[ADP logo]
AUTOMATIC DATA PROCESSING, INC.
One ADP Boulevard - Roseland, New Jersey 07068
NOTICE OF 2004 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
PLEASE TAKE NOTICE that the 2004 Annual Meeting of Stockholders of
AUTOMATIC DATA PROCESSING, INC. (the "Company") will be held at 10:00 a.m.,
Tuesday, November 9, 2004 at the Company's corporate headquarters, ONE ADP
BOULEVARD, ROSELAND, NEW JERSEY, for the following purposes:
1. To elect a Board of Directors (Proposal 1);
2. To ratify the appointment of Deloitte & Touche LLP, an independent
registered public accounting firm, to serve as the Company's
independent certified public accountants for the fiscal year that
began on July 1, 2004 (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 record of Common Stock at the close of business on
September 10, 2004 (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.
To gain admission to the Annual Meeting of Stockholders, you will need to
show that you are a stockholder of the Company. If your shares are registered in
your name and you plan to attend the Annual Meeting of Stockholders, please
retain and bring the top portion of the proxy card as your admission ticket. 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
that you own Company stock, you will not be admitted to the Annual Meeting of
Stockholders. Packages and bags will be inspected and they may have to be
checked, among other security measures that may be used for the security of
those attending the Annual Meeting of Stockholders. Please arrive early enough
to allow yourself adequate time to clear security.
By order of the Board of Directors
James B. Benson
Secretary
September 22, 2004
Roseland, New Jersey
The presence in person and/or the representation by proxy of the holders of
record of a majority of the issued and outstanding shares of stock entitled to
vote at the meeting 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.
[ADP logo]
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS OF
AUTOMATIC DATA PROCESSING, INC.
One ADP Boulevard - Roseland, New Jersey 07068
TO BE HELD ON NOVEMBER 9, 2004
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 22, 2004.
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
("Common Stock"). At the close of business on September 10, 2004, the record
date for determining stockholders entitled to notice of and to vote at the
meeting, the Company had 582,504,905 issued and outstanding shares of Common
Stock (excluding 56,197,764 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 issued and
outstanding shares of stock 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
shares present 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 Company's independent certified public
accountants. Under the Company's Amended and 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 the proposal to ratify the
Company's independent certified public accountants and will have the effect of a
negative vote. Under applicable Delaware law, a non-vote will have no effect on
the outcome of any of the matters referred to in this Proxy Statement. 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 that
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
-----------------------------------------------------------------------------------------------------------------------------------
Gregory D. Brenneman 42 2001 Chairman and Chief Executive Officer of Burger King Corporation, a privately held
company (1)
Leslie A. Brun 52 2003 Founder and Chairman of Hamilton Lane, a global private equity/advisor company (2)
Gary C. Butler 57 1996 President and Chief Operating Officer of the Company (3)
Joseph A. Califano, Jr. 73 1982 Chairman of the Board and President of The National Center on Addiction and
Substance Abuse at Columbia University (4)
Leon G. Cooperman 61 1991 Chairman and Chief Executive Officer of Omega Advisors, Inc., an investment
partnership (5)
R. Glenn Hubbard 46 2004 Dean of the Graduate School of Business at Columbia University (6)
Ann Dibble Jordan 69 1993 Consultant (7)
Harvey M. Krueger 75 1967 Vice Chairman of Lehman Brothers, investment bankers (8)
Frederic V. Malek 67 1978 Chairman of Thayer Capital Partners, a merchant
banking firm (9)
Henry Taub 77 1961 Honorary Chairman of the Board of the Company (10)
Arthur F. Weinbach 61 1989 Chairman of the Board and Chief Executive Officer
of the Company (11)
(1) Mr. Brenneman has been Chief Executive Officer of Burger King Corporation
since July 2004. He was Chairman and Chief Executive Officer of TurnWorks,
Inc. from October 2002 to July 2004 and also from May 2001 to June 2002. He
was President and Chief Executive Officer of PwC Consulting from June 2002
to October 2002, and was the President and Chief Operating Officer of
Continental Airlines, Inc. from May 1995 to May 2001. Mr. Brenneman is also
a director of The Home Depot, Inc. and Burger King Corporation.
(2) Mr. Brun has been the Chairman of Hamilton Lane since 1991. He is also a
director of Episcopal Academy and a trustee of the University of Buffalo
Foundation.
(3) Mr. Butler became President and Chief Operating Officer of the Company in
April 1998. He is also a director of Liberty Mutual Group and CIT Group
Inc.
(4) Mr. Califano has been Chairman of the Board and President of The National
Center on Addiction and Substance Abuse at Columbia University since 1992.
He is also a director of Viacom, Inc., Midway Games Inc. and Willis Group
Holdings Limited.
(5) Mr. Cooperman has been Chairman and Chief Executive Officer of Omega
Advisors, Inc. since 1991.
(6) Mr. Hubbard was named the Dean of the Graduate School of Business at
Columbia University on July 1, 2004 and has been the Russell L. Carson
Professor of Finance and Economics in the Department of
2
Economics and Graduate School of Business at Columbia University since
1994. From February 2001 until March 2003 he was Chairman of the U.S.
Council of Economic Advisors. He is also a director of Dex Media, Inc.
(7) 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.
(8) 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 Bernard Chaus, Inc. and Delta
Galil Industries Ltd.
(9) Mr. Malek has been Chairman of Thayer Capital Partners since 1992. He is
also a director of CB Richard Ellis Services, Inc., FPL Group, Inc., Manor
Care, Inc., Northwest Airlines Corporation and Federal National Mortgage
Association.
(10) Mr. Taub has been Honorary Chairman of the Company's Board of Directors
since 1986.
(11) Mr. Weinbach became Chairman of the Board and Chief Executive Officer of
the Company in April 1998. He is also a director of First Data Corporation
and Schering Plough Corp.
Stockholder Approval Required
Directors shall be elected by a plurality of the affirmative votes cast in
person or by proxy at the meeting of stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS.
3
Corporate Governance
During the last fiscal year, the Board of Directors held seven meetings.
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, except for Mr.
Taub, who attended 70% of the meetings of the Board of Directors and the
committees of which he is a member.
The Board of Directors' categorical standards of director independence are
attached as Appendix A to this Proxy Statement. Directors who meet these
standards are considered to be "independent." Messrs. Brenneman, Brun, Califano,
Cooperman, Hubbard, Malek and Ms. Jordan meet these standards and are,
therefore, considered to be independent directors. Messrs. Butler, Krueger,
Taub, Weinbach and Weston (who is retiring at this Annual Meeting of
Stockholders in accordance with the retirement policy of the Board of Directors)
do not meet these standards and are, therefore, not considered to be independent
directors. Based on the foregoing categorical standards, all current members of
the Audit, Compensation and Nominating/Corporate Governance Committees are
independent.
The table below provides membership and meeting information for each of the
committees of the Board of Directors.
Nominating/Corporate
Name Audit Compensation Governance Executive
----------------------------------------------------------------------------------------------------------------------------
Gregory D. Brenneman X(FE) X(C) X
Leslie A. Brun X X
Gary C. Butler
Joseph A. Califano, Jr. X X
Leon G. Cooperman X(C) (FE) X X
R. Glenn Hubbard
Ann Dibble Jordan X X
Harvey M. Krueger X(C)
Frederic V. Malek X X(C) X
Henry Taub X
Arthur F. Weinbach X
Josh S. Weston* X
Meetings held in fiscal 2004 6 3 5 3
(C) Chairperson of the committee.
(FE) Audit Committee financial expert.
* Mr. Weston is retiring at the 2004 Annual Meeting of Stockholders in
accordance with the retirement policy of the Board of Directors.
The Audit Committee acts under a written charter (the "Audit Committee
Charter"), which is required to be provided to stockholders every three fiscal
years, unless amended earlier. The members of the Audit Committee satisfy the
independence requirements of the New York Stock Exchange (NYSE) rules currently
in effect. The Audit Committee Charter may be viewed online on the Company's
website at www.adp.com under "Governance" in the "About ADP" section. The
principal functions of the Audit Committee are to:
(i) assist the Board of Directors in fulfilling its oversight
responsibilities with respect to (a) the Company's systems of internal
controls regarding finance, accounting, legal compliance and ethical
behavior, (b) the Company's auditing, accounting and financial
reporting processes generally, (c) the Company's financial statements
and other financial information provided by the Company to its
stockholders, the public and others, (d) the Company's compliance with
legal and regulatory requirements and (e) the performance of the
Company's corporate audit department and independent auditors;
(ii) appoint, compensate and oversee the work of the independent auditors
(including resolution of disagreements between management and the
independent auditors regarding financial reporting) for the purpose of
preparing its audit report or related work;
4
(iii) review in advance and pre-approve all services to be provided by the
independent auditors, as permitted by applicable rules and regulations
and the Auditor Independence Policy (which is discussed in further
detail below under "Independent Registered Public Accounting Firms'
Fees"), and in connection therewith to approve all fees and other
terms of engagement;
(iv) review and approve disclosures required to be included in the
Securities and Exchange Commission (the "SEC") periodic reports filed
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); and
(v) review the performance of the internal auditors and the independent
auditors on at least an annual basis.
The Compensation Committee acts under a written charter, which may be
viewed online on the Company's website at www.adp.com under "Governance" in the
"About ADP" section. The principal function of the Compensation Committee is to
assist the Board of Directors in discharging its responsibilities in respect of
compensation of the Company's executive officers by:
(i) evaluating the Chief Executive Officer's performance and setting the
Chief Executive Officer's compensation based on such evaluation; and
(ii) developing guidelines and reviewing the compensation and performance
of officers of the Company and other Company associates.
The Compensation Committee also develops plans for managerial succession.
The Nominating/Corporate Governance Committee acts under a written charter,
which may be viewed online on the Company's website at www.adp.com under
"Governance" in the "About ADP" section. The members of the Nominating/Corporate
Governance Committee satisfy the independence of the NYSE rules currently in
effect. The principal functions of the Nominating/Corporate Governance Committee
are to:
(i) develop policies on the size and composition of the Board of
Directors;
(ii) identify individuals qualified to become members of the Board of
Directors and review candidates for Board membership;
(iii) recommend a slate of nominees to the Board of Directors annually;
(iv) ensure that the Audit, Compensation and Nominating/Corporate
Governance Committees of the Board of Directors have the benefit of
qualified and experienced independent directors;
(v) review and reassess the adequacy of the Board of Directors' corporate
governance principles (which principles may be viewed online on the
Company's website at www.adp.com under "Governance" in the "About ADP"
section) and recommend changes to such principles annually; and
(vi) advise the full Board of Directors on corporate governance matters.
When the Board of Directors decides to recruit a new member 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 significant technology, international or marketing backgrounds directly
related to the Company's technologies, markets and/or clients. The Board of
Directors will consider any such strong candidate provided he or she possesses
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. If the
Committee does not believe that a candidate possesses the above personal
characteristics, that candidate will not be considered. Stockholders who wish
the Nominating/Corporate Governance Committee to consider their recommendations
for nominees for the position of director should submit their recommendations in
writing to the Nominating/Corporate Governance Committee in care of the
Secretary of the Company at the Company's principal executive offices.
5
The Executive Committee acts under a written charter, which may be viewed
online on the Company's website at www.adp.com under "Governance" in the "About
ADP" section. The function of the Executive Committee is to act in the absence
of the Board of Directors.
During the last fiscal year, non-employee directors were paid an annual
retainer of $55,000, which was paid in the form of restricted stock units of
Common Stock pursuant to the Company's 2003 Director Stock Plan, plus $1,500 in
cash for each Board of Directors meeting attended. In addition, non-employee
directors were paid $1,000 in cash for each committee meeting attended if such
committee meeting was held on the same day a Board of Directors meeting was
held; otherwise, non-employee directors were paid $1,500 in cash for each
committee meeting attended. Further, the chairperson of the Audit Committee was
paid an additional annual retainer of $10,000 in cash and the chairperson of
each of the Executive Committee, Compensation Committee and Nominating/Corporate
Governance Committee was paid an additional annual retainer of $5,000 in cash.
During fiscal 2004, non-employee directors received grants under each of
the Company's 1989 Non-Employee Director Stock Option Plan ("1989 Directors'
Option Plan") and the 2000 Stock Option Plan (the "2000 Stock Option Plan"). The
vesting schedule for the options granted under such plans was designed to ensure
that at least 5,000 options become exercisable for each non-employee director
(other than Mr. Tisch, who retired from the Board of Directors at last year's
Annual Meeting of Stockholders, and Mr. Hubbard, who was appointed to the Board
of Directors during fiscal 2004) in each calendar year through 2007.
Until last year's Annual Meeting of Stockholders, held on November 11,
2003, the non-employee directors of the Company were entitled to participate in
the 1989 Directors' Option Plan. In fiscal 2004, options to purchase 22,500
shares of Common Stock were granted to each non-employee director (other than
Mr. Hubbard, who was not a member of the Board of Directors at that time) at an
exercise price of $37.81 per share under the 1989 Directors' Option Plan. All
options were 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. In the case of each
of Messrs. Brenneman, Brun and Cooperman and Ms. Jordan, 20% percent of the
options granted under the 1989 Directors' Option Plan become exercisable on the
first anniversary of the date such options were granted, and 20% percent become
exercisable on each successive anniversary date thereafter until all such
options become exercisable; in the case of each of Messrs. Califano, Krueger,
Malek and Tisch, approximately 24.4%, 31.1%, 26.7%, 8.9% and 8.9% of the options
granted under the 1989 Directors' Option Plan become exercisable on the first,
second, third, fourth and fifth anniversary, respectively, of the date such
options were granted, provided that, for all such directors, 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 1989 Directors' Option Plan have a
term of ten years. Following last year's Annual Meeting of Stockholders, the
1989 Directors' Option Plan was amended to prohibit any future grants
thereunder.
Following last year's Annual Meeting of Stockholders, the non-employee
directors of the Company became eligible to participate in the 2000 Stock Option
Plan. Under the 2000 Stock Option Plan, upon initial election to the Board of
Directors, a non-employee director will receive a grant of options to purchase
5,000 shares of Common Stock. Thereafter, a non-employee director will receive
an annual grant of options to purchase 5,000 shares of Common Stock. All options
are 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. All options granted under
the 2000 Stock Option Plan have a term of ten years. In fiscal 2004, options to
purchase 5,000 shares of Common Stock were granted to each non-employee director
(other than Messrs. Weston and Hubbard) at an exercise price of $39.225 per
share under the 2000 Stock Option Plan. At the time he became a non-employee
director, January 2, 2004, Mr. Weston received options to purchase 5,000 shares
of Common Stock at an exercise price of $39.885 per share under the 2000 Stock
Option Plan. At the time he was appointed to the Board of Directors, Mr. Hubbard
received options to purchase 5,000 shares of Common Stock at an exercise price
of $41.79 per share under the 2000 Stock Option Plan. In the case of each of
Messrs. Califano, Krueger and Malek, 60% percent and 40% of such options granted
under the 2000 Stock Option Plan become exercisable on the fourth and fifth
anniversary, respectively, of the date such options were granted; in the case of
each of Mr. Brun and Ms. Jordan, all of such options granted under the 2000
Stock Option Plan become
6
exercisable on the sixth anniversary of the date such options were granted; in
the case of Mr. Brenneman, 10%, 10% and 80% of such options granted under the
2000 Stock Option Plan become exercisable on the fourth, fifth and sixth
anniversary, respectively, of the date such options were granted; in the case of
Mr. Cooperman, 10% of such options granted under the 2000 Stock Option Plan
become exercisable on each of the first, second, third, fourth and fifth
anniversary of the date such options were granted and 50% become exercisable on
the sixth anniversary of the date such options were granted; in the case of Mr.
Hubbard, all of such options granted under the 2000 Stock Option Plan become
exercisable on the first anniversary of the date such options were granted;
and in the case of Mr. Weston, all of such options granted under the 2000 Stock
Option Plan become exercisable on the day prior to the 2004 Annual Meeting of
Stockholders, at which meeting Mr. Weston's retirement from the Board of
Directors will become effective. For all such directors, the options granted in
fiscal 2004 under the 2000 Stock Option Plan become exercisable only if the
director is then still serving in such capacity, unless certain specified events
occur, such as the death or disability of a director, in which case the options
shall immediately vest and become fully exercisable.
Any person who became a non-employee director after August 13, 1997 will
not be eligible to receive a pension from the Company. A non-employee director
(who was a director on August 13, 1997) who retires 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.
The mandatory retirement age for directors is 72, except as noted below.
The Board of Directors may, upon the recommendation of the Nominating/Corporate
Governance Committee made annually, waive the mandatory retirement age
requirement for any director, except persons who first became directors after
May 14, 2002. The Board of Directors waived the mandatory retirement age
requirement for Messrs. Califano, Krueger and Taub based on their respective
contributions to and involvement in the Board of Directors so that they may be
nominated at this Annual Meeting of Stockholders to serve as directors for the
upcoming year. Notwithstanding the foregoing annual waiver procedure (but
subject to an exception for Henry Taub, the Company's founder), the oldest
member of the Board of Directors, Mr. Weston, after serving as a director since
1977, shall automatically retire at this Annual Meeting of Stockholders. The
next oldest member of the Board of Directors shall automatically retire at the
Company's 2005 Annual Meeting of Stockholders. This "then oldest director"
automatic retirement process shall continue until there are no directors over
the age of 72. Thereafter, all directors will automatically retire from the
Board of Directors at the Company's Annual Meeting of Stockholders following the
date he or she turns 72. As noted, this "then oldest director" automatic
retirement procedure portion of the Board of Directors' retirement policy does
not apply to Henry Taub, the Company's founder. Management directors who are no
longer officers of the Company are required to resign from the Board of
Directors. However, the Company's Chief Executive Officer may, provided the
Board of Directors approves, continue to serve as a director for a transition
period of up to one year after the date he or she ceases to be the Company's
Chief Executive Officer.
Executive sessions are held during each Board of Directors and committee
meeting. The Company has adopted a procedure by which the presiding director at
executive sessions of the Board of Directors shall change each meeting and shall
rotate, consecutively, among the independent chairpersons of the Audit,
Compensation and Nominating/Corporate Governance Committees.
7
Security Ownership of Certain Beneficial Owners and Managers
The following table contains information as of August 31, 2004 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 (and former
executive officer) 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 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
--------------------------------------------------------------------------------------------------------------------------
Gregory D. Brenneman 12,000 *
Leslie A. Brun 9,000 *
Gary C. Butler 963,805 *
Joseph A. Califano, Jr. (2) 34,600 *
Leon G. Cooperman (3) 74,983 *
Richard J. Daly 417,078 *
Russell P. Fradin** 94,500 *
John Hogan 424,003 *
R. Glenn Hubbard 0 *
Ann Dibble Jordan 22,400 *
Harvey M. Krueger (4) 103,758 *
Frederic V. Malek (5) 19,500 *
S. Michael Martone 213,667 *
Henry Taub (6) 5,863,220 1.0066%
Arthur F. Weinbach (7) 1,550,796 *
Josh S. Weston 635,102 *
Capital Research and Management Company (8) 43,761,780 7.5126%
Directors and executive officers (and former executive officer) as a group (25
persons, including those directors and executive officers (and former executive
officer) named above) (9) 11,849,091 2.0216%
*Indicates less than one percent.
** Mr. Fradin served as an executive officer of the Company until January 1,
2004.
(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, 2004. The
shares beneficially owned include: (i) the following shares subject to such
options granted to the directors and executive officers indicated: 12,000
(Mr. Brenneman), 7,000 (Mr. Brun), 585,899 (Mr. Butler), 31,000 (Mr.
Califano), 19,500 (Mr. Cooperman), 329,164 (Mr. Daly), 46,500 (Mr. Fradin),
378,364 (Mr. Hogan), 22,000 (Ms. Jordan), 31,500 (Mr. Krueger), 11,500 (Mr.
Malek), 133,834 (Mr. Martone) and 957,123 (Mr. Weinbach); and (ii)
3,616,004 shares subject to such options granted to the directors and
executive officers (and former executive officer) as a group.
(2) Excludes an aggregate of 2,800 shares of Common Stock that are owned
outright by members of Mr. Califano's immediate family or by charitable
trusts of which members of Mr. Califano's immediate family were potential
beneficiaries. Mr. Califano disclaims beneficial ownership of such shares.
(3) Includes 30,483 shares, representing the gain resulting from the exercise
of an option to purchase 38,000 shares of Common Stock on October 15, 2001.
Mr. Cooperman has elected to defer receipt of the shares representing such
gain.
(4) Includes 31,732 shares, representing the remaining gain resulting from the
exercise of an option to purchase 40,000 shares of Common Stock on November
1, 1999. At the time of such option's exercise, Mr. Krueger
8
elected to defer receipt of 35,258 shares representing the full amount of
such gain; in fiscal 2004, Mr. Krueger received 3,526 shares that had been
previously deferred.
(5) Excludes an aggregate of 3,200 shares of Common Stock that are owned
outright by members of Mr. Malek's immediate family or by charitable trusts
of which members of Mr. Malek's immediate family were potential
beneficiaries. Mr. Malek disclaims beneficial ownership of such shares.
(6) Excludes an aggregate of 311,907 shares of Common Stock that are owned
outright by members of Mr. Taub's immediate family or by charitable trusts
of which members of Mr. Taub's immediate family were potential
beneficiaries. Mr. Taub disclaims beneficial ownership of such shares.
(7) Includes 78,616 shares, representing (i) a gain of 42,877 shares resulting
from the exercise of an option to purchase 50,000 shares of Common Stock on
August 19, 1999 and (ii) a gain of 35,739 shares resulting from the
exercise of an option to purchase 40,000 shares of Common Stock on October
6, 2000. In each case, Mr. Weinbach has elected to defer receipt of the
shares representing such gain.
(8) On February 13, 2004, Capital Research and Management Company filed a
statement on Schedule 13G with the Securities and Exchange Commission to
report that Capital Research and Management Company owned more than 5% of
the outstanding shares of Common Stock.
(9) Excludes an aggregate of 2,632 shares of Common Stock owned by members of
the immediate families of non-director officers of the Company. The
non-director officers of the Company disclaim beneficial ownership of such
shares.
9
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, the four other most
highly compensated executive officers of the Company and one former executive
officer 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;
and (iii) a report by the Compensation Committee of the Board of Directors
describing the Company's compensation policies for fiscal 2004 for its executive
officers and the rationale upon which its Chief Executive Officer's compensation
for fiscal 2004 was based. Also included is 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, the four other most highly compensated executive officers,
and one former executive officer of the Company for services in all capacities
to the Company for the three years ended June 30, 2004.
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 2004 $784,750 $840,000 $1,940,748 340,000 $ 17,610
Chairman and Chief 2003 $759,438 $167,500 $ 844,240 184,998 $ 20,664
Executive Officer 2002 $735,000 $173,500 $1,452,776 182,125 $ 6,833
Gary C. Butler 2004 $663,776 $650,000 $ 748,992 200,000 $ 21,250
President and Chief 2003 $641,882 $120,000 $1,425,520 109,899 $ 6,312
Operating Officer 2002 $620,000 $108,500 $ -- 108,000 $ 6,289
S. Michael Martone 2004 $398,231 $275,790 $ 351,090 50,000 $ 23,599
Group President 2003 $375,754 $113,145 $ 622,800 30,459 $ 6,082
2002 $362,308 $117,058 $ -- 29,375 $ 6,073
Richard J. Daly 2004 $413,450 $280,400 $1,106,904 50,000 $ 13,965
Group President 2003 $403,004 $62,677 $ -- 30,039 $ 6,165
2002 $392,308 $72,023 $1,286,064 29,125 $ 6,148
John Hogan 2004 $413,450 $269,100 $1,106,904 50,000 $ 16,166
Group President 2003 $403,004 $60,993 $ -- 30,039 $ 6,115
2002 $392,308 $64,750 $1,286,064 29,125 $ 6,105
Russell P. Fradin* 2004 $262,000 $325,000 $ 468,120 30,000 $492,968
Former Group President 2003 $510,909 $111,864 $1,384,000 47,949 $ 5,845
2002 $493,750 $112,600 $ -- 46,500 $ 5,149
* Mr. Fradin served as an executive officer of the Company until January 1,
2004.
(1) None of the named executive officers (or former named executive officer)
received any perquisites or other personal benefits of an amount, or any
other annual compensation of a type, required to be reported by the SEC
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 six years) and continued employment with
the Company.
10
As of June 30, 2004, the aggregate number of shares of restricted stock
held by a named executive officer (or former 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 (or
former named executive officer) by the difference between $41.88, the
closing price of the Common Stock on June 30, 2004, and $.10, the
consideration paid per share of restricted stock) was: Mr. Weinbach, 65,700
shares ($2,744,946); Mr. Butler, 54,000 shares ($2,256,120); Mr. Martone,
24,000 shares ($1,002,720); Mr. Daly, 36,000 shares ($1,504,080); Mr.
Hogan, 36,000 shares ($1,504,080); and Mr. Fradin, 48,000 shares
($2,005,440).
The restricted stock awards to the named executive officers reported in the
table that vest, in whole or in part, in under four years from the date of
grant, together with their vesting schedule, are as follows:
(i) Mr. Weinbach received a grant of 49,750 shares of restricted stock in
fiscal 2004, 8,450 of which vested in fiscal 2004, 8,450 of which will
vest in fiscal 2005 and 32,850 of which will vest in fiscal 2006. Mr.
Weinbach received a grant of 24,400 shares of restricted stock in
fiscal 2003, 24,400 of which will vest in fiscal 2005.
(ii) Mr. Butler received a grant of 19,200 shares of restricted stock in
fiscal 2004, 6,400 of which vested in fiscal 2004, and 6,400 of which
will vest in each of fiscal 2005 and 2006. Mr. Butler received a grant
of 41,200 shares of restricted stock in fiscal 2003, 20,600 of which
will vest in each of fiscal 2005 and 2006.
(iii) Mr. Martone received a grant of 9,000 shares of restricted stock in
fiscal 2004, 3,000 of which vested in fiscal 2004, and 3,000 of which
will vest in each of fiscal 2005 and 2006. Mr. Martone received a
grant of 18,000 shares of restricted stock in fiscal 2003, 9,000 of
which will vest in each of fiscal 2005 and 2006.
(iv) Mr. Daly received a grant of 26,400 shares of restricted stock in
fiscal 2004, 1,200 of which vested in fiscal 2004, 1,200 of which will
vest in fiscal 2005, and 12,000 of which will vest in each of fiscal
2006 and 2007. Mr. Daly received a grant of 21,600 shares of
restricted stock in fiscal 2002, 10,800 of which vested in fiscal 2004
and 10,800 of which will vest in fiscal 2005.
(v) Mr. Hogan received a grant of 26,400 shares of restricted stock in
fiscal 2004, 1,200 of which vested in fiscal 2004, 1,200 of which will
vest in fiscal 2005, and 12,000 of which will vest in each of fiscal
2006 and 2007. Mr. Hogan received a grant of 21,600 shares of
restricted stock in fiscal 2002, 10,800 of which vested in fiscal 2004
and 10,800 of which will vest in fiscal 2005.
(vi) Mr. Fradin received a grant of 40,000 shares of restricted stock in
fiscal 2003, 20,000 of which will vest on January 1, 2005; the
remaining 20,000 shares from this grant will be resold and returned to
the Company at a price of $.10 per share. Mr. Fradin received a grant
of 12,000 shares of restricted stock in fiscal 2004, of which 4,000
vested in fiscal 2004, 4,000 will vest on January 1, 2005 and 4,000
will be resold and returned to the Company at a price of $.10 per
share.
Dividends are paid on restricted stock at the same rate as other
outstanding shares of Common Stock. In the event of a termination of their
employment following a change in control of the Company, the unvested
portion of the restricted stock of Messrs. Weinbach and Butler will be
subject to accelerated vesting as further described in this Proxy Statement
under the heading "Employment Agreements." In the event of a termination of
their employment following a change in control of the Company, the unvested
portion of the restricted stock of Messrs. Martone, Daly and Hogan will be
subject to accelerated vesting as further described in this Proxy Statement
under the heading "Change in Control Severance Plan for Corporate
Officers."
(3) The Company does not award Stock Appreciation Rights (SARs).
(4) For the year ended June 30, 2004, all other compensation consists of (i)
Company matching contributions to the Company's Retirement and Savings Plan
(401(k)) in the following amounts: Mr. Weinbach, $5,916, Mr. Butler,
$5,916, Mr. Martone, $5,916, Mr. Daly, $5,916, Mr. Hogan, $5,916 and Mr.
Fradin, $5,916; (ii) a Company car allowance in the following amounts: Mr.
Weinbach, $8,794, Mr. Butler, $9,077, Mr. Martone, $9,439, Mr. Daly,
$5,975, Mr. Hogan, $10,250 and Mr. Fradin, $7,525; (iii) the amount paid
11
by the Company on behalf of executives' spouses that accompanied such
executives on business travel and associated tax payments related thereto,
in the following amounts: Mr. Weinbach, $2,900, Mr. Butler, $6,257, Mr.
Martone, $5,750, Mr. Daly, $1,666 and Mr. Fradin, $2,900; and (iv) the
amount of income attributable to disqualifying dispositions related to
sales of shares of Common Stock purchased by executives under the Company's
Amended and Restated Employees' Savings-Stock Purchase Plan within one year
of purchase in the following amounts: Mr. Martone, $2,494 and Mr. Fradin,
$2,494.
In fiscal 2003, the Company surrendered all split-dollar insurance policies
for executive officers. Mr. Daly received a cash payment of $408 in fiscal
2004 in connection with the surrender of his insurance policy in accordance
with the terms thereof. None of the other executive officers received a
payment in fiscal 2004 upon the surrender of their policies.
In connection with the termination of his employment with the Company, Mr.
Fradin received severance payments totaling $261,999, a payment with
respect to unused vacation totaling $52,400 and payments relating to his
2004 accrued benefits in the Supplemental Officers' Retirement Plan
(described below under "--Defined Benefit Plans") totaling $159,734.
Stock Option Plans
The Company has in effect a 1990 Key Employees' Stock Option Plan (the
"1990 Stock Option Plan") and the 2000 Stock Option Plan. The 1990 Stock Option
Plan and the 2000 Stock Option 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 Stock Option Plan, but outstanding options under
the 1990 Stock Option Plan remain valid. In the event of a termination of their
employment following 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 as further described in this Proxy Statement under the heading
"Employment Agreements." In the event of a termination of their employment
following a change in control of the Company, the unvested portion of the stock
options of Messrs. Martone, Daly and Hogan will be subject to accelerated
vesting as further described in this Proxy Statement under the heading "Change
in Control Severance Plan for Corporate Officers."
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 or her options until the date of issuance of a stock certificate
to him or her for such shares. During the life of the optionee, the option is
exercisable only by him or her. Except as otherwise provided in the applicable
award agreement or as described herein, no option is exercisable more than 60
days after termination of employment. Notwithstanding the foregoing, if
termination is due to the total and permanent disability of the optionee, vested
options remain exercisable for 12 months after termination (unless such person
dies during such 12-month period, in which case the period applicable in case of
death applies) or, if termination is due to the death of an optionee, vested
options remain exercisable until the earlier of 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. In addition, if the
optionee is at least 55 years of age at the time of retirement and has at least
10 years of service with the Company, then vested options will remain
exercisable for a period of 36 months from the date of such person's retirement
(unless such person dies during such 36-month period, in which case other
periods apply), or, if such retiree has five (but less than 10) years of service
with the Company, then vested options will remain exercisable for a period of 12
months from the date of such person's retirement (unless such person dies during
such 12-month period, in which case other periods apply).
12
The following table sets forth certain information concerning stock option
grants to the named executive officers during the fiscal year ended June 30,
2004.
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 250,000 1.38% $37.8100 8/10/2013 $2,923,223
90,000 .50% $37.8100 8/10/2013 $1,052,360
Gary C. Butler 135,000 .75% $37.8100 8/10/2013 $1,578,540
65,000 .36% $37.8100 8/10/2013 $ 760,038
S. Michael Martone 20,000 .11% $37.8100 8/10/2013 $ 241,091
30,000 .17% $46.4250 5/10/2014 $ 349,003
Richard J. Daly 20,000 .11% $37.8100 8/10/2013 $ 241,091
30,000 .17% $39.2250 11/10/2013 $ 349,003
John Hogan 20,000 .11% $37.8100 8/10/2013 $ 241,091
30,000 .17% $39.2250 11/10/2013 $ 349,003
Russell P. Fradin* 30,000 .17% $37.8100 8/10/2013 $ 361,636
*Mr. Fradin served as an executive officer of the Company until January 1, 2004.
(1) 720,000 options were granted pursuant to the 2000 Stock Option Plan. The
options were granted at an exercise price equal to the fair market value of
the Common Stock on the date of grant. The options were granted for terms
of ten years, and vest during periods of 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 6.5 years after
the date of grant, based on historical experience. A risk-free interest
rate of 3.75%, stock price volatility of 30.99% and a dividend yield of
0.94% was used in the calculation of the option grants to Messrs. Weinbach,
Butler, Martone, Daly, Hogan and Fradin expiring on August 10, 2013. A
risk-free interest rate of 3.92%, stock price volatility of 29.00% and a
dividend yield of 0.99% was used in the calculation for the option grants
to Messrs. Daly and Hogan expiring on November 10, 2013. A risk-free
interest rate of 4.48%, stock price volatility of 29.26% and a dividend
yield of 1.11% was used in the calculation for the option grant to Mr.
Martone expiring on May 10, 2014. An annual 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 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 Common Stock from the date of grant, which increase would
benefit all stockholders commensurately.
13
Aggregated Option Exercises
For Fiscal Year Ended June 30, 2004
And Option Values As Of June 30, 2004
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 6/30/04 at 6/30/04
(#) ($)
--------------------------------------------------------------
Shares Acquired
On Exercise Value Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
----------------------------------------------------------------------------------------------------------------------------
Arthur F. Weinbach 160,000 $4,458,192 787,123 990,000 $13,529,456 $2,727,200
Gary C. Butler 8,000 $ 227,800 471,899 536,000 $ 4,077,767 $1,859,760
S. Michael Martone 0 $ -- 124,834 149,000 $ 724,402 $ 462,850
Richard J. Daly 60,000 $1,567,527 290,164 190,000 $ 4,770,919 $ 423,872
John Hogan 0 $ -- 339,364 190,000 $ 6,341,708 $ 423,872
Russell P. Fradin* 345,949 $4,912,868 26,500 202,000 $ -- $ 430,420
*Mr. Fradin served as an executive officer of the Company until January 1, 2004.
Equity Compensation Plan Information
The following table sets forth information as of June 30, 2004 regarding
compensation plans under which the Company's equity securities are authorized
for issuance:
Number of securities
Number of securities remaining available for
to be issued upon Weighted average future issuance under
exercise of exercise price of equity compensation
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 security holders 70,159,348 $41.52 30,452,637 (1)
Equity compensation plans not approved by security 323,500 $35.78 4,256,715 (3),(4),(5)
holders (2) ----------------------------------------------------------------------
Total 70,482,848 $41.49 34,709,352
========== ====== ==========
======================================================================
(1) Includes 8,021,637 shares of Common Stock remaining available for future
issuance under the Company's Employees' Savings-Stock Purchase Plan, which
shares and weighted average exercise prices are not reflected in Columns
(a) and (b) of this table.
(2) Represents (i) the 1989 Directors' Option Plan, (ii) the Key Employees'
Restricted Stock Plan, and (iii) the French Employees' Saving-Stock Option
Plan (the "French Plan"), none of which have been approved by the Company's
stockholders. The material terms of the 1989 Directors' Option Plan are
described above under "Election of Directors -- Corporate Governance," the
material terms of the Key Employees' Restricted Stock Plan are described in
Note 10 to the Company's Consolidated Financial Statements included in the
Company's 2004 Annual Report and the material terms of the French
Employees' Saving-Stock Option Plan are described in footnote (5) below.
(3) Following stockholder approval of the amendment to the 2000 Stock Option
Plan at the Company's 2003 Annual Meeting of Stockholders, the 1989
Directors' Option Plan was amended to prohibit any future stock option
grants thereunder.
(4) Includes 3,187,300 shares of Common Stock reserved for issuance pursuant to
the Key Employees' Restricted Stock Plan.
14
(5) Includes 1,069,415 shares of Common Stock reserved for issuance pursuant to
the French Plan. The French Plan is similar to the Company's Employees'
Savings-Stock Purchase Plan; French tax law prevents employees based in
France from participating in the Company's Employees' Savings-Stock
Purchase Plan. In January 1996, the Board of Directors adopted the French
Plan. Employees of the Company based in France are entitled to purchase
shares of Common Stock (such rights referred to as "Stock Options") under
the French Plan under annual offerings that commence on January 1 of each
calendar year and close on December 31 of the following calendar year
(each, an "Offering"). In October 2002, the French Employees' Saving-Stock
Option Plan Committee (appointed by the Board of Directors) (the "French
Stock Option Committee") amended the French Plan to extend the offering
period from 24 months to 48 months for the Offering commencing on January
1, 2003 and each Offering commenced thereafter. Each eligible employee is
granted Stock Options in each Offering that would generally entitle such
employee to purchase a whole number of shares of Common Stock equivalent in
value to 10% of his or her base salary, based upon a price per share (in
U.S. dollars) determined in advance of such Offering by the French Stock
Option Committee, subject to adjustment for currency rate changes over the
term of the Offering. Participating employees pay for the exercise of the
Stock Options through monthly payroll deductions taken during the two-year
period or four-year period, as the case may be, of each Offering, and have
the opportunity upon the close of the Offering to exercise their Stock
Options (or any portion thereof) and purchase the associated number of
shares of Common Stock. To the extent a participating employee elects to
purchase fewer shares of Common Stock than would be available under his or
her full allotment of Stock Options, such employee would receive the cash
remaining from the aggregate payroll deductions after taking into account
his or her purchase of shares of Common Stock.
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.
Years of Credited Service at Retirement
-----------------------------------------------------------------------------------------
Final
5-Year Average
Compensation 10 15 20 25 30
----------------------------------------------------------------------------------------------------------------------------
$ 500,000 83,000 129,000 153,000 172,000 201,000
750,000 121,000 185,000 216,000 235,000 264,000
1,000,000 158,000 241,000 278,000 297,000 326,000
1,500,000 233,000 354,000 403,000 422,000 451,000
2,000,000 308,000 466,000 528,000 547,000 576,000
2,500,000 383,000 579,000 653,000 672,000 701,000
3,000,000 458,000 691,000 778,000 797,000 826,000
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 under certain
circumstances.
Messrs. Weinbach, Butler, Fradin, Martone, Daly and Hogan have 23, 28, 6,
16, 14 and 10 years of credited service, respectively, under the Pension Plan
and 15, 15, 7, 9, 10 and 9 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, and his benefit will not be reduced for
commencement prior to age 65 as long as the Compensation Committee deems his
retirement prior to age 65 is in the Company's best interest. 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.
15
Change in Control Severance Plan for Corporate Officers
To aid the Company in retaining its officers, the Company has in effect the
Automatic Data Processing, Inc. Change in Control Severance Plan for Corporate
Officers (the "CIC Plan"), which provides for the payment of specified benefits
to officers selected by the Board of Directors if their employment terminates
after a "change in control" (as defined below) of the Company. All corporate
officers of the Company ("Participants") participate in the CIC Plan. As of
August 31, 2004, there were 30 Participants in the CIC Plan.
The CIC Plan provides that Participants who are terminated by the Company
without "cause" (as defined in the CIC Plan) or by the Participant for "good
reason" (as defined in the CIC Plan) (a "Qualifying Termination") during the
two-year period following the occurrence of a change in control will receive a
payment equal to 150% of such Participant's "current total annual compensation."
Participants who have a Qualifying Termination during the third year following
the occurrence of a change in control will receive a payment equal to 100% of
such Participant's current total annual compensation. A Participant's "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.
In addition to the payments described in the preceding paragraph, options
to purchase Company stock held by Participants who have a Qualifying Termination
during the two-year period following the occurrence of a change in control will
become fully vested and exercisable. Options to purchase Company stock held by
Participants who have a Qualifying Termination during the third year following
the occurrence of a change in control will become fully vested and exercisable
to the extent that such options would have otherwise vested within one year
after the Qualifying Termination.
Likewise, restricted shares of Company stock ("Restricted Shares") held by
Participants who have a Qualifying Termination during the two-year period
following the occurrence of a change in control will become fully vested as to
those Restricted Shares for which vesting restrictions would otherwise have
lapsed within two years after the Qualifying Termination. Restricted Shares held
by Participants who have a Qualifying Termination during the third year
following the occurrence of a change in control will become fully vested to the
extent that vesting restrictions would have lapsed within one year after the
Qualifying Termination.
Generally, the CIC Plan supersedes any other change in control severance
plans, policies and practices of the Company with respect to the Participants.
Messrs. Weinbach and Butler are entitled to receive the greater of the benefits
and payments and more favorable conditions provided under their employment
agreements and the CIC Plan on an item-by-item basis.
A "change in control" as defined in the CIC Plan will have occurred if (i)
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 Company's then outstanding
securities; (ii) 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 (iii) there occurs
the sale of all or substantially all of the Company's 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 CIC Plan to avoid the application of
excise taxes pursuant to section 4999 of the Code.
16
Employment Agreements
Mr. Weinbach entered into an employment agreement with the Company as of
August 13, 2001. The agreement provides for successive one-year terms unless
terminated by the Company or Mr. Weinbach at least six months prior to the end
of the applicable one-year term. Mr. Weinbach's annual base salary is to be no
less than $750,000, and his annual target bonus is to be no less than $485,000.
The actual bonus paid to Mr. Weinbach is based upon his accomplishment of
pre-established business performance goals. The agreement provides that Mr.
Weinbach is to be granted performance-based restricted stock awards for a number
of shares so that restrictions may lapse in each fiscal year of the Company on
shares with a market value on the date of the award of at least $1,000,000. The
agreement also provides that Mr. Weinbach will at all times own sufficient
shares of restricted stock such that restrictions may lapse during each of the
following two fiscal years on a number of shares having a market value on the
date of their award of at least $1,000,000. The agreement further provides that
Mr. Weinbach is to be granted, on an annual basis, a minimum of 170,000 options
to purchase shares of Common Stock and that all options to purchase Common Stock
not yet vested at the time of Mr. Weinbach's retirement would fully vest upon
his retirement. 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" (as defined below) of
the Company, he will receive a termination payment equal to a percentage,
ranging from 300% if such termination occurs within two years after such change
in control to 100% if it occurs after the third year, of his annual base salary
and his "current total annual compensation" (as defined below). 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.
The definition of a "change in control" in Mr. Weinbach's employment
agreement is the same as the definition of a "change in control" under the CIC
Plan except for the percentage in clause (i) of such CIC Plan definition which
is 25% under Mr. Weinbach's employment agreement.
Mr. Weinbach's "current total annual compensation" equals his highest rate
of annual salary during the calendar year in which his employment terminates or
the year immediately prior to the year of such termination plus his average
annual bonus compensation earned in respect of the two most recent calendar
years immediately preceding the calendar year in which his employment
terminates. Mr. Weinbach's employment agreement provides that in the event any
payment from the Company to him results in the imposition of an excise tax under
section 4999 of the Code, he will receive an additional payment such that after
the payment of all such excise taxes and any taxes on the additional payments he
will be in the same after-tax position as if no excise tax had been imposed.
Mr. Butler entered into an agreement with the Company that provides that if
his employment is terminated following a "change in control" (as defined below)
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.
The definition of a "change in control" in Mr. Butler's employment
agreement, as modified by the CIC Plan, is the same as the definition of a
"change in control" under Mr. Weinbach's employment agreement noted above.
Mr. Butler's employment agreement provides that in the event any payment
from the Company to him results in the imposition of an excise tax under section
4999 of the Code, he will receive an additional payment such that after the
payment of all such excise taxes and any taxes on the additional payments he
will be in the same after-tax position as if no excise tax had been imposed.
Certain Transactions
Mr. 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.
17
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Compensation Committee of the Board of Directors is comprised of four
independent directors: Messrs. Brenneman, Brun, Califano and Malek.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") acts
under a written charter adopted by the Board of Directors, which may be viewed
online on the Company's website at www.adp.com under "Governance" in the "About
ADP" section. 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,
the Senior Vice President 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 2004, which were
reviewed by the Committee, were designed to emphasize both competitive and
variable compensation, with direct links to business objectives and exceptional
performance.
The primary components of the compensation package for key executives for
fiscal 2004 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 total annual
compensation target (as described below) at the median of market range levels of
comparable sized companies. The Company's executives may derive more economic
benefit from stock option price appreciation, as a percentage of total
compensation, than from base salary and bonus combined. The Committee generally
intends to cause all eligible compensation to be exempt from the limitations of
section 162(m) of the Code, but reserves the right to make non-exempt awards
where appropriate.
Annual Compensation
Total annual compensation consists of base salary, cash bonus and yearly
vesting of restricted stock. The base salaries for executives for fiscal 2004
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 2004 based upon both
individual and business annual accomplishments versus pre-established goals.
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 six 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 2004 on a basis consistent with the above guidelines.
18
Benefits
The Company provided certain supplemental benefits to key executives during
fiscal 2004 to ensure that it could compete effectively for executive talent.
These supplemental benefits included 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 earned a base salary of $784,750 and a bonus of $840,000
during fiscal 2004. Mr. Weinbach's compensation is based on the satisfaction of
specific performance objectives and the terms of his employment agreement.
The long-term 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. Mr. Weinbach's total compensation
including the long-term component approximates the market median of chief
executive officers at companies with annual revenues between $3 and $12 billion,
as surveyed by the Company.
Compensation Committee
of the Board of Directors
Gregory D. Brenneman, Chairman
Leslie A. Brun
Joseph A. Califano, Jr.
Frederic V. Malek
19
PERFORMANCE GRAPH
The following graph compares the cumulative return on the Common Stock for
the most recent five years with the cumulative total return on the S&P 500 Index
and a Peer Group Index* comprised of industry participants over the same period,
assuming an initial investment of $100 on June 30, 1999, with all dividends
reinvested.
EDGAR PRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AUTOMATIC DATA PROCESSING S&P 500 INDEX PEER GROUP
6/30/99 100.00 100.00 100.00
6/30/00 122.56 107.22 103.55
6/30/01 114.51 91.36 135.93
6/30/02 101.22 74.97 122.54
6/30/03 79.79 75.18 124.03
6/30/04 100.03 89.52 145.67
*The Peer Group Index is comprised of the following companies (in February
2004, Concord EFS, Inc., formerly a member of the Peer Group Index, merged into
First Data Corporation):
Ceridian Corp. Fiserv, Inc.
Computer Sciences Corporation Paychex, Inc.
DST Systems, Inc. SunGard Data Systems Inc.
Electronic Data Systems Corporation Total System Services, Inc.
First Data Corporation
20
AUDIT COMMITTEE REPORT
The Audit Committee (the "Committee") is comprised of the four independent
members of the Board of Directors named below. Each member of the Audit
Committee satisfies the independence requirements of the NYSE rules currently in
effect. The Board of Directors has determined that Messrs. Brenneman and
Cooperman are audit committee financial experts. The Committee acts under a
written charter, which may be viewed online on the Company's website at
www.adp.com under "Governance" in the "About ADP" section.
The Committee oversees the financial management, the Company's 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 Company's 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 Committee that the Company's financial
statements were prepared in accordance with generally accepted accounting
principles. The Committee also reviewed and discussed the Company's audited
financial statements with Deloitte & Touche LLP, an independent registered
public accounting firm, the Company's independent auditors for fiscal 2004,
which is responsible for expressing an opinion on the conformity of the
Company's audited financial statements with generally accepted accounting
principles.
The Committee has discussed with Deloitte & Touche LLP the matters that are
required to be discussed by Statement on Auditing Standards No. 61
(Communication With Audit Committees), as amended. Deloitte & Touche LLP has
provided to the Committee the written disclosures and the letter required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and the Committee discussed with Deloitte & Touche LLP the firm's
independence, including the matters in those written disclosures. The Committee
also considered whether Deloitte & Touche LLP's 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 LLP's independence. The Committee has discussed with the
Company's internal and independent auditors, with and without management
present, their evaluations of the Company's internal accounting controls and the
overall quality of the Company's 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 on a going-forward
basis. 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 Committee recommended to
the Board of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for fiscal 2004. In addition, the Committee
appointed Deloitte & Touche LLP as the independent auditors for the Company for
fiscal 2005.
Audit Committee
of the Board of Directors
Leon G. Cooperman, Chairman
Gregory D. Brenneman
Joseph A. Califano, Jr.
Ann Dibble Jordan
21
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS' FEES
In addition to retaining Deloitte & Touche LLP, an independent registered
public accounting firm, to audit the consolidated financial statements for
fiscal 2004, Deloitte & Touche LLP were retained by the Audit Committee to
provide various services in fiscal 2004 and fiscal 2003. The aggregate fees
billed by Deloitte & Touche LLP in fiscal 2004 and 2003 for these various
services were:
Type of Fees FY 2004 FY 2003
-------------------------------------------------------------------------------
($ in thousands)
Audit Fees $4,605 $3,455
Audit-Related Fees 3,560 2,672
Tax Fees 1,453 1,374
All Other Fees -- 824
---------------------------------------
Total $9,618 $8,325
=======================================
In the above table, in accordance with new SEC definitions, "audit fees"
are fees the Company paid Deloitte & Touche LLP for professional services for
the audit of the Company's consolidated financial statements included in the
Company's Annual Report on Form 10-K and review of financial statements included
in the Company's 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 a policy (the "Auditor Independence
Policy") that prohibits the Company's independent auditors from providing: (i)
bookkeeping or other services related to the accounting records or financial
statements of the Company; (ii) financial information systems design and
implementation services; (iii) appraisal or valuation services, fairness
opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal
audit outsourcing services; (vi) management functions or human resources; (vii)
broker or dealer, investment adviser or investment banking services; (viii)
legal services and expert services unrelated to the audit; and (ix) any other
service that the Public Company Accounting Oversight Board determines, by
regulation, is impermissible. The independent auditors are only permitted to
provide services to the Company that have been 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 Company's
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 the Company's 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.
22
PROPOSAL 2
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
At the Annual Meeting of Stockholders, the 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 auditors to
audit the accounts of the Company and its subsidiaries for the fiscal year that
began on July 1, 2004. 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 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.
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 LLP's appointment as the Company's
independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT 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
During the fiscal year ended June 30, 2004, the Company believes that all
filing requirements under Section 16(a) of the Exchange Act applicable to its
officers, directors and beneficial owners have been complied with, except that
there was an inadvertent omission to report (i) the sale of shares of Company
Common Stock in fiscal 2004 on a Form 4 filed on behalf of Mr. Op de Beeck, an
executive officer, which was subsequently reported in a Form 4 filed on behalf
of Mr. Op de Beeck in August 2004 and (ii) the purchase of shares of Company
Common Stock in fiscal 2004 on a Form 4 filed on behalf of Mr. Weston, a
director, which was subsequently reported on in a Form 5 filed on behalf of Mr.
Weston, and the transfer of funds representing Company Common Stock in the
401(k) account of Mr. Weston on a Form 4 filed on behalf of Mr. Weston, which
was subsequently reported on in a Form 5 filed on behalf of Mr. Weston.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2005 Annual Meeting
of Stockholders must be received by the Company for inclusion in the 2005 Proxy
Statement no later than May 25, 2005.
For any stockholder proposal that is not submitted for inclusion in the
2005 Proxy Statement (as described in the preceding paragraph) but is instead
sought to be presented directly at the 2005 Annual Meeting of Stockholders, SEC
rules permit management to vote proxies in its discretion if the Company (a)
receives notice of the proposal before the close of business on August 9, 2005
and advises stockholders in next year's Proxy Statement about the nature of the
matter and how management intends to vote on such matter, or (b) does not
receive notice of the proposal prior to the close of business on August 9, 2005.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended June 30, 2004, which
is not a part of the proxy soliciting material, is being mailed to the Company's
stockholders together with this Proxy Statement.
23
ELECTRONIC ACCESS TO PROXY MATERIALS AND ANNUAL REPORT
This Proxy Statement and the Company's Annual Report may be viewed online
at www.adp.com under "Investor Information" in the "About ADP" section.
Stockholders of record may elect to view future proxy statements and annual
reports over the Internet rather than receiving paper copies in the mail and can
thereby 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 following the instructions that you will receive in
connection with next year's 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. Your
choice will remain in effect until you cancel it. You do not have to elect
Internet access each year.
IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS
In accordance with notices previously sent to stockholders, the Company is
delivering one annual report and Proxy Statement in one envelope addressed to
all stockholders who share a single address unless they have notified the
Company that they wish to "opt out" of the program known as "householding."
Householding is intended to reduce the Company's printing and postage costs.
If you are a registered stockholder and you choose not to have the
aforementioned disclosure documents sent to a single household address as
described above, you must "opt-out" by writing to ADP Investor Communication
Services, Sharelink 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
account(s) from this service, your account(s) will continue to be "householded"
until we notify you otherwise.
If you own 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.
MISCELLANEOUS
Stockholders who wish to communicate with the Board of Directors may send a
detailed letter to P.O. Box 34, Roseland, New Jersey 07068, leave a message for
a return call at 973-974-5770 or send an email to adp_audit_committee@adp.com.
Communications from stockholders will be relayed to the Board of Directors
unless they are outside the scope of matters considered by the Board of
Directors or duplicative of other communications previously forwarded to the
Board of Directors.
It is the Company's policy that members of the Board of Directors attend
the Annual Meetings of Stockholders. All of the members of the Board of
Directors that were elected at last year's meeting attended the Company's 2003
Annual Meeting of Stockholders.
For the Board of Directors
James B. Benson
Secretary
Roseland, New Jersey
September 22, 2004
24
APPENDIX A
AUTOMATIC DATA PROCESSING, INC.
CATEGORICAL STANDARDS OF DIRECTOR INDEPENDENCE
A director who meets all of the following categorical standards shall be
presumed to be "independent":
o During the past five years, the Company has not employed the director,
and has not employed (except in a non-officer capacity) any of his or
her immediate family members.
o During any twelve-month period within the past five years, neither the
director nor any of his or her immediate family members has received
more than $60,000 per year in direct compensation from the Company,
other than director and committee fees and pension or other forms of
deferred compensation (provided such compensation is not contingent in
any way on continued service).
o During the past five years, the director has not been employed (or
affiliated with) the Company's present or former internal or external
auditors, nor has any of his or her immediate family members been so
employed or affiliated in a professional capacity.
o During the past five years, neither the director, nor any of his or her
immediate family members, has been employed by a company where an
executive officer of the Company serves on such company's compensation
(or equivalent) committee.
o The director does not (directly or indirectly as a partner, shareholder
or officer of another company) provide consulting, legal or financial
advisory services to the Company or the Company's present or former
auditors.
o During the past five years, the director has not been an employee or
executive officer, nor has any of his or her immediate family members
been an executive officer, of a company that makes payments to, or
receives payments from, the Company of property or services in an
amount which, in any fiscal year of such company, exceeds, 1% of such
company's consolidated gross revenues.
o During the past five years, the director has not had a personal
services contract with the Company, its chairman, chief executive
officer or other executive officer, or any affiliate of the Company.
o During the past five years, the director has not been an employee,
officer or director of a foundation, university or other non-profit
organization to which the Company gave directly, or indirectly through
the provision of services, more than $100,000 per annum or 1% of the
total annual donations received (whichever is less).
o The director does not, either directly or indirectly as a partner,
shareholder or officer of another company, own more than 5% of the
Company's common stock.
A-1
September 22, 2004
Dear Stockholder:
You are cordially invited to join us at the 2004 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, on Tuesday, November 9, 2004, starting at 10:00 a.m. I hope you will be
able to attend. At the meeting we will (i) elect directors, (ii) vote on the
appointment of Deloitte & Touche LLP as independent auditors.
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 by 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 your 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 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.
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.
Sincerely,
/s/ Arthur F. Weinbach
----------------------
Arthur F. Weinbach
Chairman and Chief Executive Officer
--------------------------------------------------------------------------------
[ADP logo]
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
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 2004 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 9, 2004 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 by the Internet, as described in the
instructions on the reverse side.
[ADP logo] VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting
AUTOMATIC DATA PROCESSING, INC. instructions and for electronic delivery
PROXY SERVICES of information up until 11:59 P.M. Eastern
P.O. BOX 9162 Time the day before the cut-off date or
FARMINGDALE, NY 11735 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 then
follow the instructions.
ADMISSION TICKET VOTE BY MAIL
---------------- Mark, sign, and date your proxy card and
Please retain and present this top return it in the postage-paid envelope we
portion of the proxy card as your have provided or return it to Automatic
admission ticket together with a Data Processing, Inc. c/o ADP, 51 Mercedes
valid picture identification to Way, Edgewood, NY 11717. All proxy cards
gain admittance to the Annual must be received by the day before the
Meeting. cut-off date or the meeting date.
--------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
AUTOMATIC DATA PROCESSING, INC.
The Board of Directors recommends a vote
FOR the proposals regarding:
(1) Election of Directors
Nominees: For Withhold For All To withhold authority to vote, mark
01) Gregory D. Brenneman 07) Ann Dibble Jordan All All Except "For All Except" and write the
02) Leslie A. Brun 08) Harvey M. Krueger nominee's number on the line below.
03) Gary C. Butler 09) Frederic V. Malek
04) Joseph A. Califano, Jr. 10) Henry Taub [ ] [ ] [ ] -----------------------------------
05) Leon G. Cooperman 11) Arthur F. Weinbach
06) R. Glenn Hubbard
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.
HOUSEHOLDING ELECTION - Please indicate if you consent to
receive certain future investor communications in a single Yes No
package per household [ ] [ ]
---------------------------------- ------- ----------------------- ------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date