SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
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)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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AUTOMATIC DATA PROCESSING, INC.
(ADP Logo)(R) One ADP Boulevard . Roseland, New Jersey 07068
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NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
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To the Stockholders:
PLEASE TAKE NOTICE that the 2000 Annual Meeting of Stockholders of
AUTOMATIC DATA PROCESSING, INC. (the "Company") will be held at 10:00 a.m.,
Tuesday, November 14, 2000 at the Company's corporate headquarters, ONE ADP
BOULEVARD, ROSELAND, NEW JERSEY 07068, for the following purposes:
1. To elect a Board of Directors (Proposal 1);
2. To ratify the appointment of Deloitte & Touche LLP to
serve as the Company's independent certified public
accountants for the fiscal year which began on July 1, 2000
(Proposal 2); and
3. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
Only the holders of Common Stock of record at the close of business on
September 15, 2000 (the "Record Date") are entitled to vote at the meeting. Each
stockholder is entitled to one vote for each share of Common Stock held on the
Record Date.
By order of the Board of Directors
JAMES B. BENSON
Secretary
September 21, 2000
Roseland, New Jersey
The presence in person and/or the representation by proxy of the
holders of a majority of the issued and outstanding shares of stock entitled to
vote is necessary and sufficient to constitute a quorum. Accordingly, if you do
not expect to be present at the meeting, you may vote your shares of stock by
phone, the Internet or by executing the accompanying proxy and returning it
promptly in the enclosed envelope, which requires no postage if mailed in the
United States.
PROXY STATEMENT
(ADP Logo)(R) ANNUAL MEETING OF STOCKHOLDERS OF
AUTOMATIC DATA PROCESSING, INC.
One ADP Boulevard . Roseland, New Jersey 07068
TO BE HELD ON NOVEMBER 14, 2000
SOLICITATION AND REVOCATION OF PROXY
The accompanying proxy is being solicited by the Board of Directors of
the Company for use at the forthcoming Annual Meeting of Stockholders. Each
stockholder giving such a proxy has the power to revoke the same at any time
before it is voted by so notifying the Secretary of the Company in writing. All
expenses in connection with the solicitation will be borne by the Company. This
Proxy Statement and the accompanying proxy are being mailed to stockholders on
or about September 21, 2000.
The Company has one class of securities outstanding and entitled to
vote at the Annual Meeting of Stockholders, its Common Stock, par value $.10 per
share. At the close of business on September 15, 2000, the record date for
determining stockholders entitled to notice of and to vote at the meeting, the
Company had issued and outstanding 630,384,236 shares of Common Stock
(excluding 1,437,825 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.
The representation in person or by proxy of a majority of the shares
entitled to vote shall constitute a quorum at the Annual Meeting of
Stockholders. Directors are elected by a plurality of the affirmative votes
cast. The affirmative vote of the holders of a majority of the outstanding
shares present in person or by proxy and entitled to vote thereon is required to
ratify the appointment of Deloitte & Touche LLP as the Company's independent
certified public accountants. Under the Company's Restated Certificate of
Incorporation and By-Laws and under Delaware law, abstentions and "non-votes"
are counted as present in determining whether the quorum requirement is
satisfied. With regard to the election of directors, votes may be cast in favor
or withheld. Votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on any proposal (other than
the election of directors) and will have the effect of a negative vote. Under
applicable Delaware law, a non-vote will have no effect on the outcome of (i)
the election of directors or (ii) the ratification of the appointment of
Deloitte & Touche LLP. A non-vote occurs when a nominee holding shares for a
beneficial owner votes on one proposal, but does not vote on another proposal
because the nominee does not have discretionary voting power and has not
received instructions from the beneficial owner.
The Company's Board of Directors has adopted a policy whereby
stockholders' proxies are received by the Company's independent tabulators and
the vote is certified by independent inspectors of election. Proxies and ballots
that identify the vote of individual stockholders will be kept confidential from
the Company's management and directors, except as necessary to meet legal
requirements, in cases where stockholders request disclosure, or in a contested
election.
PROPOSAL 1
ELECTION OF DIRECTORS
Properly executed proxies will be voted as marked, and if not marked,
will be voted in favor of the election of 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 does not remain a candidate at the time of the meeting (a situation
which management does not anticipate), proxies solicited hereunder will be voted
in favor of those nominees who do remain as candidates and may be voted for
substitute nominees designated by the Board of Directors.
Served as a
Director
Continuously
Name Age Since Principal Occupation
---- --- ---------------- ---------------------------------------------------------------
Gary C. Butler 53 1996 President and Chief Operating Officer of the Company (1)
Joseph A. Califano, Jr. 69 1982 Chairman of the Board and President, The National Center on
Addiction and Substance Abuse at Columbia University (2)
Leon G. Cooperman 57 1991 Chairman and Chief Executive Officer, Omega Advisors, Inc., an
investment partnership (3)
George H. Heilmeier 64 1994 Chairman Emeritus of Telcordia Technologies
(formerly Bellcore), a research and engineering consortium (4)
Ann Dibble Jordan 65 1993 Consultant (5)
Harvey M. Krueger 71 1967 Vice Chairman of Lehman Brothers, investment bankers (6)
Frederic V. Malek 63 1978 Chairman, Thayer Capital Partners, a merchant banking firm (7)
Henry Taub 73 1961 Honorary Chairman of the Board of the Company, Chairman of the
Executive Committee of the Board of the Company (8)
Laurence A. Tisch 77 1972 Co-Chairman of Loews Corporation, which is engaged in the consumer
products, hotel and insurance businesses (9)
Arthur F. Weinbach 57 1989 Chairman of the Board and Chief Executive Officer of the
Company (10)
Josh S. Weston 71 1977 Honorary Chairman of the Board of the Company (11)
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(1) Mr. Butler became President and Chief Operating Officer of the
Company in April 1998, having served as Group President of the
Employer Services Group of the Company since January 1995. Prior to
that time, he served as Group President for the Dealer Services
Group of the Company for more than five years. He is also a director
of Convergys Corp.
(2) Mr. Califano has been Chairman of the Board and President of The
National Center on Addiction and Substance Abuse at Columbia
University since 1992. Mr. Califano was a senior partner in the
Washington, D.C. office of Dewey Ballantine from 1983 through
1992. He is also a director of HealthPlan Services Corporation,
Kmart Corporation, True North Communications Inc. and The Warnaco
Group, Inc.
2
(3) Mr. Cooperman has been Chairman and Chief Executive Officer of
Omega Advisors, Inc. since 1991. From 1989 to July 1991, he was
Chairman and Chief Executive Officer of Goldman Sachs Asset
Management and a limited partner of Goldman, Sachs & Co.
(4) Dr. Heilmeier has been Chairman Emeritus of Telcordia
Technologies (formerly Bellcore) since November 1997. Dr.
Heilmeier served as Chairman and Chief Executive Officer of
Bellcore from January 1997 to November 1997 and President and Chief
Executive Officer from April 1991 to January 1997. Dr.
Heilmeier is also a director of Compaq Computer Corporation,
The MITRE Corporation, Teletech Holdings Inc. and TRW Inc.
(5) Ms. Jordan is the former Director, Social Services Department,
Chicago Lying-In Hospital, University of Chicago Medical Center, a
position she assumed in 1970. She is also a director of Johnson &
Johnson Corporation and Citigroup Inc.
(6) Mr. Krueger is Vice Chairman of Lehman Brothers and has been a
senior officer of Lehman Brothers and its predecessor companies
for more than the past five years. He is also a director of Chaus,
Inc., Delta Galil Industries Ltd. and R.G. Barry Corporation.
(7) Mr. Malek has been Chairman of Thayer Capital Partners since 1992.
From 1989 to 1997, Mr. Malek was also Co-Chairman of CB Commercial
Real Estate Group. Mr. Malek is also a director of Aegis
Communications Group, Inc., American Management Systems,
Incorporated, CB Commercial Real Estate Group, FPL Group,
Inc., Manor Care, Inc., Northwest Airlines Corporation,
Saga Systems, Inc. and various Paine Webber mutual funds.
(8) Mr. Taub became Honorary Chairman of the Company's Board of
Directors in 1986 and has been Chairman of the Executive Committee
since 1983.
(9) Mr. Tisch has been Co-Chairman of the Board of Directors of Loews
Corporation since January 1999. From October 1994 to January 1999,
he was Co-Chairman of the Board and Co-Chief Executive Officer
of Loews Corporation. Mr. Tisch has also been Chairman of the
Board and Chief Executive Officer of CNA Financial Corporation
since 1990. From January 1987 to November 1995, Mr. Tisch was
Chairman of the Board, President and Chief Executive Officer of
CBS, Inc. He is also a director of Bulova Corporation.
(10) Mr. Weinbach became Chairman of the Board and Chief Executive
Officer of the Company in April 1998, having served as President and
Chief Executive Officer since August 1996 and President and Chief
Operating Officer since January 1994. Prior to that time, he served
as Executive Vice President since August 1992. He is also a director
of HealthPlan Services Corporation and Schering Plough Corp.
(11) Mr. Weston became Honorary Chairman of the Company's Board of
Directors in April 1998. He served as Chairman of the Board of the
Company from August 1996 to April 1998. Prior to August 1996, he
served as Chairman of the Board and Chief Executive Officer of the
Company for more than the past five years. He is also a director of
Gentiva Health Services, Inc., J. Crew Group Inc. and Russ Berrie
& Company, Inc.
Stockholder Approval Required
Directors shall be elected by a plurality of the affirmative votes cast at
the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS.
Directors' Meetings, Committees and Fees
During the last fiscal year six meetings of the Board of Directors were
held. All directors attended at least 75%, in the aggregate, of the meetings of
the Board of Directors and the committees of which they were members.
3
The Company has a standing Audit Committee composed of Messrs. Califano,
Cooperman and Krueger, and Ms. Jordan. Mr. Krueger is the Chairman. The
principal functions of the Audit Committee are to (i) make recommendations to
the full Board of Directors concerning the appointment of independent auditors,
(ii) review the scope of the audit and related fees, (iii) review the Company's
accounting principles, policies and reporting practices with the independent and
internal auditors and management, (iv) discuss with the independent auditors the
results of their audit and determine what action, if any, is required with
respect to the Company's internal controls and (v) consider other audit and
non-audit matters from time to time as requested by the full Board of Directors.
The Audit Committee met four times during fiscal 2000.
The Company has a Compensation Committee composed of Messrs. Heilmeier,
Malek and Tisch. Mr. Malek is the Chairman. The purpose of the Compensation
Committee is to develop guidelines and review the compensation and performance
of officers of the Company and other Company associates, to review and approve
criteria for granting bonuses and options to officers of the Company, and to
develop plans for managerial succession. The Compensation Committee met three
times during fiscal 2000.
The Company has an Executive Committee composed of Messrs. Krueger, Malek,
Taub, Weinbach and Weston. Mr. Taub is the Chairman. The purpose of the
Executive Committee is to act in the absence of the Board of Directors. In
addition, the Executive Committee acts as a corporate governance/nominating
committee to (i) advise the full Board of Directors on corporate governance
matters, (ii) develop policies on the size and composition of the Board of
Directors, (iii) review candidates for Board of Directors membership, (iv)
perform Board of Directors evaluations and (v) recommend a slate of nominees to
the Board of Directors. The Executive Committee will consider recommendations
for nominees for directorships submitted by stockholders. Stockholders who wish
the Executive Committee to consider their recommendations for nominees for the
position of director should submit their recommendations in writing to the
Executive Committee in care of the Secretary of the Company at our principal
executive offices. The Executive Committee met three times during fiscal 2000.
Non-employee directors are paid an annual retainer of $35,000, plus $1,500
for each Board of Directors meeting attended. In addition, non-employee
directors are paid $1,000 for each committee meeting attended, if such committee
meeting is held on the same day a Board of Directors meeting is held; otherwise,
non-employee directors are paid $1,500 for each committee meeting attended.
Non-employee directors may elect to defer payment of the above amounts. There
are no fees paid to employee directors or other fee arrangements provided by the
Company.
The non-employee directors of the Company are entitled to participate in
the 1989 Non-Employee Director Stock Option Plan (the "Directors' Plan")
pursuant to which options to purchase 9,000 shares of Common Stock will
automatically be granted to persons who become non-employee directors. In
addition, each non-employee director will be granted an additional option to
purchase 9,000 shares on the first business day after each fifth anniversary of
the date of the initial grant to each such non-employee director, provided that
he or she is then still serving in such capacity. The Directors' Plan was
adopted on November 2, 1989 and will remain in effect until terminated by action
of the Board of Directors. All options have been and will be granted at the fair
market value of the Common Stock, determined on the basis of the closing price
of the Common Stock in consolidated trading on the date of grant, as reported in
The Wall Street Journal. Twenty percent of the options granted under the
Directors' Plan become exercisable on the first anniversary of the date such
options were granted, and twenty percent become exercisable on each successive
anniversary date thereafter until all such options are exercisable, provided
that options become exercisable only if the director is then still serving in
such capacity, unless certain specified events occur such as the death,
disability or retirement of a director, in which case the options shall
immediately vest and become fully exercisable. All options granted under the
Directors' Plan have a term of ten years. During fiscal 2000 (and prior to the
change in level of grant to the present grant level of 9,000 shares), an option
to purchase 7,500 shares at an exercise price of $50.38 was granted to Dr.
Heilmeier.
Any person who first becomes a non-employee director after August 13, 1997
is not eligible to receive a pension from the Company. A non-employee director
(who was a director on August 13, 1997) who retires
4
after 20 years of service in such capacity and having attained the age of
70 will receive a pension of $25,000 per year for the remainder of his or
her life. If such non-employee director retires after having attained the
age of 65 with 15 years of service, he or she will receive a pension of $12,500
per year.
Security Ownership of Certain Beneficial Owners and Managers
The following table contains information as of August 31, 2000 with
respect to the beneficial ownership of Common Stock by (i) each director and
nominee for director of the Company, (ii) each of the executive officers of the
Company named in the Summary Compensation Table, (iii) all directors and
executive officers of the Company as a group (including the named individuals),
and (iv) all stockholders known to the Company to be the beneficial owners of
more than 5% of the outstanding shares of the Company's Common Stock. Unless
otherwise noted in the footnotes following the table, the persons as to whom the
information is given had sole voting and investment power over the shares of
Common Stock shown as beneficially owned.
Shares of Common Stock
Name Beneficially Owned (1) Percent
- ----- ----------------------- -------
Gary C. Butler ................................. 504,680 *
Joseph A. Califano, Jr.(2) ..................... 21,600 *
Leon G. Cooperman .............................. 48,000 *
Richard J. Daly ................................ 378,698 *
Russell P. Fradin .............................. 274,312 *
George H. Heilmeier ............................ 20,400 *
John Hogan ..................................... 289,506 *
Ann Dibble Jordan .............................. 26,400 *
Harvey M. Krueger (3) .......................... 87,258 *
Frederic V. Malek (4) .......................... 28,000 *
Henry Taub (5) ................................. 6,819,970 1.08%
Laurence A. Tisch .............................. 1,000 *
Arthur F. Weinbach (6) ......................... 1,068,351 *
Josh S. Weston ................................. 793,517 *
FMR Corp. (7) .................................. 46,301,355 7.41%
Directors and Executive Officers as a group (25 persons,
including those Directors and Officers named above)(8) 11,566,491 1.84%
- --------------------------
* Indicates less than one percent.
(1) Includes shares that may be acquired upon the exercise of options
granted by the Company that are exercisable on or prior to October
30, 2000. The shares beneficially owned include 128,000, 20,000,
44,000, 300,000, 150,000, 20,000, 255,600, 20,000, 564,000, 280,000
and 26,000 shares subject to such options granted to Messrs. Butler,
Califano, Cooperman, Daly, Fradin, Heilmeier, Hogan, Krueger,
Weinbach and Weston and Ms. Jordan, respectively, and 2,600,767
shares subject to such options granted to the Directors and
Executive Officers as a group.
(2) In addition, members of Mr. Califano's immediate family were
potential beneficiaries of charitable trusts or owned outright an
aggregate of 800 shares of Common Stock of the Company.
(3) Includes 35,258 shares, representing the gain resulting from
the exercise of an option to purchase 40,000 shares of Common
Stock on November 1, 1999. Mr. Krueger has elected to defer receipt
of the shares representing such gain.
(4) In addition, members of Mr. Malek's immediate family were potential
beneficiaries of charitable trusts or owned outright an aggregate of
3,200 shares of Common Stock of the Company.
5
(5) In addition, members of Mr. Taub's immediate family were potential
beneficiaries of charitable trusts or owned outright an aggregate of
299,358 shares of Common Stock of the Company.
(6) Includes 42,877 shares, representing the gain resulting from
the exercise of an option to purchase 50,000 shares of Common
Stock on August 19, 1999. Mr. Weinbach has elected to defer receipt
of the shares representing such gain.
(7) On February 11, 2000, FMR Corp., Edward C. Johnson 3d and Abigail P.
Johnson (the "FMR Group") filed a statement on Schedule 13G with the
Securities and Exchange Commission to report that as of February 11,
2000, the FMR Group owned more than 5% of the outstanding shares of
the Company's Common Stock. The FMR Group's beneficial ownership
consists of shares of the Company's Common Stock that are held by
various subsidiaries of FMR Corp. that serve as financial or
investment advisors.
(8) In addition, members of the immediate families of non-director
officers of the Company owned 3,588 shares of Common Stock of the
Company.
6
COMPENSATION OF EXECUTIVE OFFICERS
The following sections of this Proxy Statement cover the components of the
total compensation of the Company's Chief Executive Officer and the four other
most highly compensated executive officers of the Company. These sections
include: (i) a series of tables covering annual and long-term compensation; (ii)
a pension plan table summarizing the annual benefits payable under the Company's
defined benefit retirement plans; (iii) a report by the Compensation Committee
of the Board of Directors describing the Company's compensation policies for
fiscal 2000 for its executive officers and the rationale upon which its Chief
Executive Officer's compensation for fiscal 2000 was based; and (iv) a
performance graph comparing the Company's total stockholder return to the S&P
500 and a Peer Group Index over a five year period.
Summary Compensation Table
The following table summarizes the compensation of the Company's Chief
Executive Officer and the four other most highly compensated executive officers
for services in all capacities to the Company for the three years ended June 30,
2000.
Annual
Compensation(1) Long-Term Compensation
--------------------------- -------------------------------
Number of
Securities
Year Restricted Underlying
Name and Ended Stock Options All other
Principal Position June 30, Salary Bonus Awards Granted Compensation
- -------------------- ------- ---------- ----------- ---------- ----------- ------------
(2) (3) (4)
Arthur F. Weinbach 2000 $687,500 $560,000 $2,002,020 160,000 $5,840
Chairman and Chief 1999 $658,750 $485,000 $ -- 160,000 $6,509
Executive Officer 1998 $625,000 $412,500 $1,778,150 200,000 $6,244
Gary C. Butler 2000 $578,750 $400,000 $ -- 160,000 $5,793
President and Chief 1999 $560,000 $330,000 $ -- -- $6,142
Operating Officer 1998 $506,151 $325,000 $1,595,963 120,000 $5,680
Russell P. Fradin 2000 $458,750 $284,500 $ -- 40,000 $4,504
Group President 1999 $440,000 $260,000 $ -- -- $4,929
1998 $420,595 $225,000 $ -- 100,000 $4,377
Richard J. Daly 2000 $359,615 $211,800 $1,120,560 31,000 $5,302
Group President 1999 $339,773 $190,900 $ -- 57,200 $5,848
1998 $318,269 $195,000 $ -- 82,800 $5,499
John Hogan 2000 $359,615 $209,100 $1,120,560 31,000 $13,640
Group President 1999 $339,769 $189,700 $ -- 57,200 $4,892
1998 $318,270 $190,000 $ -- 50,000 $4,486
- ----------------------
(1) None of the named executive officers received any perquisites or other
personal benefits of an amount, or any other annual compensation of a type,
required to be reported by the Securities and Exchange Commission pursuant
to applicable rules and regulations.
(2) The dollar values shown in the Restricted Stock Awards column are based on
the closing market price of the Common Stock on the date the restricted
shares were granted. Restricted shares may not be transferred or pledged,
but such Company-imposed restrictions lapse with the passage of time
(generally over periods of up to five years) and continued employment with
the Company.
As of June 30, 2000, the aggregate number of shares of restricted stock
held by a named executive officer and the aggregate fair market value of
such shares (calculated by multiplying the aggregate number of shares held
by such named executive officer by the difference between $53.5625, the
7
closing price of the Common Stock on June 30, 2000, and $.10, the
consideration paid per share of restricted stock) was: Mr. Weinbach, 73,200
shares ($3,913,455); Mr. Butler, 41,200 shares ($2,202,655); Mr. Fradin,
40,000 shares ($2,138,500); Mr. Daly, 32,400 shares ($1,732,185); and Mr.
Hogan, 32,400 shares ($1,732,185).
The restricted stock awards to the named executive officers reported in the
table that vest, in whole or in part, in under three years from the date of
grant, together with their vesting schedule, are as follows:
(i) Mr. Weinbach received a grant of 48,800 shares of restricted stock in
fiscal 2000, 24,400 of which will vest in each of fiscal 2002 and 2003.
In addition, Mr. Weinbach received a grant of 48,800 shares of
restricted stock in fiscal 1998, of which 24,400 vested in fiscal 2000
and 24,400 will vest in fiscal 2001.
(ii)Mr. Butler received a grant of 43,800 shares of restricted stock in
fiscal 1998, 2,600 of which vested in fiscal 2000, and 20,600 of which
will vest in each of fiscal 2001 and 2002.
(iii) Mr. Fradin received a grant of 120,000 shares of restricted stock in
fiscal 1997, of which 20,000 vested in each of fiscal 1997, 1998, 1999
and 2000, and 20,000 will vest in each of fiscal 2001 and 2002.
(iv)Mr. Daly received a grant of 22,400 shares of restricted stock in
fiscal 2000, of which 800 will vest in fiscal 2001 and 10,800 will vest
in each of fiscal 2002 and 2003. In addition, Mr. Daly received a grant
of 20,800 shares of restricted stock in fiscal 1997, of which 5,200
vested in fiscal 1997, 4,800 vested in fiscal 1998, 4,400 vested in
fiscal 1999, 3,600 vested in fiscal 2000, and 2,800 will vest in fiscal
2001. Mr. Daly also received a grant of 24,800 shares of restricted
stock in fiscal 1996, of which 2,000 vested in fiscal 1996, 2,400
vested in fiscal 1997, 2,800 vested in fiscal 1998, 3,200 vested in
fiscal 1999, 7,200 vested in fiscal 2000, and 7,200 will vest in fiscal
2001.
(v) Mr. Hogan received a grant of 22,400 shares of restricted stock in
fiscal 2000, of which 800 will vest in fiscal 2001 and 10,800 will vest
in each of fiscal 2002 and 2003. In addition, Mr. Hogan received a
grant of 50,000 shares of restricted stock in fiscal 1996, of which
10,000 vested in each of fiscal 1997, 1998, 1999 and 2000 and 10,000
will vest in fiscal 2001.
Dividends are paid on restricted stock at the same rate as other
outstanding shares of the Company's Common Stock. In the event of a change
of control of the Company, the unvested portion of the restricted stock of
Messrs. Weinbach and Butler will be subject to accelerated vesting.
(3) The Company does not award Stock Appreciation Rights (SARs).
(4) For the year ended June 30, 2000, all other compensation consists of the
sum of: (i) contributions to the Company's Retirement and Savings Plan
(401(k)) in the following amounts: Mr. Weinbach, $4,759, Mr. Butler,
$5,306, Mr. Fradin, $4,182, Mr. Daly, $5,001, and Mr. Hogan, $4,541; and
(ii) compensatory split-dollar insurance premiums (with a statistically
calculated economic benefit to the executive determined by Phoenix Home
Life Insurance Company for W-2 income purposes) in the following amounts:
Mr. Weinbach, $1,081, Mr. Butler, $487, Mr. Fradin, $322, Mr. Daly,
$301, and Mr. Hogan, $230. Further, in connection with a relocation
package, Mr. Hogan received a loan from the Company on July 1, 1999 in
the amount of $689,044. The loan was repaid in full on September 28,
1999. Accrued interest of $8,869 (based on a rate of 5.22%) was accounted
for and reported as taxable income.
Stock Option Plans
The Company has in effect a 1990 Key Employees' Stock Option Plan (the
"1990 Plan") and a 2000 Key Employees' Stock Option Plan (the "2000 Plan"). The
1990 Plan and the 2000 Plan collectively are referred to as the "Option Plans".
Officers and key employees are eligible to participate in the Option Plans,
which permit the issuance, in addition to non-qualified options, of "incentive
stock options" ("ISOs") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The Company has ceased granting
options under the 1990 Plan, but outstanding options under the 1990 Plan remain
valid. In the event of a change in control of the Company, the unvested portion
of the stock options of Messrs. Weinbach and Butler will be subject to
accelerated vesting.
8
The Option Plans are administered by the Compensation Committee of the
Board of Directors. The Compensation Committee has the authority to determine
the employees to whom options will be granted and, subject to the Option Plans,
the terms and amount of options granted.
ISOs and non-qualified options expire no more than ten years from their
date of grant, with an exercise price no less than 100% of the fair market value
on the date of grant. The Board of Directors has resolved that once granted, no
ISO or non-qualified option may be repriced.
An optionee has no rights as a stockholder with respect to any shares
covered by his options until the date of issuance of a stock certificate to him
for such shares. During the life of the optionee, the option is exercisable only
by him. No option is exercisable more than 60 days after termination of
employment, or (if termination is due to the death of an optionee) more than six
months after the appointment and qualification of an executor or administrator
of the deceased optionee's estate or 12 months after the death of the optionee,
whichever occurs earlier.
The following table sets forth certain information concerning stock option
grants to the named executive officers during the fiscal year ended June 30,
2000.
Option Grants in Last Fiscal Year
------------------------------------------------------------------
Number of Percent of Total
Securities Options
Underlying Granted
Options to Employees Exercise Grant Date
Granted in Fiscal Year Price Expiration Value
Name (#) (1) (%) ($/Share) Date ($) (2)
- ---- ----------- ---------------- --------- ----------- -------------
Arthur F. Weinbach.......... 160,000 1.7% $41.72 7/25/09 $1,929,809
Gary C. Butler.............. 100,000 1.0% $41.72 7/25/09 $1,249,336
60,000 0.6% $43.97 10/17/09 $ 841,132
Russell P. Fradin........... 40,000 0.4% $43.97 10/17/09 $ 546,763
Richard J. Daly............. 31,000 0.3% $43.97 10/17/09 $ 411,168
John Hogan.................. 31,000 0.3% $43.97 10/17/09 $ 411,168
- --------------------
(1) 260,000 options were granted pursuant to the 1990 Plan and 162,000
options were granted pursuant to the 2000 Plan. The options were granted
at an exercise price equal to the fair market value of the Company's
Common Stock on the date of grant. The options were granted for terms of
ten years, and vest during periods up to six years subsequent to the date
of grant.
(2) The grant date values were calculated on the basis of the Black-Scholes
option pricing model. Options were assumed to be exercised 6.4 years after
the date of grant, based on historical experience. A risk-free interest
rate of 6.01%, stock price volatility of 22.00% and a dividend yield of
0.90% was used in the calculation of the July option grants to Messrs.
Weinbach and Butler. A risk-free interest rate of 6.38%, stock price
volatility of 23.86% and a dividend yield of 0.88% was used in the
calculation for the October option grants to Messrs. Butler, Daly, Fradin
and Hogan. A discount factor of 3% was applied to the calculated value to
reflect the risk of forfeiture during the option term. The actual value of
the options will depend on the market value of the Company's Common Stock
on the dates the options are exercised. No realization of value from the
options is possible without an increase in the price of the Company's
Common Stock, which would benefit all stockholders commensurately.
9
Aggregated Option Exercises
For Fiscal Year Ended June 30, 2000
And Option Values As Of June 30, 2000
The following table sets forth certain information concerning option exercises during the last fiscal year by the
named executive officers and unexercised options held by such officers at the end of the last fiscal year.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at 6/30/00 at 6/30/00
Shares Acquired (#) ($)
On Exercise Value Realized -------------------------- --------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- --------------- -------------- ----------- ------------- ----------- -------------
Arthur F. Weinbach (1).... 170,000 $7,224,557 504,000 716,000 $20,195,000 $17,847,000
Gary C. Butler............ 232,000 $8,460,400 128,000 300,000 $ 4,031,000 $ 4,927,000
Russell P. Fradin......... 10,000 $ 141,888 150,000 220,000 $ 4,535,000 $ 5,564,000
Richard J. Daly........... 0 $ 0 295,000 216,000 $11,079,000 $ 5,227,000
John Hogan................ 60,000 $1,932,150 255,600 186,600 $ 9,340,000 $ 4,240,000
- -------------------------
(1) As previously stated in footnote 6 to the table herein reflecting Security
Ownership of Certain Beneficial Owners and Managers, Mr. Weinbach elected
to defer receipt of 42,877 shares of Common Stock representing the gain
resulting from the exercise of an option to purchase 50,000 shares of
Common Stock on August 19, 1999.
Defined Benefit Plans
The following table shows the estimated annual retirement benefits payable
under the Company's retirement program, consisting of the Retirement Capital
Accumulation Plan (the "Pension Plan") and the Supplemental Officers' Retirement
Plan (the "Supplemental Retirement Plan"), to persons in specified average
compensation and credited service classifications, assuming retirement at age
65.
Final Years of Credited Service at Retirement
5-Year Average --------------------------------------------------------------------
Compensation 10 15 20 25 30
--------------- ----------- --------- -------- --------- ---------
$ 400,000 $ 69,000 $108,000 $132,000 $152,000 $181,000
500,000 84,000 131,000 157,000 177,000 206,000
600,000 99,000 153,000 182,000 202,000 231,000
700,000 114,000 176,000 207,000 227,000 256,000
800,000 129,000 198,000 230,000 252,000 281,000
900,000 144,000 221,000 257,000 277,000 306,000
1,000,000 159,000 243,000 282,000 302,000 331,000
Compensation covered by the Pension Plan is limited to January 1 base
salary up to the current compensation limit in effect for the plan year.
Compensation covered under the Supplemental Retirement Plan includes cash
compensation (paid or deferred) and compensation from restricted stock vesting
during the year. Benefits under the Supplemental Retirement Plan are subject to
reduction for social security, Pension Plan and 401(k) benefits.
Messrs. Weinbach, Butler, Fradin, Daly and Hogan have, in the aggregate,
19, 24, 2, 10 and 6 years of credited service, respectively, under the Pension
Plan and 11, 11, 3, 6 and 5 years of credited service, respectively, under the
Supplemental Retirement Plan. In addition, unless his employment is terminated
for cause, Mr. Weinbach will receive the maximum benefits available under the
Supplemental Retirement Plan. The figures shown on the table above are for a
straight-life annuity commencing at age 65. Reduced benefits are available at
earlier ages and in other forms of benefits.
10
Employment Agreements
Arthur F. Weinbach entered into an employment agreement with the Company
as of August 1, 1996, the day Mr. Weinbach became Chief Executive Officer of the
Company. The agreement has successive one-year terms unless terminated by the
Company or Mr. Weinbach prior to June 1 of any year. Mr. Weinbach's annual base
salary is to be no less than $580,000, and his annual target bonus is to be no
less than $290,000. The agreement provides that Mr. Weinbach is to be granted
restricted stock awards for a number of shares so that restrictions will lapse
in each fiscal year of the Company on shares with a market value on the date of
the award of at least $500,000. If the Company terminates Mr. Weinbach's
employment without cause, then he is entitled to receive his base salary for 18
months and continue to vest in his restricted stock awards and stock options. If
Mr. Weinbach's employment is terminated following a change-in-control of the
Company, he will receive a termination payment equal to a percentage, ranging
from 300% if such termination occurs within two years of such change-in-control
to 100% if it occurs after the third year, of his annual base salary and his
average annual bonus for the prior two years. In addition, all of his stock
options will become fully vested and all of his restricted stock having
restrictions lapsing within three years after such termination shall have such
restrictions automatically removed.
Mr. Butler has entered into an agreement with the Company that provides
that if his employment is terminated following a change-in-control of the
Company, he will receive a termination payment equal to a percentage, ranging
from 200% if such termination occurs within two years of such change-in-control
to 100% if it occurs after the third year, of his annual base salary and his
average annual bonus for the prior two years. In addition, all of his stock
options will become fully vested and all of his restricted stock having
restrictions lapsing within three years after such termination shall have such
restrictions automatically removed.
Certain Transactions
Harvey M. Krueger, a director of the Company, is Vice Chairman of Lehman
Brothers, which provided various investment banking and brokerage services to
the Company in the past fiscal year.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Compensation Committee of the Board of Directors is composed of
three outside directors: Messrs. Heilmeier, Malek and Tisch.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for setting, on behalf of the Board of Directors, the base salaries
and the total compensation levels of the Chairman and Chief Executive Officer,
the President and Chief Operating Officer and the Group Presidents of the
Employer Services, Brokerage Services and Dealer Services businesses, as well as
a structure for other key executives of the Company. The Committee grants all
stock options and reviews all recommendations for grants of restricted stock to
these and other key executives.
Compensation Policies
The Company's executive compensation policies for fiscal 2000, which were
reviewed by the Committee, were designed to emphasize both competitive and
variable compensation, with direct linkages to business objectives and
exceptional performance.
The primary components of the compensation package for key executives for
fiscal 2000 were base salary, bonus, restricted stock and stock options. The
Company and the Committee have always believed that stock ownership in the form
of restricted stock and longer-term stock option vesting is vital in linking
management to stockholder interests. The Company sets its salary and bonus
targets (i.e., direct cash compensation) at the median of market range levels of
comparable sized companies in the S&P 500. The Company's executives may derive
more from stock option price appreciation, as a percentage of total
compensation, than from base salary and bonus combined.
11
Annual Compensation
Total annual compensation consists of base salary, cash bonus and yearly
vesting of restricted stock. The base salaries for executives for fiscal 2000
were determined based upon the job grade of the position, the salary range of
the job grade and the performance of the executive.
Key executives earned cash bonuses in fiscal 2000 based upon individual
annual accomplishments versus individual pre-established goals that included
business growth and increased profitability. Performance goals also included
quality/service, product development, organization development and leadership.
Long-Term Compensation
Long-term compensation is comprised of restricted stock and the expected
value of stock options. The Company has from time to time sold shares of
restricted stock to executive officers and other key employees, at par value, in
recognition of their individual levels of relative responsibility and
prospective contributions to the business. Company-imposed restrictions on
transfer or pledge of the restricted stock generally lapse over a period of up
to five years, and are subject to continued employment. The restricted stock
plan is designed to encourage stock ownership, longevity and long-term
performance.
Stock options are granted to executive officers and other key employees in
amounts based upon their job grade and individual performance. Stock options are
granted at fair market value as of the date of grant, and have a term of up to
ten years. Stock options provide incentive for the creation of stockholder value
over the long-term, and also significantly aid in executive recruiting and
retention.
Restricted stock and stock option grants were made to individual key
executives during fiscal 2000 on a basis consistent with the above guidelines.
Benefits
The Company provided certain supplemental benefits to key executives
during fiscal 2000 to ensure that it could compete effectively for executive
talent. These supplemental benefits included additional Company-paid life
insurance and certain additional retirement benefits described in the "Defined
Benefit Plans" section of this Proxy Statement.
CEO Compensation
The Committee meets annually to evaluate the performance of the Chief
Executive Officer and to determine his compensation.
Mr. Weinbach received a base salary of $687,500 and a bonus of $560,000
during fiscal 2000. Mr. Weinbach's compensation is based on the satisfaction of
specific performance objectives and the terms of his employment agreement. Mr.
Weinbach's compensation approximates the median base salary and bonus
compensation of chief executive officers at companies in the S&P 500 with annual
revenues between $3 and $9 billion, as surveyed by the Company.
The incentives provided to the Chief Executive Officer are provided in the
form of restricted stock and stock options. This ensures that the Chief
Executive Officer and the Company's stockholders have a commonality of purpose
in enhancing stockholder value.
Compensation Committee
of the Board of Directors
Frederic V. Malek, Chairman
George H. Heilmeier
Laurence A. Tisch
12
PERFORMANCE GRAPH
The following graph compares the cumulative return on the Common Stock of
the Company for the most recent five years with the cumulative total return on
the S&P 500 Index and a Peer Group Index* comprised of direct competitors of the
Company over the same period, assuming an initial investment of $100 on June 30,
1995, with all dividends reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AUTOMATIC DATA PROCESSING, INC. S&P 500 INDEX PEER GROUP
Jun-95 100.00 100.00 100.00
Jun-96 124.14 125.93 162.91
Jun-97 152.60 169.55 146.02
Jun-98 238.57 220.57 207.71
Jun-99 290.18 270.69 215.09
Jun-00 355.64 290.23 227.27
- ---------------------
* The Peer Group Index is comprised of the following companies:
Affiliated Computer Services, Inc. First Data Corporation PMT Services, Inc.
The BISYS Group, Inc. Fiserv, Inc. The Profit Recovery Group International, Inc.
Ceridian Corp. Health Management Systems, Inc. SEI Investments Company
Computer Sciences Corporation Health Systems Design Corporation Shared Medical Systems Corporation
Concord EFS, Inc. HPR Inc. SPS Transaction Services, Inc.
Deluxe Corporation National Data Corporation SunGard Data Systems Inc.
DST Systems, Inc. National Processing, Inc. Total System Services, Inc.
Electronic Data Systems Corporation NOVA Corporation Ultradata Corporation
ENVOY Corporation Paychex, Inc.
Equifax Inc. Per-Se Technologies, Inc.
13
PROPOSAL 2
APPOINTMENT OF AUDITORS
At the Annual Meeting of Stockholders, the stockholders will vote on the
ratification of the appointment of Deloitte & Touche LLP, certified public
accountants, as independent auditors to audit the accounts of the Company and
its subsidiaries for the fiscal year begun July 1, 2000. A representative of
Deloitte & Touche LLP will be present at the Annual Meeting of Stockholders and
will have an opportunity to make a statement if he or she desires. He or she
will be available to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF THE AUDITORS.
OTHER MATTERS
So far as the Board of Directors is aware, only the aforementioned 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 said proxy.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
There was an inadvertent omission to report a grant of options in a Form 5
(Annual Statement of Beneficial Ownership of Securities) filed on behalf of S.
Michael Martone, an executive officer, as required by the Securities Exchange
Act of 1934, for the fiscal year ended June 30, 1999. The grant of options was
subsequently reported in the Form 5 filed for the fiscal year ended June 30,
2000.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2001 Annual Meeting
must be received by the Company for inclusion in the 2001 Proxy Statement no
later than May 24, 2001.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended June 30, 2000, which
is not a part of the proxy soliciting material, is being mailed to the Company's
stockholders together with this Proxy Statement.
For the Board of Directors
James B. Benson
Secretary
Roseland, New Jersey
September 21, 2000
14
[ADP Letterhead]
September 21, 2000
Dear Shareholder:
You are cordially invited to join us at the 2000 Annual Meeting of
Stockholders of Automatic Data Processing, Inc. This year's meeting will be held
at the corporate offices of the Company at One ADP Boulevard, Roseland, New
Jersey 07068, on Tuesday, November 14, 2000, starting at 10:00 a.m. I hope you
will be able to attend. At the meeting we will (i) elect directors and (ii)
vote on the appointment of Deloitte & Touche LLP as independent auditors.
It is important that your 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, postpaid return envelope as promptly as
possible. Alternatively, you may vote by phone or by the Internet, as described
on the reverse side. If you date, sign and return your proxy form without
specifying your choices, your shares will be voted in accordance with the
recommendation of your directors.
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 shareholders. I am
looking forward to seeing you at the meeting.
Sincerely,
/s/Arthur F. Weinbach
------------------------------------
Arthur F. Weinbach
Chairman and Chief Executive Officer
Proxy
This proxy is solicited on behalf of the Board of Directors
Properly executed proxies 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 proposal (2) on the reverse side.
The undersigned hereby appoints Arthur F. Weinbach and Gary C. Butler, 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 2000 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 07068, on
Tuesday, November 14, 2000 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.
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.
(ADP LOGO) VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telphone to vote your
AUTOMATIC DATA PROCESSING, INC. proxy 24 hours a day, 7 days a week. Have
PROXY SERVICES your proxy card in hand when you call. You
P.O. BOX 9015 will be prompted to enter your 12-digit
FARMINGDALE, NY 11735 Control Number, which is located below, and
then follow the simple instructions the Vote
Voice provides you.
VOTE BY INTERNET - www.proxyvote.com
-----------------
Use the Internet to vote your proxy 24 hours a
day, 7 days a week. Have your proxy card in
hand when you access the website. You will be
prompted to enter your 12-digit Control Number,
which is located below to obtain your records
and create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return
it in the postage-paid envelope we've provided
or return to Automatic Data Processing, Inc.,
P.O. Box 9015, Farmingdale, NY 11735.
If you vote by phone or vote using the Internet, please do not mail your proxy.
THANK YOU FOR VOTING
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
The Board of Directors recommends a vote FOR the proposals regarding:
(1) ELECTION OF DIRECTORS
(01) Gary C. Butler, (02) Joseph A. Califano, Jr., (03) Leon For Withhold For All To withhold authority to vote,
G. Cooperman, (04) George H. Heilmeier, (05) Ann Dibble All All Except mark "For All Except" and write the
Jordan, (06) Harvey M. Krueger, (07) Frederic V. Malek, nominees's number on the line below.
(08) Henry Taub, (09) Laurence A. Tisch, (10) Arthur F.
Weinbach and (11) Josh S. Weston [] [] [] -----------------------------------
For Against Abstain
(2) Appointment of Deloitte & Touche LLP [] [] []
(3) Upon any and all other matters which may properly come before the meeting or any adjournment thereof.
Please sign below exactly as the name(s) appear on your stock certificate (as indicated hereon). If the shares are issued in the
names of two or more persons, all such persons must sign the proxy.
- -------------------------- --------------------- -------------------------------- --------------------
Signature (Single Owner) Date Signature (Joint Owners, if any) Date