of the Company and/or one or
more Affiliates as a whole or any divisional or operational unit(s) of the Company and/or one or more Affiliates or any combination
thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of
a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate,
or as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any
Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph. To the extent
required under Section 162(m) of the Code, the Committee shall, within the first 90 days of a Performance Period (or, within any
other maximum period allowed under Section 162(m) of the Code), define in an objective fashion the manner of calculating the Performance
Criteria it selects to use for such Performance Period.
(d)
Modification of Performance Goal(s)
. In the event that applicable tax and/or securities laws change to permit Committee
discretion to alter the governing Performance Criteria without obtaining stockholder approval of such alterations, the Committee
shall have sole discretion to make such alterations without obtaining stockholder approval. Unless otherwise determined by the
Committee at the time a Performance Compensation Award is granted, the Committee shall, during the first 90 days of a Performance
Period (or, within any other maximum period allowed under Section 162(m) of the Code), or at any time thereafter to the extent
the exercise of such authority at such time would not cause the Performance Compensation Awards granted to any Participant for
such Performance Period to fail to qualify as performance-based compensation under Section 162(m) of the Code, adjust
or modify the calculation of a Performance Goal for such Performance Period, based on and in order to appropriately reflect the
following events: (i) asset write-downs; (ii) litigation or claim judgments or settlements; (iii) the effect of changes in tax
laws, accounting principles, or other laws or regulatory rules affecting reported results; (iv) any reorganization and restructuring
programs; (v) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 (or any successor pronouncement
thereto) and/or in managements
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discussion and analysis of financial
condition and results of operations appearing in the Companys annual report to
stockholders for the applicable year; (vi) acquisitions or divestitures; (vii)
any other specific unusual or nonrecurring events, or objectively determinable
category thereof; (viii) foreign exchange gains and losses; and (ix) a change in
the Companys fiscal year.
(e)
Payment of Performance Compensation
Awards
. (i) Condition to Receipt of Payment. Unless otherwise provided in the applicable Award agreement, a Participant must
be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation
Award for such Performance Period.
(ii)
Limitation
. Unless otherwise provided in the applicable Award agreement, a Participant shall be eligible to receive payment
in respect of a Performance Compensation Award only to the extent that: (A) the Performance Goals for such period are achieved;
and (B) all or some of the portion of such Participants Performance Compensation Award has been earned for the Performance
Period based on the application of the Performance Formula to such achieved Performance Goals.
(iii)
Certification
. Following the completion of a Performance Period, the Committee shall review and certify in writing whether,
and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing
that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall
then determine the amount of each Participants Performance Compensation Award actually payable for the Performance Period
and, in so doing, may apply Negative Discretion.
(iv)
Use of Negative Discretion
. In determining the actual amount of an individual Participants Performance Compensation
Award for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned
under the Performance Formula in the Performance Period through the use of Negative Discretion if, in its sole judgment, such
reduction or elimination is appropriate. Unless otherwise provided in the applicable Award agreement, the Committee shall not
have the discretion to (A) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if
the Performance Goals for such Performance Period have not been attained; or (B) increase a Performance Compensation Award above
the applicable limitations set forth in Section 5 of the Plan.
(f)
Timing of Award Payments
. Unless
otherwise provided in the applicable Award agreement, Performance Compensation Awards granted for a Performance Period shall be
paid to Participants as soon as administratively practicable following completion of the certifications required by this Section
11. Any Performance Compensation Award that has been deferred shall not (between the date as of which the Award is deferred and
the payment date) increase (i) with respect to a Performance Compensation Award that is payable in cash, by a measuring factor
for each fiscal year greater than a reasonable rate of interest set by the Committee or (ii) with respect to a Performance Compensation
Award that is payable in shares of Common Stock, by an amount greater than the appreciation of a share of Common Stock from the
date such Award is deferred to the payment date. Unless otherwise provided in an Award agreement, any Performance Compensation
Award that is deferred and is otherwise payable in shares of Common Stock shall be credited (during the period between the date
as of which the Award is deferred and the payment date) with dividend equivalents (in a manner consistent with the methodology
set forth in the last sentence of Section 9(d)(ii)).
12. Changes in Capital Structure and
Similar Events.
In the event of (a) any
dividend (other than regular cash dividends) or other distribution (whether in
the form of cash, shares of Common Stock, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, split-off, spin-off, combination, repurchase or
exchange of shares of Common Stock or other securities of the Company, issuance
of warrants or other rights to acquire shares of Common Stock or other
securities of the Company, or other similar corporate transaction or event
(including, without limitation, a Change in Control) that affects the shares of
Common Stock, or (b) unusual or nonrecurring events (including, without
limitation, a Change in Control) affecting the Company, any Affiliate, or the
financial statements of the Company or any Affiliate, or changes in applicable
rules, rulings, regulations or other requirements of any governmental body or
securities exchange or inter-dealer quotation system, accounting principles or
law, such that in either case an adjustment is
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determined by the Committee in its sole
discretion to be necessary or appropriate, then the Committee shall make any
such adjustments in such manner as it may deem equitable, including without
limitation, any or all of the following:
(i)
adjusting any or all of (A) the number of shares of Common Stock or other
securities of the Company (or number and kind of other securities or other
property) which may be delivered in respect of Awards or with respect to which
Awards may be granted under the Plan (including, without limitation, adjusting
any or all of the limitations under Section 5 of the Plan) and (B) the terms of
any outstanding Award, including, without limitation, (1) the number of shares
of Common Stock or other securities of the Company (or number and kind of other
securities or other property) subject to outstanding Awards or to which
outstanding Awards relate, (2) the Exercise Price or Strike Price with respect
to any Award or (3) any applicable performance measures (including, without
limitation, Performance Criteria and Performance Goals);
(ii) providing for a substitution
or assumption of Awards, accelerating the exercisability of, lapse of
restrictions on, or termination of, Awards or providing for a period of time for
exercise prior to the occurrence of such event; and
(iii) cancelling any one or more
outstanding Awards and causing to be paid to the holders thereof, in cash,
shares of Common Stock, other securities or other property, or any combination
thereof, the value of such Awards, if any, as determined by the Committee (which
if applicable may be based upon the price per share of Common Stock received or
to be received by other stockholders of the Company in such event), including
without limitation, in the case of an outstanding Option or SAR, a cash payment
in an amount equal to the excess, if any, of the Fair Market Value (as of a date
specified by the Committee) of the shares of Common Stock subject to such Option
or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR,
respectively (it being understood that, in such event, any Option or SAR having
a per share Exercise Price or Strike Price equal to, or in excess of, the Fair
Market Value of a share of Common Stock subject thereto may be canceled and
terminated without any payment or consideration therefor);
provided
,
however
,
that in the case of any equity restructuring (within the meaning of the
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 123 (revised 2004)), the Committee shall make an equitable or proportionate
adjustment to outstanding Awards to reflect such equity restructuring.
Any adjustment in Incentive Stock Options under
this Section 12 (other than any cancellation of Incentive Stock Options) shall
be made only to the extent not constituting a modification within the meaning
of Section 424(h)(3) of the Code, and any adjustments under this Section 12
shall be made in a manner which does not adversely affect the exemption provided
pursuant to Rule 16b-3 under the Exchange Act. Any such adjustment shall be
conclusive and binding for all purposes.
13. Amendments and Termination.
(a)
Amendment and Termination
of the Plan
. The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time;
provided
,
that no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if such
approval is necessary to comply with any regulatory requirement applicable to the Plan (including, without limitation, as necessary
to comply with any rules or regulations of any securities exchange or inter-dealer quotation system on which the securities of
the Company may be listed or quoted);
provided
,
further
, that any such amendment, alteration, suspension, discontinuance
or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award
theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary.
Notwithstanding the foregoing, no amendment shall be made to the last proviso of Section 13(b) without stockholder approval.
(b)
Amendment of Award Agreements
. The Committee may, to the extent consistent with the terms of any applicable Award agreement,
waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore
granted or the associated Award agreement, prospectively or retroactively;
provided
that any such waiver, amendment, alteration,
suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant
with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant;
provided
,
further
, that without stockholder approval, except as otherwise permitted under Section 12 of the Plan,
(i) no amendment or modification may reduce the Exercise Price of any Option or the Strike Price of any SAR, (ii) the Committee
may not cancel any outstanding Option or SAR and replace it with a new Option or SAR (with a lower
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Exercise Price or Strike Price, as the
case may be) or other Award or cash in a manner which would result in any
repricing for financial statement reporting purposes (or otherwise cause the
Award to fail to qualify for equity accounting treatment) and (iii) the
Committee may not take any other action which is considered a repricing for
purposes of the stockholder approval rules of any securities exchange or
inter-dealer quotation system on which the securities of the Company are listed
or quoted.
14. General.
(a)
Award Agreements
. Each Award under the
Plan shall be evidenced by an Award agreement, which shall be delivered to the Participant and shall specify the terms and conditions
of the Award and any rules applicable thereto, including without limitation, the effect on such Award of the death, Disability
or termination of employment or service of a Participant, or of such other events as may be determined by the Committee. For purposes
of the Plan, an Award agreement may be in any such form (written or electronic) as determined by the Committee (including, without
limitation, a Board or Committee resolution, an employment agreement, a notice, a certificate or a letter) evidencing the Award.
The Committee need not require an Award agreement to be signed by the Participant or a duly authorized representative of the Company.
(b)
Nontransferability
. (i) Each
Award shall be exercisable only by a Participant during the Participants lifetime, or, if permissible under applicable law,
by the Participants legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by a Participant other than by will or by the laws of descent and distribution and any such purported
assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company
or an Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment,
sale, transfer or encumbrance.
(ii)
Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to
be transferred by a Participant, without consideration, subject to such rules as the Committee may adopt consistent with any applicable
Award agreement to preserve the purposes of the Plan, to: (A) any person who is a family member of the Participant,
as such term is used in the instructions to Form S-8 under the Securities Act (collectively, the
Immediate Family Members
);
(B) a trust solely for the benefit of the Participant and his or her Immediate Family Members; (C) a partnership or limited liability
company whose only partners or stockholders are the Participant and his or her Immediate Family Members; or (D) any other transferee
as may be approved either (I) by the Board or the Committee in its sole discretion, or (II) as provided in the applicable Award
agreement; (each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as a
Permitted
Transferee
); provided that the Participant gives the Committee advance written notice describing the terms and conditions
of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements
of the Plan.
(iii) The terms of any Award
transferred in accordance with the immediately preceding sentence shall apply to
the Permitted Transferee and any reference in the Plan, or in any applicable
Award agreement, to a Participant shall be deemed to refer to the Permitted
Transferee, except that (A) Permitted Transferees shall not be entitled to
transfer any Award, other than by will or the laws of descent and distribution;
(B) Permitted Transferees shall not be entitled to exercise any transferred
Option unless there shall be in effect a registration statement on an
appropriate form covering the shares of Common Stock to be acquired pursuant to
the exercise of such Option if the Committee determines, consistent with any
applicable Award agreement, that such a registration statement is necessary or
appropriate; (C) the Committee or the Company shall not be required to provide
any notice to a Permitted Transferee, whether or not such notice is or would
otherwise have been required to be given to the Participant under the Plan or
otherwise; and (D) the consequences of the termination of the Participants
employment by, or services to, the Company or an Affiliate under the terms of
the Plan and the applicable Award agreement shall continue to be applied with
respect to the Participant, including, without limitation, that an Option shall
be exercisable by the Permitted Transferee only to the extent, and for the
periods, specified in the Plan and the applicable Award agreement.
(c)
Dividends and Dividend Equivalents
. In addition to Dividend Equivalents awarded under Section 10(b) of the Plan, the Committee
in its sole discretion may provide a Participant as part of an Award with dividends or dividend equivalents, payable in cash,
shares of Common Stock, other securities, other Awards or other property, on a current or deferred basis, on such terms and conditions
as may be determined by the Committee in its sole
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discretion, including without limitation,
payment directly to the Participant, withholding of such amounts by the Company
subject to vesting of the Award or reinvestment in additional shares of Common
Stock, Restricted Stock or other Awards.
(d)
Tax Withholding
. (i) A Participant
shall be required to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right and is hereby
authorized to withhold, from any cash, shares of Common Stock, other securities or other property deliverable under any Award
or from any compensation or other amounts owing to a Participant, the amount (in cash, Common Stock, other securities or other
property) of any required withholding taxes in respect of an Award, its exercise, or any payment or transfer under an Award or
under the Plan and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all
obligations for the payment of such withholding and taxes.
(ii) Without limiting the
generality of clause (i) above, the Committee may, in its sole discretion,
permit a Participant to satisfy, in whole or in part, the foregoing withholding
liability (but no more than the minimum required statutory withholding
liability) by (A) the delivery of shares of Common Stock (which are not subject
to any pledge or other security interest ) owned by the Participant having a
Fair Market Value equal to such withholding liability or (B) having the Company
withhold from the number of shares of Common Stock otherwise issuable or
deliverable pursuant to the exercise or settlement of the Award a number of
shares with a Fair Market Value equal to such withholding liability.
(e)
No Claim to Awards; No Rights to Continued Employment; Waiver
. No employee of the Company or an Affiliate, or other person,
shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be
selected for a grant of any other Award. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries
of Awards. The terms and conditions of Awards and the Committees determinations and interpretations with respect thereto
need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants
are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right
to be retained in the employ or service of the Company or an Affiliate, nor shall it be construed as giving any Participant any
rights to continued service on the Board. The Company or any of its Affiliates may at any time dismiss a Participant from employment
or discontinue any consulting relationship, free from any liability or any claim under the Plan, unless otherwise expressly provided
in the Plan or any Award agreement. By accepting an Award under the Plan, a Participant shall thereby be deemed to have waived
any claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the
Award beyond the period provided under the Plan or any Award agreement, notwithstanding any provision to the contrary in any written
employment contract or other agreement between the Company and its Affiliates and the Participant, whether any such agreement
is executed before, on or after the Date of Grant.
(f)
International Participants
. With respect to Participants who reside or work outside of the United States of America and
who are not (and who are not expect to be) covered employees within the meaning of Section 162(m) of the Code, the
Committee may in its sole discretion amend the terms of the Plan or Sub-Plans or outstanding Awards with respect to such Participants
in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for a Participant,
the Company or its Affiliates.
(g)
Designation and Change of Beneficiary
. Each Participant may file with the Committee a written designation of one or more
persons as the beneficiary(ies) who shall be entitled to receive the amounts payable with respect to an Award, if any, due under
the Plan upon his or her death. A Participant may, from time to time, revoke or change his or her beneficiary designation without
the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the
Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Participants death, and in no event shall it be effective as of a date prior to such
receipt. If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be his or her spouse or,
if the Participant is unmarried at the time of death, his or her estate.
(h)
Termination of Employment
. Except as otherwise provided in an Award agreement or an employment or consulting or similar
agreement with a Participant, unless determined otherwise by the Committee at any point following such event: (i) neither a temporary
absence from employment or service due to illness, vacation or leave of absence nor a transfer from employment or service with
the Company to employment or service with an
A-17
Affiliate (or vice-versa) shall be
considered a termination of employment or service of such Participant with the
Company or an Affiliate; and (ii) if a Participants employment with the Company
and its Affiliates terminates, but such Participant continues to provide
services to the Company and its Affiliates in a non-employee capacity, such
change in status shall not be considered a termination of employment or service
of such Participant with the Company or an Affiliate for purposes of the
Plan.
(i)
No Rights as a Stockholder
.
Except as otherwise specifically provided in the Plan or any Award agreement, no person shall be entitled to the privileges of
ownership in respect of shares of Common Stock which are subject to Awards hereunder until such shares have been issued or delivered
to that person.
(j)
Government and Other Regulations
. (i) The obligation of the Company to settle Awards in Common Stock or other consideration
shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required.
Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell
or to sell, and shall be prohibited from offering to sell or selling, any shares of Common Stock pursuant to an Award unless such
shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless
the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such
registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied
with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Common Stock
to be offered or sold under the Plan. The Committee shall have the authority to provide that all shares of Common Stock or other
securities of the Company or any Affiliate delivered under the Plan shall be subject to such stop transfer orders and other restrictions
as the Committee may deem advisable under the Plan, the applicable Award agreement, the Federal securities laws, or the rules,
regulations and other requirements of the Securities and Exchange Commission, any securities exchange or inter-dealer quotation
system on which the securities of the Company are listed or quoted and any other applicable Federal, state, local or non-U.S.
laws, and, without limiting the generality of Section 9 of the Plan, the Committee may cause a legend or legends to be put on
certificates representing shares of Common Stock or other securities of the Company or any Affiliate delivered under the Plan
to make appropriate reference to such restrictions or may cause such Common Stock or other securities of the Company or any Affiliate
delivered under the Plan in book-entry form to be held subject to the Companys instructions or subject to appropriate stop-transfer
orders. Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to add any additional terms
or provisions to any Award granted under the Plan that it in its sole discretion deems necessary or advisable in order that such
Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.
(ii) The Committee may cancel an
Award or any portion thereof if it determines, in its sole discretion, that
legal or contractual restrictions and/or blockage and/or other market
considerations would make the Companys acquisition of shares of Common Stock
from the public markets, the Companys issuance of Common Stock to the
Participant, the Participants acquisition of Common Stock from the Company
and/or the Participants sale of Common Stock to the public markets, illegal,
impracticable or inadvisable. If the Committee determines to cancel all or any
portion of an Award in accordance with the foregoing, the Company shall pay to
the Participant an amount equal to the excess of (A) the aggregate Fair Market
Value of the shares of Common Stock subject to such Award or portion thereof
canceled (determined as of the applicable exercise date, or the date that the
shares would have been vested or delivered, as applicable), over (B) the
aggregate Exercise Price or Strike Price (in the case of an Option or SAR,
respectively) or any amount payable as a condition of delivery of shares of
Common Stock (in the case of any other Award). Such amount shall be delivered to
the Participant as soon as practicable following the cancellation of such Award
or portion thereof.
(k)
No Section 83(b) Elections Without Consent of Company
. No election under Section 83(b) of the Code or under a similar provision
of law may be made unless expressly permitted by the terms of the applicable Award agreement or by action of the Committee in
writing prior to the making of such election. If a Participant, in connection with the acquisition of shares of Common Stock under
the Plan or otherwise, is expressly permitted to make such election and the Participant makes the election, the Participant shall
notify the Company of such election within ten days of filing notice of the election with the Internal Revenue Service or other
governmental authority, in addition to any filing and notification required pursuant to Section 83(b) of the Code or other applicable
provision.
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(l)
Payments to Persons Other Than
Participants
. If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for
his or her affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his or her
estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs
the Company, be paid to his or her spouse, child, relative, an institution maintaining or having custody of such person, or any
other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liability of the Committee and the Company therefor.
(m)
Nonexclusivity of the Plan
. Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders
of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this
Plan, and such arrangements may be either applicable generally or only in specific cases.
(n)
No Trust or Fund Created
. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Company or any Affiliate, on the one hand, and a Participant or other person
or entity, on the other hand. No provision of the Plan or any Award shall require the Company, for the purpose of satisfying any
obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made
or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence
of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights
under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled
to payment of additional compensation by performance of services, they shall have the same rights as other employees under general
law.
(o)
Reliance on Reports
. Each member of the Committee and each member of the Board shall be fully justified in acting or failing
to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report
made by the independent public accountant of the Company and its Affiliates and/or any other information furnished in connection
with the Plan by any agent of the Company or the Committee or the Board, other than himself.
(p)
Relationship to Other Benefits
. No payment under the Plan shall be taken into account in determining any benefits under
any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically
provided in such other plan.
(q)
Governing Law
. The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware
applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the conflict of laws
provisions thereof.
(r)
Severability
. If any provision of the Plan or any Award or Award agreement is or becomes or is deemed to be invalid, illegal,
or unenforceable in any jurisdiction or as to any person or entity or Award, or would disqualify the Plan or any Award under any
law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws,
or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent
of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, person or entity or Award
and the remainder of the Plan and any such Award shall remain in full force and effect.
(s)
Obligations Binding on Successors
. The obligations of the Company under the Plan shall be binding upon any successor corporation
or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation
or organization succeeding to substantially all of the assets and business of the Company.
(t)
409A of the Code
. Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of this
Plan comply with Section 409A of the Code, and all provisions of this Plan shall be construed and interpreted in a manner consistent
with the requirements for avoiding taxes or penalties under Section 409A of the Code. Each Participant is solely responsible and
liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection
with this Plan or any other plan maintained by the
A-19
Company (including any taxes and penalties
under Section 409A of the Code), and neither the Company nor any Affiliate shall
have any obligation to indemnify or otherwise hold such Participant (or any
beneficiary) harmless from any or all of such taxes or penalties.
(u)
Clawback/Forfeiture
. Notwithstanding
anything to the contrary contained herein, an Award agreement may provide that the Committee may in its sole discretion cancel
such Award if the Participant, without the consent of the Company, while employed by or providing services to the Company or any
Affiliate or after termination of such employment or service, violates a non-competition, non-solicitation or non-disclosure covenant
or agreement or otherwise engages in activity that is in conflict with or adverse to the interest of the Company or any Affiliate,
including fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its
sole discretion. The Committee may also provide in an Award agreement that if the Participant engages in any activity referred
to in the preceding sentence, the Participant will forfeit any gain realized on the vesting or exercise of such Award, and must
repay the gain to the Company.
(v)
Code Section 162(m) Re-approval
. If so determined by the Committee, the provisions of the Plan regarding Performance Compensation
Awards shall be submitted for re-approval by the stockholders of the Company no later than the first stockholder meeting that
occurs in the fifth year following the year in which stockholders previously approved such provisions, in each case for purposes
of exempting certain Awards granted after such time from the deduction limitations of Section 162(m) of the Code. Nothing in this
subsection, however, shall affect the validity of Awards granted after such time if such stockholder approval has not been obtained.
(w)
Expenses; Gender; Titles and Headings
. The expenses of administering the Plan shall be borne by the Company and its Affiliates.
Masculine pronouns and other words of masculine gender shall refer to both men and women. The titles and headings of the sections
in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles
or headings shall control.
* * *
A-20
AUTOMATIC DATA PROCESSING, INC.
1 ADP
BOULEVARD
ROSELAND, NJ
07068
VOTE BY INTERNET -
www.proxyvote.com
Use the
Internet to transmit your voting instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the day before the cut-off date or
meeting date. Have your proxy card in hand when you access the web site and
follow the instructions to obtain your records and to create an electronic
voting instruction form.
VOTE BY PHONE -
1-800-690-6903
Use any touch-tone
telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in hand
when you call and follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
ADMISSION
TICKET
Please retain and
present this top portion of the proxy card as your admission ticket
together with a valid picture identification to gain admittance to the Annual
Meeting.
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TO VOTE, MARK BLOCKS BELOW IN
BLUE OR BLACK INK AS FOLLOWS:
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M62742-P43055
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KEEP THIS PORTION FOR YOUR
RECORDS
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DETACH AND RETURN THIS PORTION
ONLY
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THIS PROXY CARD IS VALID ONLY
WHEN SIGNED AND DATED.
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AUTOMATIC DATA PROCESSING,
INC.
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For
All
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Withhold
All
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For
All
Except
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To withhold authority
to vote for any individual nominee(s), mark For All Except and write the
number(s) of the nominee(s) on the line below.
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The Board of Directors recommends a vote FOR
the
following:
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1.
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Election of Directors
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o
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o
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o
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Nominees:
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01)
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Ellen R. Alemany
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06)
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Linda R. Gooden
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02)
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Gregory D. Brenneman
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07)
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R. Glenn Hubbard
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03)
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Leslie A. Brun
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08)
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John P. Jones
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04)
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Richard T. Clark
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09)
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Carlos A. Rodriguez
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05)
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Eric C. Fast
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10)
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Gregory L. Summe
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The Board of Directors recommends a vote FOR
the following proposals:
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For
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Against
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Abstain
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2.
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Advisory Vote on Executive Compensation.
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o
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o
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o
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3.
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Appointment of Deloitte & Touche LLP.
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o
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o
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o
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4.
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Re-approval of Performance-Based Provisions
of the Automatic Data Processing, Inc. 2008 Omnibus Award Plan.
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o
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o
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o
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NOTE:
The proxies will vote in their discretion upon any
and all other matters which may properly come before the meeting or any
adjournment thereof.
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Please sign exactly as your name(s) appear(s)
hereon. When signing as attorney, executor, administrator, or other fiduciary,
please give full title as such. Joint owners should each sign personally. All
holders must sign. If a corporation or partnership, please sign in full
corporate or partnership name by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Dear Stockholder:
You are cordially invited to join us at the 2013 Annual Meeting of Stockholders
of Automatic Data Processing, Inc. This years meeting will be held at the
corporate offices of the Company at One ADP Boulevard, Roseland, New Jersey, on
Tuesday, November 12, 2013, starting at 10:00 a.m. I hope you will be able to
attend. At the meeting, we will (i) elect directors, (ii) hold an advisory vote
on executive compensation, (iii) vote on the appointment of Deloitte &
Touche LLP as the Company's independent certified public accountants, and (iv) vote on
the re-approval of the performance-based provisions of the Automatic Data
Processing, Inc. 2008 Omnibus Award Plan.
It
is important that these shares be voted, whether or not you plan to be present
at the meeting. You should specify your choices by marking the appropriate boxes
on the proxy form on the reverse side, and date, sign and return your proxy form
in the enclosed, postage-paid return envelope as promptly as possible.
Alternatively, you may vote by phone or the Internet, as described on the
reverse side. If you date, sign and return your proxy form without specifying
your choices, these shares will be voted in accordance with the recommendation
of the Company's directors.
Please retain and present this top portion of the proxy card as your admission
ticket together with a valid picture identification to gain admittance to the meeting.
This ticket will admit only the stockholder listed on the reverse side and is
not transferable. If these shares are held in the name of your broker or bank or
you received your proxy materials electronically, you will need to bring
evidence of the stock ownership, such as the most recent brokerage account
statement.
As
in the past years, we will discuss the business of the Company and its
subsidiaries during the meeting. I welcome your comments and suggestions, and we
will provide time during the meeting for questions from stockholders. I am
looking forward to seeing you at the meeting.
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Sincerely,
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Carlos A.
Rodriguez
President and Chief Executive
Officer
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Important Notice
Regarding the Availability of Proxy Materials for the Annual Meeting:
The Combined Document
containing Notice of 2013 Annual Meeting of Stockholders, Proxy Statement and
Annual Report on Form 10-K is available at
www.proxyvote.com.
Proxy
This proxy is solicited on behalf of the
Board of Directors
Properly executed
proxies received by the day before the cut-off date or the meeting date will be
voted as marked and, if not marked, will be voted FOR the election of the
nominees listed in the accompanying Proxy Statement and FOR proposals (2), (3)
and (4) on the reverse side.
The undersigned hereby appoints Leslie
A. Brun and Carlos A. Rodriguez, and each of them, attorneys and proxies with
full power of substitution, in the name, place and stead of the undersigned, to
vote as proxy at the 2013 Annual Meeting of Stockholders of Automatic Data
Processing, Inc. to be held at the corporate offices of the Company,
ONE ADP BOULEVARD, ROSELAND, NEW JERSEY
, on Tuesday, November 12, 2013 at 10:00 a.m., or at any
adjournment or adjournments thereof, according to the number of votes that the
undersigned would be entitled to cast if personally present. If shares of
Automatic Data Processing, Inc. Common Stock are issued to or held for the
account of the undersigned under employee plans and voting rights attach to such
shares (any of such plans, a "Voting Plan"), then the undersigned hereby directs
the respective fiduciary of each applicable Voting Plan to vote all shares of
Automatic Data Processing, Inc. Common Stock in the undersigned's name and/or
account under such Voting Plan in accordance with the instructions given herein,
at the Annual Meeting and at any adjournments or postponements thereof, on all
matters properly coming before the Annual Meeting, including but not limited to
the matters set forth on the reverse side. Either of said attorneys and proxies
or substitutes, who shall be present at such meeting or at any adjournment or
adjournments thereof, shall have all the powers granted to such attorneys and
proxies.
Please date, sign and mail the proxy
promptly in the self-addressed return envelope which requires no postage if
mailed in the United States. When signing as an attorney, executor,
administrator, trustee or guardian, please give your full title as such. If
shares are held jointly, both owners should sign. Alternatively, you may vote by
phone or the Internet, as described in the instructions on the reverse
side.
Continued and to be
signed on reverse side
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