Delaware 22-1467904
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One ADP Boulevard, Roseland, New Jersey 07068
(Address of principal executive offices) (Zip Code)
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Name of each exchange on
Title of each class which registered
Common Stock, $.10 Par Value New York Stock Exchange
(voting) Chicago Stock Exchange
Pacific Stock Exchange
Liquid Yield Option Notes due 2012 New York Stock Exchange
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes x No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the Registrant as of August 31, 2002 was approximately $22,815,638,729. On August 31, 2002, there were 604,067,745 shares of Common Stock outstanding.
Portions of the Registrant's 2002 Annual Report to Shareholders.Parts I, II & IV
Portions of the Registrant's Proxy Statement for Annual Meeting
of Stockholders to be held on November 12, 2002. Part III
Item 1. Business
Automatic Data Processing, Inc., incorporated in Delaware in 1961 (together with its subsidiaries "ADP" or the "Registrant"), is one of the largest providers of computerized transaction processing, data communication, and information services in the world. For financial information by segment and by geographic area, see Note 13 of the "Notes to Consolidated Financial Statements" contained in ADP's 2002 Annual Report to Shareholders, which information is incorporated herein by reference. The Registrant's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, Proxy Statement for its Annual Meeting of Stockholders and Annual Report to Shareholders are made available, free of charge, on its website at www.adp.com as soon as reasonably practicable after such reports have been filed with or furnished to the Securities and Exchange Commission. The following summary describes ADP's activities.
Employer Services
Employer Services offers a comprehensive range of payroll processing, Total Pay(TM) products (ADP's payroll check and full service direct deposit products), human resource information systems ("HR"), benefits administration, including 401(k), COBRA and flexible spending account administration, time and labor management, payroll and business tax filing and reporting, professional employer organization ("PEO"), pre-employment screening and selection and regulatory compliance management (i.e., new hire reporting and wage garnishment processing) to approximately 450,000 employers in North America, Europe, South America (primarily Brazil), Australia, and Asia. These services are marketed through Employer Services' direct marketing sales forces and through indirect sales channels such as marketing relationships with banks, accountants, and online companies that market Employer Services' services to their customers. In fiscal 2002, 89% of Employer Services' revenues were from North America, 9% were from Europe, and 2% were from South America (primarily Brazil), Australia and Asia.
Employer Services' approach to the market is to match a client's needs with the product that will best meet expectations. As a result, in North America, Employer Services is comprised of the following groups: Emerging Business Services ("EBS") (primarily companies with fewer than 50 employees); Major Accounts (primarily companies with between 50 and 999 employees); and National Accounts Services (primarily companies with 1,000 or more employees).
EBS processes payroll for the aforementioned smaller companies and provides them with leading solutions, including a range of value-added services that are specifically designed for small business clients. Major Accounts and National Account Services offer a full suite of best-of-breed employer services solutions, including full database and other functional integration between payroll and HR for clients ranging from mid-sized through many of the world's largest corporations.
In many cases, ADP provides system solutions for its clients' entire human resource, payroll and benefits needs. Through ADP Connection(TM), ADP can enable its largest clients to interface their major enterprise resource planning applications with ADP's outsourced payroll services. For those companies who choose to process these applications in-house, ADP delivers stand-alone services such as payroll tax filing, check printing and distribution, and year-end statements (i.e., W-2's). Other large clients rely on ADP to design and deliver their own customized human resource information systems and benefits outsourcing solutions.
ADP's Tax and Financial Service Center processes and collects federal, state and local payroll taxes on behalf of, and from, ADP clients and remits such taxes to the appropriate taxing authorities. Through service offerings such as new hire reporting, ADP's Total Pay(TM) payroll check and full service direct deposit products (in conjunction with major bank partners) and the collection and payment of wage garnishments, the ADP Tax and Financial Services Center is also responsible for the efficient movement of funds and information from clients to third parties. The ADP Tax and Financial Services Center supports large, mid-sized and small clients. It provides an electronic interface between approximately 354,000 ADP clients in the United States and Canada and about 2,000 federal, state and local tax agencies, from the Internal Revenue Service to local town governments. In fiscal 2002, the ADP Tax and Financial Services Center printed and delivered approximately 42 million year-end tax statements in North America, and moved over $580 billion in client funds to tax authorities and its clients' employees via electronic transfer, direct deposit and ADP Check.
ADP's HR services, operating in conjunction with a client's payroll database, provide comprehensive HR recordkeeping services, including benefits administration and outsourcing, applicant tracking, employee history and position control. ADP's Benefits Services provides benefits administration across all market segments, including management of the open enrollment of benefits, COBRA and flexible spending account administration, Section 529 College Savings Plan administrative services and 401(k) recordkeeping. In fiscal 2002, ADP grew revenues in its retirement services business 11% and is among the ten largest providers of 401(k) retirement plans. In fiscal 2002, ADP grew revenues in its COBRA administration services business by over 19%.
ADP TotalSource, ADP's PEO business, provides clients with comprehensive employment administration outsourcing solutions, including payroll, HR, benefits administration and workers' compensation insurance. ADP TotalSource, the third largest PEO in the U.S., has 21 offices located in twelve states and serves over 3,000 PEO clients and over 75,000 work-site employees in all 50 states. ADP TotalSource revenues increased by 14% in fiscal 2002 over the previous fiscal year.
ADP complements its payroll and HR services with additional employer services that include products such as time and labor management and unemployment compensation management. In fiscal 2002, ADP expanded its time and labor management business by 20%. ADP's unemployment compensation services aid clients in managing and reducing unemployment insurance costs. In fiscal 2002, ADP acquired Avert, Inc., a leading provider of pre-employment screening (i.e., employee background checking) and selection services. Prior to the acquisition, Avert had provided these services to ADP clients through a marketing alliance with ADP. In fiscal 2002, ADP launched its "Pay-by-Pay" Workers' Compensation Insurance Service that allows employers using ADP's payroll services to pay for workers' compensation insurance on a payroll by payroll basis.
During fiscal 2002, ADP continued the process of Internet-enabling existing product offerings, while at the same time creating new products expressly designed for the Internet. ADP's Internet offerings now include its EasyPayNet(sm) Internet-based payroll solution for EBS clients, Pay eXpert(R) Internet-based payroll solution for Major Accounts clients, and its Enterprise HRMS integrated HR, payroll and benefits solution for National Accounts Services clients, all of which feature Internet-based employer self-service capabilities. Further, in fiscal 2002, ADP launched its Total Choice Solutions(sm)Internet-based payroll solution, a fully-integrated, web-native human resource and payroll management solution hosted by ADP. For benefits administration, ADP offers Benefits eXpert(sm), an Internet-based benefits administration and employee self-service solution that allows mid-market companies in Major Accounts to manage more efficiently their employees' health and welfare benefits. For large clients, ADP Benefit Services offers an Internet-based COBRA administrative solution, as well as employee self-service applications for open-enrollment, flexible spending account administration and other employee-administered benefit options.
The continued increase in the number of multi-national companies makes payroll and human resource management services a global opportunity. In fiscal 2002, ADP increased payroll sales to multi-national employers throughout Europe by nearly 40% over the previous fiscal year. ADP constantly seeks to further enhance its presence in the global market through alliances, such as its partnership with Exult, Inc. in which it offers its services for large companies to the "Global 500" market using a new technology outsourcing model.
Brokerage Services
Brokerage Services provides transaction processing systems, desktop productivity applications and investor communication services to financial services firms and public corporations worldwide. ADP's products and services include: (i) global order entry, trade processing and settlement systems including automated inquiry, reporting and record keeping services for trading virtually any financial instrument (including equities, fixed income, foreign currency, commodities and derivatives), in any market, at any time; (ii) full-service investor communications services including convenient electronic delivery and Internet solutions, financial and sophisticated on-demand printing, proxy distribution and vote processing, householding, regulatory mailings and fulfillment services; (iii) real-time order entry and processing services for Internet-based brokerage firms; (iv) automated, browser-based, desktop productivity tools for financial consultants, institutional investors and corporate secretaries; and (v) integrated delivery of multiple products and services through ADP's Global Processing Solution(sm).
In fiscal 2002, Brokerage Services processed a significant portion of U.S. and Canadian securities transactions, with an average daily volume of 1.4 million trades processed. In addition, ADP served the North American securities transaction processing needs of most large global banks. In fiscal 2002, Brokerage Services received ISO 9001:2000 certification, an international standard for the highest quality, for its Brokerage Processing Services system.
Brokerage Services also provides computerized proxy vote tabulation and shareholder communication, distribution and fulfillment services, including Internet-enabled products and services. ADP served approximately 14,000 publicly traded companies and 450 mutual funds on behalf of more than 800 brokerage firms and banks in fiscal 2002. In fiscal 2002, Brokerage Services distributed more than 870 million investor communications on behalf of its clients worldwide and processed over 475 billion shares. In fiscal 2002, Brokerage Services delivered more than 14 million investor communications via the Internet, which is 172% more than the prior fiscal year. Brokerage Services consolidated or electronically delivered approximately 24% of all shareholder positions, saving clients approximately $300 million in printing and postage costs. In addition, Brokerage Services printed over 6.4 billion document pages for the financial services industry in fiscal 2002.
Brokerage Services serves a diverse client base, including: full-service, discount and online brokerage firms; global banks; mutual funds; institutional investors; specialty trading firms; clearing firms; and publicly traded corporations. Brokerage Services provides securities transaction processing, printing and electronic distribution of shareholder communications and other services to clients in more than 25 countries in North America, Europe, Asia, South America and Australia.
In fiscal 2002, Brokerage Services acquired the output services business of IBM Global Services, significantly enhancing ADP's distributive printing capabilities. In fiscal 2002, Brokerage Services also acquired the Argus Group, an acquisition that supplemented ADP's current investor delivery and fulfillment service capabilities and provided ADP with a state-of-the-art, online content management system.
Dealer Services
Dealer Services provides integrated dealer management systems ("DMS") and business performance solutions for motor vehicle (automobile and heavy truck) dealers and their manufacturers worldwide. More than 16,000 automobile and truck dealers throughout North America and Europe and more than 30 vehicle manufacturers use ADP's DMS, networking solutions, data integration, consulting and/or marketing services. As a result of its acquisition of Digital Motorworks Holdings, Inc. ("DMI") in fiscal 2002, Dealer Services now has the ability to extract, transform and standardize data from varied sources to client specifications. These DMS-independent solutions from DMI help drive improved decision-making by automotive manufacturers, dealers and related businesses.
Dealer Services offers its dealership clients a service solution that includes computer hardware, hardware maintenance services, licensed software, software support, system design and network consulting services. Dealer Services also offers such clients "front-end" dealership sales process and business development training services, consulting services, software products and customer relationship management solutions. Clients use an ADP DMS to manage business activities such as accounting, inventory, factory communications, scheduling, vehicle financing, insurance, sales and service. Dealer Services also designs, establishes and maintains communications networks for its dealership clients that allow interactive communications among multiple site locations (for larger dealers) as well as links between franchised dealers and their vehicle manufacturer franchisors. These networks are used for activities such as new vehicle ordering and status inquiry, warranty submission and validation, parts and vehicle locating, dealership customer credit application submission and decisioning, vehicle repair estimating and obtaining vehicle registration and lien holder information. Dealer Services also offers an Application Service Provider (ASP) Managed Services solution to its dealership clients pursuant to which such clients outsource all information technology management, computing and network infrastructure, technology decisions and system support to Dealer Services.
Claims Services
Claims Services offers a broad line of automated information tools to property and casualty insurance companies, claims adjusters, repair shops and auto parts recycling facilities. These tools help insurers to improve their performance by accelerating the claims review and settlement process and streamlining workflow. The products and services include the following: (i) automated vehicle repair estimating applications and total loss vehicle valuation applications and related databases for the property and casualty and collision repair industries; (ii) medical cost management applications and services for the auto casualty and workers' compensation markets; (iii) auto body shop management systems; (iv) parts locator systems; and (v) workflow applications to streamline the end-to-end claims process and other applications, databases and services that enhance and optimize the claims process.
All of ADP's services are offered broadly across North America and Europe. Some employer services and brokerage services are also offered in South America (primarily Brazil), Australia and Asia.
None of ADP's major business groups have a single homogenous client base or market. For example, while Brokerage Services primarily serves the retail brokerage market, it also serves banks, commodity dealers, the institutional brokerage market and individual non-brokerage corporations. Dealer Services primarily serves automobile dealers, but also serves truck and agricultural equipment dealers, auto repair shops, used car lots, state departments of motor vehicles and manufacturers of automobiles, trucks and agricultural equipment. Claims Services has many clients who are insurance companies, but it also provides services to automobile manufacturers, body repair shops, salvage yards, distributors of new and used automobile parts and other non-insurance clients. Employer Services has clients from a large variety of industries and markets. Within this client base are concentrations of clients in specific industries. Employer Services also sells to auto dealers, brokerage clients and insurance clients. While concentrations of clients exist, no one client or business group is material to ADP's overall revenues.
None of ADP's businesses are overly sensitive to price changes. Economic conditions among selected clients and groups of clients may and do have a temporary impact on demand for ADP's services. In fiscal 2002, in Employer Services, the continued weak economic conditions resulted in slower sales, lower client retention due primarily to bankruptcies, and fewer employees on our clients' payrolls; in Brokerage Services, weakness in the brokerage and financial services industry significantly reduced discretionary spending and investments in new initiatives, and the change in the mix of retail versus institutional transactions lowered revenue per trade; and interest rates in the U.S. declined precipitously last year significantly impacting interest earnings on our client funds.
ADP enjoys a leadership position in each of its major service offerings and does not believe any major service or business unit in ADP is subject to unique market risk.
Competition
The computing services industry is highly competitive. ADP knows of no reliable statistics by which it can determine the number of its competitors, but it believes that it is one of the largest providers of computerized transaction processing, data communication and information services in the world.
ADP's competitors include other independent computing services companies, divisions of diversified enterprises and banks. Another competitive factor in the computing services industry is the in-house computing function, whereby a company installs and operates its own computing systems.
Competition in the computing services industry is primarily based on service responsiveness, product quality and price. ADP believes that it is very competitive in each of these areas and that there are no material negative factors impacting ADP's competitive position in the computing services industry. No one competitor or group of competitors is dominant in the computing services industry.
Clients and Client Contracts
ADP provides its services to over 500,000 clients. In fiscal 2002, no single client or group of affiliated clients accounted for revenues in excess of 2% of annual consolidated revenues.
ADP's average client retention is more than 8 years in Employer Services and is 10 or more years in Brokerage Services and Dealer Services, and does not vary significantly from period to period.
ADP's services are provided under written price quotations or service agreements having varying terms and conditions. No one price quotation or service agreement is material to ADP. Discounts, rebates and promotions offered by ADP to clients are not material.
ADP offers a service warranty to its clients that if any errors or omissions occur in its service offerings, ADP will correct them as soon as possible. In addition, ADP provides, either directly or through third parties, maintenance and support for the ADP provided equipment and software that facilitates the delivery of its services to clients.
Systems Development and Programming
During the fiscal years ended June 30, 2002, 2001 and 2000, ADP invested $475 million, $514 million and $460 million, respectively, in systems development and programming, migration to new computing technologies and the development of new products.
Product Development
ADP continually upgrades, enhances and expands its existing products and services. Generally, no new product or service has a significant effect on ADP's revenues or negatively impacts its existing products and services, and ADP's products and services have a significant remaining life cycle.
Licenses
ADP is the licensee under a number of agreements for computer programs and databases. ADP's business is not dependent upon a single license or group of licenses. Third-party licenses, patents, trademarks and franchises are not material to ADP's business as a whole.
Number of Employees
ADP employed approximately 40,000 persons as of June 30, 2002.
Item 2. Properties
ADP leases space for 45 of its principal processing centers. In addition, ADP leases numerous other small processing centers and sales offices. All of these leases, which aggregate approximately 6,100,000 square feet in North America, Europe, South America (primarily Brazil), Asia, Australia and South Africa, expire at various times up to the year 2018. ADP owns 31 of its processing facilities and its corporate headquarters complex in Roseland, New Jersey, which aggregate approximately 3,000,000 square feet. None of ADP's owned facilities is subject to any material encumbrances. ADP believes its facilities are currently adequate for their intended purposes and are adequately maintained.
In the normal course of business, the Registrant is subject to various claims and litigation. While the outcome of any litigation is inherently unpredictable, we believe we have valid defenses with respect to the legal matters pending against us and we believe that the ultimate resolution of these matters will not have a material adverse impact on our financial condition, results of operations or cash flows. Among the various claims and litigation pending against the Registrant is the following:
The Registrant and its indirect wholly-owned subsidiaries Dealer Solutions, L.L.C. and Dealer Solutions Holdings, Inc. ("DSI") are named as defendants in a lawsuit filed on March 4, 1999 in the 133rd Judicial District Court of Harris County, Texas by Universal Computer systems, Inc., Universal Computer Consulting, Ltd., Universal Computer Services, Inc., and Dealer Computer Services, Inc. (collectively, "UCS"), which lawsuit has since been referred by the Court to arbitration. This lawsuit alleges trade secret violations by DSI in the creation by DSI of the CARMan automobile dealership software product. UCS is seeking injunctive relief and unspecified damages. We believe we have valid defenses with respect to the above matter and should prevail.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
See "Market Price, Dividend Data and Other" contained in the Registrant's 2002 Annual Report to Shareholders, which information is incorporated herein by reference. As of August 31, 2002, the Registrant had 34,536 registered holders of its Common Stock, par value $.10 per share. The Registrant's Common Stock is traded on the New York, Chicago and Pacific Stock Exchanges.
On May 23, 2002, the Registrant issued 8,774 shares of its Common Stock
in respect of an earnout paid to a company in accordance with an asset purchase
agreement dated November 30, 2000 pursuant to which the Registrant acquired
substantially all of the assets of such company. The Registrant issued the
foregoing shares of Common Stock without registration under the Securities Act
of 1933, as amended, in reliance upon the exemption therefrom set forth in
Section 4(2) of such Act relating to sales by an issuer not involving a public
offering.
Equity Compensation Plan Information
Plan category Number of securities to Weighted average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options, outstanding options, future issuance under
warrants and rights warrants and rights equity compensation
plans (excluding
securities reflected in
Column (a))
(a) (b) (c)
Equity compensation plans 50,656,776 $40.94 17,210,779 (1)
approved by security holders
Equity compensation plans not 186,000 $27.43 2,115,330 (3), (4), (5)
approved by security holders (2)
Total 50,842,776 $40.89 19,326,109
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(1) Includes 3,318,779 shares of Common Stock remaining available for future
issuance under the Registrant's Employees' Stock Purchase Plan, which such shares
and weighted average exercise prices are not reflected in Columns (a) and (b)
of this table.
(2) Represents (i) the Registrant's 1989 Non-Employee Director Stock Option
Plan, as amended, (ii) the Key Employees' Restricted Stock Plan, and
(iii) the French Employees' Saving-Stock Option Plan, as amended, none of which
have been approved by the Registrant's stockholders. The terms of the 1989 Non-Employee
Director Stock Option Plan are described under "Corporate Governance"
in the Proxy Statement for Registrant's 2002 Annual Meeting of Stockholders,
the terms of the Key Employees' Restricted Stock Plan are described in Note
10 to the Registrant's Consolidated Financial Statements included in the Registrant's
2002 Annual Report to Shareholders and the terms of the French Employees' Saving-Stock
Option Plan are described in footnote (5) below.
(3) The number of shares of Common Stock reserved for issuance pursuant to the
terms of the Registrant's 1989 Non-Employee Director Stock Option Plan adjust
to equal the number of shares of Common Stock issuable under such plan. At June
30, 2002, there were 280,500 shares of Common Stock reserved for issuance pursuant
to the terms of the 1989 Non-Employee Director Stock Option Plan, as amended.
(4) Includes 768,672 shares of Common Stock reserved for issuance pursuant to
the Key Employees' Restricted Stock Plan.
(5) Includes 1,066,158 shares of Common Stock reserved for issuance pursuant
to the French Employees' Saving-Stock Option Plan. In January 1996, the Board
of Directors adopted the French Employees' Saving-Stock Option Plan (the "French
Plan"). Employees of the Registrant 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"). 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 Employees' Saving-Stock Option Plan Committee
(appointed by the Board of Directors), 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 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.
Item 6. Selected Financial Data
See "Selected Financial Data" contained in the Registrant's 2002 Annual Report to Shareholders, which information is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
See "Management's Discussion and Analysis" contained in the Registrant's 2002 Annual Report to Shareholders, which information is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Approximately 30% of the Registrant's overall investment portfolio is invested in overnight interest-bearing instruments, which are therefore impacted immediately by changes in interest rates. The other 70% of the Registrant's investment portfolio is invested in fixed-income securities, with maturities of up to ten years, which are also subject to interest rate risk, including reinvestment risk. The Registrant has historically had the ability to hold these investments until maturity, and therefore this has not had an adverse impact on income or cash flows.
The earnings impact of future rate changes is not precisely predictable because many factors influence the return on the Registrant's portfolio. These factors include, among others, the overall portfolio mix between short-term and long-term investments. The mix varies during the year and is impacted by daily interest rate changes. A hypothetical change in interest rates of 25 basis points applied to the forecasted average balances in fiscal 2003 would result in approximately a $9 million pre-tax earnings impact over the twelve-month period.
The financial statements described in Item 15(a)1. hereof are incorporated herein.
The following supplementary data is incorporated herein by reference:
Quarterly Financial Results (unaudited) for the two years ended June 30, 2002 (see Note 14 of the "Notes to Consolidated Financial Statements" contained in ADP's 2002 Annual Report to Shareholders)
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 10. Directors and Executive Officers of the Registrant
Executive Officers of the Registrant
The executive officers of the Registrant, their ages, positions and the period
during which they have been employed by ADP are as follows:
Employed by
Name Age Position ADP Since
-------------------- --- -------------------------- ----------
John D. Barfitt 49 President, Employer 1979
Services - International
James B. Benson 57 Vice President, General 1977
Counsel and Secretary
Richard C. Berke 57 Vice President, Human 1989
Resources
Gary C. Butler 55 President and Chief 1975
Operating Officer
Raymond L. Colotti 56 Vice President and 1995
Treasurer
Richard J. Daly 49 Group President, 1989
Brokerage Services
Richard A. Douville 47 Vice President, 1999
Finance
G. Harry Durity 55 Vice President, 1994
Worldwide Business
Development
Karen E. Dykstra 43 Vice President, 1981
Finance
(Principal Financial Officer)
Russell P. Fradin 47 Group President, 1996
Employer Services - North America
Eugene A. Hall 46 Senior Vice President, and 1998
President of Financial
and Technology Services,
Employer Services - North America
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John Hogan 54 Group President, 1993
Brokerage Services
Campbell Langdon 41 Vice President, 2000
Strategic Development
S. Michael Martone 54 Group President, Dealer 1987
Services
Peter Op de Beeck 46 Group President, 1998
Claims Solutions Group
Arthur F. Weinbach 59 Chairman and 1980
Chief Executive Officer
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Messrs. Benson, Berke, Butler, Daly, Durity, Fradin, Hogan, Martone and Weinbach have each been employed by ADP in senior executive positions for more than the past five years.
John D. Barfitt joined ADP in 1979. Prior to his promotion to President, Employer Services -International he served as President, Claims Services at ADP from 1998 to 2000 and Senior Vice President - Automotive Claims Services at ADP from 1996 to 1998.
Raymond L. Colotti joined ADP in 1995. Prior to his promotion to Vice President and Treasurer, he served as President of ADP Atlantic, Inc. and its related companies from 1995 to 1997.
Richard A. Douville joined ADP in 1999 as Vice President, Finance. Prior to joining ADP, he served as Senior Vice President and Chief Financial Officer from 1996 to 1999 and as Vice President and Treasurer from 1993 to 1996 at United States Surgical Corporation.
Karen E. Dykstra joined ADP in 1981. Prior to her promotion to Vice President, Finance (Principal Financial Officer) in 2001, she served as Vice President and Controller from 1998 to 2001, Assistant Corporate Controller from 1996 to 1998 and as Chief Financial Officer of Dealer Services from 1995 to 1996.
Eugene A. Hall joined ADP in 1998 as Senior Vice President. In 2000, he also became President of Financial and Technology Services of Employer Services - North America. Prior to joining ADP, he was a senior partner of McKinsey & Company and had been associated with that firm for 16 years.
Campbell Langdon joined ADP in 2000 as Vice President, Strategic Development. Prior to joining ADP, he was a partner of McKinsey & Company and had been associated with that firm for 11 years.
Peter Op de Beeck joined ADP in 1998 as Managing Director of Claims Solutions Group's Audatex. In 2001, he became President of ADP Claims Solutions Group. Prior to joining ADP, he was Chairman and Chief Executive Officer of Online Internet from 1996 to 1998.
Each of ADP's executive officers is elected for a term of one year and until their successors are chosen and qualified or until their death, resignation or removal.
See "Election of Directors" in the Proxy Statement for Registrant's 2002 Annual Meeting of Stockholders, which information is incorporated herein by reference.
Section 16(a) Beneficial Ownership Reporting Compliance
See "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement for Registrant's 2002 Annual Meeting of Stockholders, which information is incorporated herein by reference.
Item 11. Executive Compensation
See "Compensation of Executive Officers" in the Proxy Statement for Registrant's 2002 Annual Meeting of Stockholders, which information is incorporated herein by reference. See Item 5 of this Annual Report on Form 10-K for information concerning the Registrant's equity compensation plans.
Item 12. Security Ownership of Certain Beneficial Owners and Management
See "Election of Directors - Security Ownership of Certain Beneficial Owners and Managers" in the Proxy Statement for Registrant's 2002 Annual Meeting of Stockholders, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
See "Compensation of Executive Officers - Certain Transactions" in the Proxy Statement for Registrant's 2002 Annual Meeting of Stockholders, which information is incorporated herein by reference.
Item 14. Controls and Procedures
There have been no significant changes in the Registrant's internal controls or other factors that could significantly affect those controls since the date of the Registrant's last evaluation of its internal controls, and there have been no corrective actions with regard to significant deficiencies and material weaknesses in such controls.
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)1. Financial Statements
The following reports and consolidated financial statements of the Registrant contained in the Registrant's 2002 Annual Report to Shareholders are also included in Part II, Item 8:
Statements of Consolidated Earnings - years ended June 30, 2002, 2001 and 2000
Consolidated Balance Sheets - June 30, 2002 and 2001
Statements of Consolidated Shareholders' Equity - years ended June 30, 2002, 2001 and 2000
Statements of Consolidated Cash Flows - years ended June 30, 2002, 2001 and 2000
Financial information of the Registrant is omitted because the Registrant is primarily a holding company. The Registrant's subsidiaries, which are listed on Exhibit 21 attached hereto, are wholly owned.
2. Financial Statement Schedules
Page in Form 10-K
Independent Auditors' Report on Schedule 18
Schedule II - Valuation and Qualifying Accounts 19
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All other Schedules have been omitted because they are inapplicable or are not required or the information is included elsewhere in the financial statements or notes thereto.
3. Exhibits
The following exhibits are filed with this Form 10-K or incorporated herein by reference to the document set forth next to the exhibit in the list below:
3.1 - Amended and Restated Certificate of Incorporation dated
November 11, 1998 - incorporated by reference to Exhibit
3.1 to Registrant's registration statement on Form S-4 filed with the
Commission on February 9, 1999
3.2 - Amended and Restated By-laws of the Registrant
4 - Indenture dated as of February 20, 1992 between Automatic
Data Processing, Inc. and Bankers Trust Company, as
trustee, regarding the Liquid Yield Option Notes due 2012
of the Registrant - incorporated by reference to Exhibit
(4)-#1 to Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1992
10.1 - Letter Agreement dated as of August 13, 2001 between
Automatic Data Processing, Inc. and Arthur F. Weinbach -
incorporated by reference to Exhibit 10.1 to Registrant's
Annual Report on Form 10-K for the fiscal year ended
June 30, 2001 (Management Contract)
10.2 - Letter Agreement dated September 14, 1998 between Automatic
Data Processing, Inc. and Gary Butler - incorporated by
reference to Exhibit 10.2 to Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 1998
(Management Contract)
10.3 - Key Employees' Restricted Stock Plan - incorporated by
reference to Registrant's Registration Statement
No. 33-25290 on Form S-8 (Management Compensatory Plan)
10.4 - Supplemental Officers' Retirement Plan, as amended
(Management Compensatory Plan)
10.5 - 1989 Non-Employee Director Stock Option Plan - incorporated
by reference to Exhibit 10(iii)(A)-#7 to Registrant's
Annual Report on Form 10-K for the fiscal year ended
June 30, 1990 (Management Compensatory Plan)
10.5(a) - Amendment to 1989 Non-Employee Director Stock Option Plan -
incorporated by reference to Exhibit 10(6)(a) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1997 (Management Compensatory Plan)
10.6 - 1990 Key Employees' Stock Option Plan - incorporated by
reference to Exhibit 10(iii)(A)-#8 to Registrant's Annual
Report on Form 10-K for the fiscal year ended June 30, 1990
(Management Compensatory Plan)
10.6(a) - Amendment to 1990 Key Employees' Stock Option Plan -
incorporated by reference to Exhibit 10(7)(a) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1997 (Management Compensatory Plan)
10.7 - 1994 Directors' Pension Arrangement - incorporated by
reference to Exhibit 10(iii)(A)-#10 to Registrant's Annual
Report on Form 10-K for the fiscal year ended June 30, 1994
(Management Compensatory Plan)
|
10.8 - 2000 Key Employees' Stock Option Plan, as amended
(Management Compensatory Plan)
10.9 - 2001 Executive Incentive Compensation Plan - incorporated
by reference to Exhibit 10.9 to Registrant's Annual Report
on Form 10-K for the fiscal year ended June 30, 2001
(Management Compensatory Plan)
10.10 - Change in Control Severance Plan for Corporate Officers -
incorporated by reference to Exhibit 10.3 to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2001 (Management Compensatory Plan)
10.11 - Employees' Saving-Stock Option Plan - incorporated by
reference to Registrant's Registration Statement No.
333-10281 on Form S-8 (Management Compensatory Plan)
11 - Schedule of Calculation of Earnings Per Share
13 - Pages 22 to 39 of the 2002 Annual Report to Shareholders
(with the exception of the pages incorporated by reference
herein, the Annual Report is not a part of this filing)
21 - Subsidiaries of the Registrant
23 - Independent Auditors' Consent
99.1 - Certification by Arthur F. Weinbach pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 - Certification by Karen E. Dykstra pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) None.
|
To the Board of Directors and Shareholders of Automatic Data Processing, Inc. Roseland, New Jersey
We have audited the consolidated financial statements of Automatic Data Processing, Inc. and subsidiaries as of June 30, 2002 and 2001, and for each of the three years in the period ended June 30, 2002, and have issued our report thereon dated August 12, 2002; such consolidated financial statements and report are included in your 2002 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedule of Automatic Data Processing, Inc., listed in Item 15. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP ------------------------- New York, New York August 12, 2002 |
AUTOMATIC DATA PROCESSING, INC.
AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- ---------
Additions
-----------------------------
(1) (2)
Charged to
Balance at Charged to other Balance at
beginning costs and accounts- Deductions- end of
of period expenses describe describe period
--------- --------- --------- ---------- ----------
Year ended June 30, 2002:
Allowance for doubtful accounts:
Current $41,996 $ 27,703 $ 743 (B) $ (17,569) (A) $ 52,873
Long-term $16,666 $ 1,176 $ -- $ (1,823) (A) $ 16,019
Deferred tax valuation allowance $41,930 $ 3,179 $ 313 (C) $ (5,282) (D) $ 40,140
Year ended June 30, 2001:
Allowance for doubtful accounts:
Current $48,448 $ 16,431 $ 114 (B) $ (22,997) (A) $ 41,996
Long-term $16,946 $ 1,369 $ -- $ (1,649) (A) $ 16,666
Deferred tax valuation allowance $43,700 $ 6,145 $ (165)(C) $ (7,750) (D) $ 41,930
Year ended June 30, 2000:
Allowance for doubtful accounts:
Current $46,357 $ 25,020 $1,663 (B) $ (24,592) (A) $ 48,448
Long-term $16,556 $ 1,942 $ -- $ (1,552) (A) $ 16,946
Deferred tax valuation allowance $38,804 $ 5,229 $ (333) (C) $ -- $ 43,700
|
(A) Doubtful accounts written off, less recoveries on accounts previously
written off.
(B) Acquired in purchase transactions.
(C) Related to foreign exchange fluctuation.
(D) Related to the net deferred tax assets recorded in purchase accounting. The
recognition of this allowance is allocated to reduce the excess purchase price
over the net assets acquired.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
September 16, 2002 By: /s/ Arthur F. Weinbach
--------------------------
Arthur F. Weinbach
Chairman and
Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Arthur F. Weinbach Chairman, Chief Executive September 16, 2002
----------------------------------
(Arthur F. Weinbach) Officer and Director
(Principal Executive Officer)
/s/ Karen E. Dykstra Vice President, Finance September 16, 2002
----------------------------------
(Karen E. Dykstra) (Principal Financial Officer
and Controller)
/s/ Gregory D. Brenneman Director September 16, 2002
----------------------------------
(Gregory D. Brenneman)
/s/ Gary C. Butler Director September 16, 2002
----------------------------------
(Gary C. Butler)
/s/ Joseph A. Califano, Jr. Director September 16, 2002
----------------------------------
(Joseph A. Califano, Jr.)
/s/ Leon G. Cooperman Director September 16, 2002
----------------------------------
(Leon G. Cooperman)
/s/ George H. Heilmeier Director September 16, 2002
----------------------------------
(George H. Heilmeier)
|
Signature Title Date --------- ----- ---- /s/ Ann Dibble Jordan Director September 16, 2002 ---------------------------------- (Ann Dibble Jordan) /s/ Harvey M. Krueger Director September 16, 2002 ---------------------------------- (Harvey M. Krueger) /s/ Frederic V. Malek Director September 16, 2002 ---------------------------------- (Frederic V. Malek) /s/ Henry Taub Director September 16, 2002 ---------------------------------- (Henry Taub) /s/ Laurence A. Tisch Director September 16, 2002 ---------------------------------- (Laurence A. Tisch) /s/ Josh S. Weston Director September 16, 2002 ---------------------------------- (Josh S. Weston) |
I, Arthur F. Weinbach, certify that:
1. I have reviewed this annual report on Form 10-K of Automatic Data Processing, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
Date: September 16, 2002
_____________/s/ Arthur F. Weinbach__________
----------------------
Arthur F. Weinbach
Chairman and Chief Executive Officer
|
I, Karen E. Dykstra, certify that:
1. I have reviewed this annual report on Form 10-K of Automatic Data Processing, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
Date: September 16, 2002
______________/s/ Karen E. Dykstra _________________
--------------------
Karen E. Dykstra
Vice President, Finance (Principal Financial Officer)
|
EXHIBIT 3.2
BY-LAWS
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I STOCKHOLDERS 1
Section 1.01. Annual Meetings 1
Section 1.02. Special Meetings 1
Section 1.03. Notice of Meetings; Waiver 1
Section 1.04. Quorum 2
Section 1.05. Voting 2
Section 1.06. Voting by Ballot 2
Section 1.07. Adjournment 2
Section 1.08. Proxies 2
Section 1.09. Organization; Procedure 3
Section 1.10. Inspectors of Elections 3
Section 1.11. Opening and Closing of Polls 4
Section 1.12. Consent of Stockholders in Lieu of Meeting 4
ARTICLE II BOARD OF DIRECTORS 4
Section 2.01. General Powers 4
Section 2.02. Number and Term of Office 4
Section 2.03. Election of Directors 5
Section 2.04. Annual and Regular Meetings 5
Section 2.05. Special Meetings; Notice 5
Section 2.06. Quorum; Voting 5
Section 2.07. Adjournment 5
Section 2.08. Action Without a Meeting 6
Section 2.09. Regulations; Manner of Acting 6
Section 2.10. Action by Telephonic Communications 6
Section 2.11. Resignations 6
Section 2.12. Removal of Directors 6
Section 2.13. Vacancies and Newly Created Directorships 6
Section 2.14. Compensation 7
Section 2.15. Reliance on Accounts and Reports, etc. 7
Section 2.16. Honorary Directors 7
|
ARTICLE III EXECUTIVE COMMITTEE, AUDIT COMMITTEE, |
Section 3.01. How Constituted 7
Section 3.02. Powers; Duties and Responsibilities 8
Section 3.03. Proceedings 9
Section 3.04. Quorum and Manner of Acting 9
Section 3.05. Action by Telephonic Communications 10
Section 3.06. Absent or Disqualified Members 10
Section 3.07. Resignations 10
Section 3.08. Removal 10
Section 3.09. Vacancies 10
ARTICLE IV OFFICERS 10
Section 4.01. Number 10
Section 4.02. Election 11
Section 4.03. Salaries 11
Section 4.04. Removal and Resignation; Vacancies 11
Section 4.05. Authority and Duties of Officers 11
Section 4.06. Chairman 11
Section 4.07. President 11
Section 4.08. Vice Presidents 11
Section 4.09. Secretary 12
Section 4.10. Treasurer 12
Section 4.11. Assistant Secretary and Assistant Treasurers 13
Section 4.12. Security 13
ARTICLE V CAPITAL STOCK 13
Section 5.01. Certificates of Stock, Uncertificated Shares 13
Section 5.02. Signatures; Facsimile 13
Section 5.03. Lost, Stolen or Destroyed Certificates 13
Section 5.04. Transfer of Stock 14
Section 5.05. Record Date 14
Section 5.06. Registered Stockholders 14
Section 5.07. Transfer Agent and Registrar 15
ARTICLE VI INDEMNIFICATION 15
Section 6.01. Nature of Indemnity 15
Section 6.02. Successful Defense 16
Section 6.03. Determination that Indemnification is Proper 16
Section 6.04. Advance Payment of Expenses 16
Section 6.05. Procedure for Indemnification of Directors & Officers16
Section 6.06. Survival; Preservation of Other Rights 17
Section 6.07. Insurance 17
Section 6.08. Severability 17
ARTICLE VII GENERAL PROVISIONS 18
Section 7.01. Dividends 18
Section 7.02. Reserves 18
Section 7.03. Execution of Instruments 18
Section 7.04. Corporate Indebtedness 18
Section 7.05. Fiscal Year 19
Section 7.06. Seal 19
Section 7.07. Books and Records; Inspection 19
ARTICLE VIII AMENDMENT OF BY-LAWS 19
Section 8.01. Amendment 19
ARTICLE IX CONSTRUCTION 20
Section 9.01. Construction 20
Section 1.01. Annual Meetings. The annual meeting of the stockholders
of the Corporation for the election of directors and for the transaction of
such other business as properly may come before such meeting shall be held at
such place, either within or without the State of Delaware, and at such date
and hour, as may be fixed from time to time by resolution of the Board of
Directors and set forth in the notice or waiver of notice of the meeting.
[Sections 211(a), (b).]1
Section 1.02. Special Meetings. Special meetings of the stockholders may be called at any time by the Chief Executive Officer or the Secretary or by the Board of Directors. A special meeting shall be called by the Chief Executive Officer or by the Secretary immediately upon receipt of a written request therefor by stockholders holding in the aggregate not less than one-third in number of the outstanding shares of the Corporation at the time entitled to vote at any meeting of the stockholders. Such special meetings of the stockholders shall be held at such places, within or without the State of Delaware, as shall be specified in the respective notices or waivers of notice thereof. [Section 211(d).]
Section 1.03. Notice of Meetings; Waiver. The Secretary or any Assistant Secretary shall cause written notice of the place, date and hour of each meeting of the stockholders, and, in the case of a special meeting, the purpose or purposes for which such meeting is called, to be given personally or by mail, not less than ten nor more than sixty days prior to the meeting, to each stockholder of record entitled to vote at such meeting. If such notice is mailed, it shall be deemed to have been given to a stockholder when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the record of stockholders of the Corporation, or, if he or she shall have filed with the Secretary of the Corporation a written request that notices to him or her be mailed to some other address, then directed to him or her at such other address. Such further notice shall be given as may be required by law.
No notice of any meeting of stockholders need be given to any stockholder who submits a signed waiver of notice, whether before or after the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be
1 Citations are to the General Corporation Law of the State of Delaware as in effect on January 1, 1996 (the "GCL"). The citations are inserted for reference only, and do not constitute a part of the By-Laws. specified in a written waiver of notice. The attendance of any stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. [Sections 222, 229.]
Section 1.04. Quorum. Except as otherwise required by law or by the Certificate of Incorporation, the presence in person or by proxy of the holders of record of a majority of the shares entitled to vote at a meeting of stockholders shall constitute a quorum for the transaction of business at such meeting. [Section 216.]
Section 1.05. Voting. If, pursuant to Section 5.05 of these By-Laws, a record date has been fixed, every holder of record of shares entitled to vote at a meeting of stockholders shall be entitled to one vote for each share outstanding in his or her name on the books of the Corporation at the close of business on such record date. If no record date has been fixed, then every holder of record of shares entitled to vote at a meeting of stockholders shall be entitled to one vote for each share of stock standing in his or her name on the books of the Corporation at the close of business on the day next preceding the day on which notice of the meeting is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. Except as otherwise required by law or by the Certificate of Incorporation or by these By-Laws, the vote of a majority of the shares represented in person or by proxy at any meeting at which a quorum is present shall be sufficient for the transaction of any business at such meeting. [Sections 212(a), 213, 216.]
Section 1.06. Voting by Ballot. No vote of the stockholders need be taken by written ballot unless demanded by the holders of at least fifteen percent (15%) of the shares represented in person or by proxy at any meeting at which a quorum is present or as otherwise required by law. Any vote which need not be taken by ballot may be conducted in any manner approved by the meeting.
Section 1.07. Adjournment. If a quorum is not present at any meeting of the stockholders, the holders of a majority of the shares present in person or by proxy shall have the power to adjourn any such meeting from time to time until a quorum is present. Notice of any adjourned meeting of the stockholders of the Corporation need not be given if the place, date and hour thereof are announced at the meeting at which the adjournment is taken, provided, however, that if the adjournment is for more than thirty days, or if after the adjournment a new record date for the adjourned meeting is fixed pursuant to Section 5.05 of these By-Laws, a notice of the adjourned meeting, conforming to the requirements of Section 1.03 of these By-Laws, shall be given to each stockholder of record entitled to vote at such meeting. At any adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted on the original date of the meeting. [Section 222(c).]
Section 1.08. Proxies. Any stockholder entitled to vote at any meeting of the stockholders or to express consent to or dissent from corporate action in writing without a meeting may authorize another person or persons to vote at any such meeting and express such consent or dissent for him or her by proxy. Every proxy shall be revocable at the pleasure of the stockholder executing it, except in those cases where applicable law provides that a proxy shall be irrevocable. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by filing another duly executed proxy bearing a later date with the Secretary. [Section 212.]
Section 1.09. Organization; Procedure. At every meeting of stockholders the presiding officer shall be the Chairman or, in the event of his or her absence or should the Chairman in his or her discretion determine not to preside, in the following order of availability, the Chief Executive Officer, the President, or a Vice President, and in the case more than one Vice President shall be present, that Vice President designated by the Board of Directors (or in the absence of any such designation, the most senior Vice President, based on title). In case none of the foregoing officers designated to be the presiding officer shall be present, a presiding officer shall be chosen by the vote of a majority of the shares represented in person or by proxy and entitled to vote at the meeting. The Secretary, or in the event of his or her absence or disability, the Assistant Secretary, if any, or if there be no Assistant Secretary, in the absence of the Secretary, an appointee of the presiding officer, shall act as secretary of the meeting. The order of business and all other matters of procedure at every meeting of stockholders may be determined by such presiding officer.
Section 1.10. Inspectors of Elections. Preceding any meeting of the stockholders, the Board of Directors shall appoint one or more persons to act as Inspectors of Elections, and may designate one or more alternate inspectors. In the event no inspector or alternate is able to act, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of the duties of an inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector shall:
(a) ascertain the number of shares outstanding and the voting power of each;
(b) determine the shares represented at a meeting and the validity of proxies and ballots;
(c) count all votes and ballots;
(d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and
(e) certify his or her determination of the number of shares represented at the meeting, and his or her count of all votes and ballots.
The inspector may appoint or retain other persons or entities to assist in the performance of the duties of inspector. [Sections 231(a), (b).]
Section 1.11. Opening and Closing of Polls. The date and time for the opening and the closing of the polls for each matter to be voted upon at a stockholder meeting shall be announced at the meeting. The inspector of the election shall be prohibited from accepting any ballots, proxies or votes or any revocations thereof or changes thereto after the closing of the polls, unless the Court of Chancery upon application by a stockholder shall determine otherwise. [Section 231(c).]
Section 1.12. Consent of Stockholders in Lieu of Meeting. To the fullest extent permitted by law, whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, such action may be taken without a meeting, without prior notice and without a vote of stockholders, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.
Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered in the manner required by law to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of stockholders to take the action were delivered to the Corporation as provided in this Section 1.12. [Section 228(a), (c), (d).]
Section 2.01. General Powers. Except as may otherwise be provided by law, by the Certificate of Incorporation or by these By-Laws, the property, affairs and business of the Corporation shall be managed by or under the direction of the Board of Directors and the Board of Directors may exercise all the powers of the Corporation. [Section 141(a) .]
Section 2.02. Number and Term of Office. The number of directors constituting
the entire Board of Directors shall be between 9 and 13, which number may be
modified from time to time by resolution of the Board of Directors, but in no
event shall the number of directors be less than three. No person shall be nominated
by the Board of Directors to serve as a director after he or she has passed
his or her 72nd birthday, unless the Nominating/Corporate Governance Committee
of the Board of Directors has voted, on an annual basis, to waive, or continue
to waive, the mandatory retirement age of such person as a director. Each director
(whenever elected) shall hold office until his or her successor has been duly
elected and qualified, or until his or her earlier death, resignation or removal.
[Section 141(b).]
Section 2.03. Election of Directors. Except as otherwise provided in Sections 2.12 and 2.13 of these By-Laws, the directors shall be elected at each annual meeting of the stockholders. If the annual meeting for the election of directors is not held on the date designated therefor, the directors shall cause the meeting to be held as soon thereafter as convenient. At each meeting of the stockholders for the election of directors, provided a quorum is present, the directors shall be elected by a plurality of the votes validly cast in such election. [Sections 211(b), (c), 216.]
Section 2.04. Annual and Regular Meetings. The annual meeting of the Board of Directors for the purpose of electing officers and for the transaction of such other business as may come before the meeting shall be held as soon as possible following adjournment of the annual meeting of the stockholders at the place of such annual meeting of the stockholders. Notice of such annual meeting of the Board of Directors need not be given. The Board of Directors from time to time may by resolution provide for the holding of regular meetings and fix the place (which may be within or without the State of Delaware) and the date and hour or such meetings. Notice of regular meetings need not be given. [Section 141(g).]
Section 2.05. Special Meetings; Notice. Special meetings of the Board of Directors may be called by the Chairman, the Chief Executive Officer, the Secretary or an Assistant Secretary, if any, and, on the written request of any two directors, the Secretary or an Assistant Secretary shall call such meeting. Special meetings shall be held at such place (within or without the State of Delaware), date and hour as may be specified in the respective notices or waivers of notice of such meetings. Special meetings of the Board of Directors may be called on twenty-four hours' notice, if notice is given to each director personally or by telephone or telegram, or on five days' notice, if notice is mailed to each director, addressed to him or her at his or her usual place of business. Notice of any special meeting need not be given to any director who attends such meeting without protesting the lack of notice to him or her, prior to or at the commencement of such meeting, or to any director who submits a signed waiver of notice, whether before or after such meeting, and any business may be transacted thereat. [Sections 141(g), 229.]
Section 2.06. Quorum; Voting. At all meetings of the Board of Directors, the presence of at least one-third of the total authorized number of directors, but not less than two directors, shall constitute a quorum for the transaction of business. Except as otherwise required by law, the Certificate of Incorporation or these By-Laws, the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. [Section 141(b).]
Section 2.07. Adjournment. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting of the Board of Directors to another time or place. No notice need be given of any adjourned meeting unless the time and place of the adjourned meeting are not announced at the time of adjournment, in which case notice conforming to the requirements of Section 2.05 of these By-Laws shall be given to each director.
Section 2.08. Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent thereto in writing, and such writing or writings are filed with the minutes of proceedings of the Board of Directors. [Section 141(f).]
Section 2.09. Regulations; Manner of Acting. To the extent consistent with applicable law, the Certificate of Incorporation and these By-Laws, the Board of Directors may adopt such rules and regulations for the conduct of meetings of the Board of Directors and for the management of the property, affairs and business of the Corporation as the Board of Directors may deem appropriate. The directors shall act only as a Board, and the individual directors shall have no power as such.
Section 2.10. Action by Telephonic Communications. Except as otherwise determined by the Board of Directors, members of the Board of Directors may participate in a meeting of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting. [Section 141(i).]
Section 2.11. Resignations. Any director may resign at any time by delivering a written notice of resignation, signed by such director, to the Chairman or the Chief Executive Officer. Unless otherwise specified therein, such resignation shall take effect upon delivery. [Section 141(b).]
Section 2.12. Removal of Directors. Any director may be removed at any time, either for or without cause, upon the affirmative vote of the holders of a majority of the outstanding shares of stock of the Corporation entitled to vote for the election of such director. Any vacancy in the Board of Directors caused by any such removal may be filled at such meeting by the stockholders entitled to vote for the election of the director so removed. If such stockholders do not fill such vacancy at such meeting (or in the written instrument effecting such removal, if such removal was effected by consent without a meeting), such vacancy may be filled in the manner provided in Section 2.13 of these By-Laws. [Section 141(k).]
Section 2.13. Vacancies and Newly Created Directorships. If any vacancies shall occur in the Board of Directors, by reason of death, resignation, removal or otherwise, or if the authorized number of directors shall be increased, the directors then in office shall continue to act, and such vacancies and newly created directorships may be filled by a majority of the directors then in office, although less than a quorum. A director elected to fill a vacancy or a newly created directorship shall hold office until his or her successor has been elected and qualified or until his or her earlier death, resignation or removal. Any such vacancy or newly created directorship may also be filled at any time by vote of the stockholders. [Section 223.]
Section 2.14. Compensation. Each director, in consideration of his or her service as such, shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at directors' meetings, or both, as the Board of Directors may from time to time determine, together with reimbursement for the reasonable out-of-pocket expenses, if any, incurred by such director in connection with the performance of his or her duties. Each director who shall serve as a member of any Committee designated by the Board of Directors in consideration of serving as such shall be entitled to such additional amount per annum or such fees for attendance at committee meetings, or both, as the Board of Directors may from time to time determine, together with reimbursement for the reasonable out-of-pocket expenses, if any, incurred by such director in the performance of his or her duties. Nothing contained in this Section 2.14 shall preclude any director from serving the Corporation or its subsidiaries in any other capacity and receiving proper compensation. [Section 141(h).]
Section 2.15. Reliance on Accounts and Reports, etc. A director, or a member of any Committee designated by the Board of Directors shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Corporation and upon information, opinions, reports or statements presented to the Corporation by any of the Corporation's officers or employees, or Committees designated by the Board of Directors, or by any other person as to the matters the member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation. [Section 141(e).]
Section 2.16. Honorary Directors. The Board of Directors may, by vote at a regularly held meeting, appoint at its discretion individuals as Honorary Directors to serve for such period of time and with such compensation as shall be fixed by the Board of Directors. Individuals appointed as Honorary Directors shall have the right to attend regularly scheduled Board of Directors meetings but shall not have the right to cast a vote.
Section 3.01. How Constituted. The Board of Directors shall have an Executive Committee, an Audit Committee, a Compensation Committee and a Nominating/Corporate Governance Committee, each such Committee to consist of such number of directors as from time to time may be fixed by the Board of Directors in accordance with this Section 3.01. The Executive Committee shall consist of three or more directors. The Audit Committee, Compensation Committee, and Nominating/Corporate Governance Committee shall each consist of three or more outside directors, each of whom shall satisfy the independence (and, in the case of the Audit Committee, the financial literacy and experience) requirements of Section 10A of the Securities Exchange Act of 1934, the New York Stock Exchange and any other regulatory requirements. The Board of Directors may designate one or more other Committees, each of which shall consist of such number of directors as from time to time may be fixed by the Board of Directors. The Board of Directors may designate one or more directors as alternate members of any Committee, who may replace any absent or disqualified member or members at any meeting of such Committee. Thereafter, members (and alternate members, if any) of each Committee may be designated at the annual meeting of the Board of Directors. Any Committee, other than the Executive Committee, Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee, may be abolished or re-designated from time to time by the Board of Directors. Each member (and each alternate member) of any Committee (whether designated at an annual meeting of the Board of Directors or to fill a vacancy or otherwise) shall hold office until his or her successor shall have been designated or until he or she shall cease to be a director, or until his or her earlier death, resignation or removal. [Section 141(c).]
Section 3.02. Powers; Duties and Responsibilities. During the intervals between the meetings of the Board of Directors, the Executive Committee, except as otherwise provided in this Section 3.02, shall have and may exercise all the powers and authority of the Board of Directors in the management of the property, affairs and business of the Corporation, including the power to declare dividends and to authorize the issuance of stock.
The Audit Committee shall have the power and authority of the Board of Directors to fulfill the Board of Directors' oversight responsibilities with respect to: (a) the Corporation's systems of internal controls regarding finance, accounting, legal compliance and ethical behavior; (b) the Corporation's auditing, accounting and financial reporting processes generally; (c) the Corporation's financial statements and other financial information provided by the Corporation to its stockholders, the public and others; (d) the Corporation's compliance with legal and regulatory requirements; and (e) the performance of the Corporation's internal auditors and independent auditors. The specific powers and responsibilities of the Audit Committee are set forth in its Charter (which is available on the Corporation's website at "adp.com").
The Compensation Committee shall have the power and authority of the Board of Directors to fulfill the Board of Directors' responsibilities in respect to compensation of the Corporation's executives. The specific powers and responsibilities of the Compensation Committee are set forth in its Charter (which is available on the Corporation's website at "adp.com").
The Nominating/Corporate Governance Committee shall have the power and authority of the Board of Directors to ensure: (a) that the Board of Directors shall have the benefit of qualified and experienced Directors; (b) that the Audit, Compensation and Nominating/ Corporate Governance Committees of the Board of Directors shall have the benefit of qualified Directors, each of whom shall satisfy the independence (and, in the case of the Audit Committee, the financial literacy and experience) requirements of Section 10A of the Securities Exchange Act, the New York Stock Exchange and any other regulatory requirements, and (c) that the Corporation shall have in place effective corporate governance policies and procedures. The specific powers of the Nominating/Corporate Governance Committee are set forth in its Charter (which is available on the Corporation's website at "adp.com").
Each Committee shall have and may exercise such powers of the Board of Directors as may be provided by resolution or resolutions of the Board of Directors. Notwithstanding the foregoing, no Committee shall have the power or authority:
(a) to amend the Certificate of Incorporation (except that a Committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the General Corporation Law, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series);
(b) to adopt an agreement of merger or consolidation;
(c) to recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets;
(d) to recommend to the stockholders a dissolution of the Corporation or a revocation of dissolution; or
(e) to amend the By-Laws of the Corporation. [Section 141(c).]
Section 3.03. Proceedings. The Chairman of each Committee shall be designated by the Board of Directors. Each Committee may fix its own rules of procedure and may meet at such place (within or without the State of Delaware), at such time and upon such notice, if any, as it shall determine from time to time or as may be required by the Board of Directors. Each Committee shall keep minutes of its proceedings and shall report such proceedings to the Board of Directors at the meeting of the Board of Directors next following any such proceedings.
Section 3.04. Quorum and Manner of Acting. Except as may be otherwise provided in the resolution creating such Committee, at all meetings of any Committee the presence of members (or alternate members) constituting a majority of the total authorized membership of such Committee shall constitute a quorum for the transaction of business. Notwithstanding the foregoing, the presence of two members (or alternate members) of a Committee that has four authorized members shall constitute a quorum for the transaction of business. The act of the majority of the members present at any meeting at which a quorum is present shall be the act of such Committee. Any action required or permitted to be taken at any meeting of any such Committee may be taken without a meeting, if all members of such Committee shall consent to such action in writing and such writing or writings are filed with the minutes of the proceedings of the Committee. The members of any such Committee shall act only as a Committee, and the individual members of such Committee shall have no power as such. [Section 141(c), (f).]
Section 3.05. Action by Telephonic Communications. Except as otherwise provided by the applicable Committee or by the Board of Directors, members of any Committee may participate in a meeting of such Committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting. [Section 141(i).]
Section 3.06. Absent or Disqualified Members. In the absence or disqualification of a member of any Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another qualified member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. [Section 141(c).]
Section 3.07. Resignations. Any member (and any alternate member) of any Committee may resign at any time by delivering a written notice of resignation, signed by such member, to the Chairman or the Chief Executive Officer. Unless otherwise specified therein, such resignation shall take effect upon delivery.
Section 3.08. Removal. Any member (and any alternate member) of any Committee may be removed from his or her position as a member (or alternate member, as the case may be) of such Committee at any time, either for or without cause, by the Board of Directors.
Section 3.09. Vacancies. If any vacancy shall occur in any Committee, by reason of disqualification, death, resignation, removal or otherwise, the remaining members (and any alternate members) shall continue to act, and any such vacancy may be filled by the Board of Directors.
Section 4.01. Number. The officers of the Corporation shall be a Chairman of the Board, a President, a Secretary, a Treasurer and such other officers as the Board of Directors may appoint, including one or more Vice Presidents and one or more Assistant Secretaries and Assistant Treasurers, who shall exercise such powers and perform such duties and have such titles as shall be determined from time to time by the Board of Directors or as otherwise provided in the By-Laws. The Board of Directors shall designate an officer to be the Chief Executive Officer of the Corporation and may designate any officer to be the Chief Operating Officer or Chief Financial Officer of the Corporation. Any number of offices may be held by the same person unless the Certificate of Incorporation or these By-Laws provide otherwise. [Section 142 (a) , (b).]
Section 4.02. Election. Unless otherwise determined by the Board of Directors, the officers of the Corporation shall be elected by the Board of Directors at the annual meeting of the Board of Directors, and shall be elected to hold office until the next succeeding annual meeting of the Board of Directors. In the event of the failure to elect officers at such annual meeting, officers may be elected at any regular or special meeting of the Board of Directors. Each officer shall hold office until his or her successor has been elected and qualified, or until his or her earlier death, resignation or removal. [Section 142(b).]
Section 4.03. Salaries. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors, the Chief Executive Officer or such other persons to whom the authority to fix such salaries shall be delegated by the Board of Directors or the Chief Executive Officer. No officer shall be prevented from receiving a salary or other compensation by reason of the fact that the officer is also a director of the Corporation.
Section 4.04. Removal and Resignation; Vacancies. Any officer may be removed for or without cause at any time by the Board of Directors or by the Chief Executive Officer. Any officer may resign at any time by delivering a written notice of resignation, signed by such officer, to the Board of Directors or the Chief Executive Officer. Unless otherwise specified therein, such resignation shall take effect upon delivery. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, shall be filled by the Board of Directors or by the Chief Executive Officer. [Section 142(b), (e).]
Section 4.05. Authority and Duties of Officers. The officers of the Corporation shall have such authority and shall exercise such powers and perform such duties as may be specified in these By-Laws, except that in any event each officer shall exercise such powers and perform such duties as may be required by law. [Section 142(a).]
Section 4.06. Chairman. The Chairman shall preside at all meetings of the stockholders and the Board of Directors and shall exercise such powers and perform such other duties as shall be determined from time to time by the Board of Directors.
Section 4.07. President. The President shall have general supervision over the business of the Corporation, subject, however, to the control of the Board of Directors, any duly authorized Committee designated by the Board of Directors and the Chief Executive Officer (if not the President). The President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts and other instruments except in cases in which the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation or shall be required by statute otherwise to be signed or executed and, in general, the President shall perform all duties incident to the office of President of a corporation and such other duties as may from time to time be assigned to the President by the Board of Directors and the Chief Executive Officer (if not the President).
Section 4.08. Vice Presidents. At the request of the Chief Executive Officer, or, in the Chief Executive Officer's absence, at the request of the Board of Directors, the Vice Presidents shall (in such order as may be designated by the Chief Executive Officer or the Board of Directors or, in the absence of any such designation, the most senior Vice President based on title) perform all of the duties of the President and, in so performing, shall have all the powers of, and be subject to all restrictions upon, the President. Any Vice President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation, or shall be required by statute otherwise to be signed or executed, and each Vice President shall perform such other duties as from time to time may be assigned to such Vice President by the Board of Directors or by the Chief Executive Officer.
Section 4.09. Secretary. The Secretary shall attend all meetings of the stockholders and the Board of Directors and shall record all the proceedings of such meetings in a book or books to be kept for that purpose, and shall perform like duties for the Committees of the Board of Directors, when required. The Secretary shall give, or cause to be given, all notices to be given in accordance with these By-Laws or as required by law and shall perform such other duties as may be prescribed by the Board of Directors or by the Chief Executive Officer. The Secretary or an Assistant Secretary, if any, may attest all instruments signed by the Chairman, the Chief Executive Officer, the President, any Vice President or any other authorized officers of the Corporation. The Secretary shall have charge of the stock books and ledgers of the Corporation and all the books, records and papers of the Corporation relating to its organization and management, shall see that the reports, statements and other documents required by statute are properly kept and filed and, in general, shall perform all duties incident to the office of Secretary of a corporation and such other duties as may from time to time be assigned to the Secretary by the Board of Directors or by the Chief Executive Officer.
Section 4.10. Treasurer. The Treasurer shall have charge and custody of, and be responsible for, all funds, securities and notes of the Corporation; receive and give receipts for moneys due and payable to the Corporation from any sources whatsoever; deposit all such moneys and valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors, the Chief Executive Officer, the Treasurer or by any person to whom such power to designate is delegated by the Board of Directors, the Chief Executive Officer or the Treasurer; against proper vouchers, cause such funds to be disbursed by checks or drafts on the authorized depositories of the Corporation signed in such manner as shall be determined by the Board of Directors or the Chief Executive Officer and be responsible for the accuracy of the amounts of all moneys so disbursed; regularly enter or cause to be entered in books or other records maintained for the purpose full and adequate account of all moneys received or paid for the account of the Corporation; have the right to require from time to time reports or statements giving such information as the Treasurer may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same; render to the Chief Executive Officer or the Board of Directors, whenever the Chief Executive Officer or the Board of Directors shall require the Treasurer so to do, an account of the financial condition of the Corporation and of all financial transactions of the Corporation; exhibit at all reasonable times the records and books of account to any of the directors upon application at the office of the Corporation where such records and books are kept; disburse the funds of the Corporation as ordered by the Board of Directors and the Chief Executive Officer; and, in general, perform all duties incident to the office of Treasurer of a corporation and such other duties as may from time to time be assigned to the Treasurer by the Board of Directors or the Chief Executive Officer.
Section 4.11. Assistant Secretaries and Assistant Treasurers. Assistant Secretaries and Assistant Treasurers shall perform such duties as shall be assigned to them by the Secretary or by the Treasurer, respectively, or by the Board of Directors or by the Chief Executive Officer.
Section 4.12. Security. The Board of Directors may require any officer, agent or employee of the Corporation to provide security for the faithful performance of his or her duties, in such amount and of such character as may be determined from time to time by the Board of Directors. [Section 142(c).]
Section 5.01. Certificates of Stock; Uncertificated Shares. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the stock of the Corporation shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until each certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock in the Corporation represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Corporation, by the Chairman, the President or a Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, representing the number of shares registered in certificate form. Such certificate shall be in such form as the Board of Directors may determine, to the extent consistent with applicable law, the Certificate of Incorporation and these By-Laws. [Section 158.]
Section 5.02. Signatures; Facsimile. All of such signatures on the certificate referred to in Section 5.01 of these By-Laws may be a facsimile, engraved or printed, to the extent permitted by law. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. [Section 158.]
Section 5.03. Lost, Stolen or Destroyed Certificates. The Board of Directors may direct that a new certificate be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon delivery to the Board of Directors of proof satisfactory to the Board of Directors of such loss, theft or destruction. The Board of Directors may require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise such loss, theft or destruction in such manner as the Board of Directors may require and to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. [Section 167.]
Section 5.04. Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Subject to the provisions of the Certificate of Incorporation and these By-Laws, the Board of Directors may prescribe such additional rules and regulations as it may deem appropriate relating to the issue, transfer and registration of shares of the Corporation. [Section 151(f).]
Section 5.05. Record Date. In order to determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted by the Board of Directors, and which shall not be more than sixty nor less than ten days before the date of such meeting. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights of the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. [Section 213.]
Section 5.06. Registered Stockholders. Prior to due surrender of a certificate for registration of transfer, the Corporation may treat the registered owner as the person exclusively entitled to receive dividends and other distributions, to vote, to receive notice and otherwise to exercise all the rights and powers of the owner of the shares represented by such certificate, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in such shares on the part of any other person, whether or not the Corporation shall have notice of such claim or interests. Whenever any transfer of shares shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer if, when the certificates are presented to the Corporation for transfer or uncertificated shares are requested to be transferred, both the transferor and transferee request the Corporation to do so. [Section 159.]
Section 5.07. Transfer Agent and Registrar. The Board of Directors may appoint one or more transfer agents and one or more registrars, and may require all certificates representing shares to bear the signature of any such transfer agents or registrars.
Section 6.01. Nature of Indemnity. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer, of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, and may indemnify any person who was or is a party or is threatened to be made a party to such an action, suit or proceeding by reason of the fact that he or she is or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, if he or she (x) acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation and, in the case of any such employee or agent, in a manner he or she reasonably believed to be not in violation of any policies or directives of the Corporation, and (y) with respect to any criminal action or proceeding had no reasonable cause to believe his or her conduct was unlawful; except that in the case of an action or suit by or in the right of the Corporation to procure a judgment in its favor (i) such indemnification shall be limited to expenses (including attorneys' fees) actually and reasonably incurred by such person in the defense or settlement of such action or suit, and (ii) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. The indemnification under this Section 6.01 shall apply to all directors and officers of the Corporation who sit on the boards of directors of non-profit corporations in keeping with the Corporation's philosophy.
The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 6.02. Successful Defense. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 6.01 of these By-Laws or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith.
Section 6.03. Determination That Indemnification Is Proper. Any indemnification of a director or officer of the Corporation under Section 6.01 of these By-Laws (unless ordered by a court) shall be made by the Corporation unless a determination is made that indemnification of the director or officer is not proper in the circumstances because he or she has not met the applicable standard of conduct set forth in Section 6.01 of these By-Laws. Any indemnification of an employee or agent of the Corporation under Section 6.01 of these By-Laws (unless ordered by a court) may be made by the Corporation upon a determination that indemnification of the employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 6.01 of these By-Laws. Any such determination shall be made (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (iii) by the stockholders.
Section 6.04. Advance Payment of Expenses. Expenses (including attorneys' fees) incurred by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Article. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. The Board of Directors may authorize the Corporation's counsel to represent such director, officer, employee or agent in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding.
Section 6.05. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the Corporation under Sections
6.01 and 6.02 of these By-Laws, or advance of costs, charges and expenses to
a director or officer under Section 6.04 of these By-Laws, shall be made promptly,
and in any event within thirty days, upon the written request of the director
or officer. If a determination by the Corporation that the director or officer
is entitled to indemnification pursuant to this Article is required, and the
Corporation fails to respond within sixty days to a written request for indemnity,
the Corporation shall be deemed to have approved such request. If the Corporation
denies a written request for indemnity or advancement of expenses, in whole
or in part, or if payment in full pursuant to such request is not made within
thirty days, the right to indemnification or advances as granted by this Article
shall be enforceable by the director or officer in any court of competent jurisdiction.
Such person's costs and expenses incurred in connection with successfully establishing
his right to indemnification, in whole or in part, in any such action shall
also be indemnified by the Corporation. It shall be a defense to any such action
(other than an action brought to enforce a claim for the advance of costs, charges
and expenses under Section 6.04 of these By-Laws where the required undertaking,
if any, has been received by or tendered to the Corporation) that the claimant
has not met the standard of conduct set forth in Section 6.01 of these By-Laws,
but the burden of proving such defense shall be on the Corporation. Neither
the failure of the Corporation (including its Board of Directors, its independent
legal counsel, and its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in Section 6.01 of these By-Laws, nor the fact that there has been an
actual determination by the Corporation (including its Board of Directors, its
independent legal counsel, and its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
Section 6.06. Survival; Preservation of Other Rights. The foregoing indemnification provisions shall be deemed to be a contract between the Corporation and each director, officer, employee and agent who serves in any such capacity at any time while these provisions as well as the relevant provisions of the General Corporation Law are in effect and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a "contract right" may not be modified retroactively without the consent of such director, officer, employee or agent.
The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
Section 6.07. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her or on his or her behalf in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article, provided that such insurance is available on acceptable terms, which determination shall be made by a vote of a majority of the entire Board of Directors.
Section 6.08. Severability. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director or officer and may indemnify each employee or agent of the Corporation as to costs, charges and expenses (including attorneys' fees) judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law.