To the Stockholders:
PLEASE TAKE NOTICE that the 1996 Annual Meeting of Stockholders
of AUTOMATIC DATA PROCESSING, INC. (the "Company") will
be held at 10:00 a.m., Tuesday, November 12, 1996 at the Company's
corporate headquarters, ONE ADP BOULEVARD, ROSELAND, NEW JERSEY
07068, for the following purposes:
1. To elect a Board of Directors (Proposal 1);
2. To ratify the appointment of Deloitte & Touche
LLP to serve as the Company's independent certified public accountants
for the fiscal year which began on July 1, 1996 (Proposal 2);
and
3. To transact such other business as may properly come
before the meeting or any adjournment or adjournments thereof.
Only the holders of Common Stock of record at the close
of business on September 13, 1996 are entitled to vote at the
meeting. Each stockholder is entitled to one vote for each share
of Common Stock held on the record date.
By order of the Board of Directors
James B. Benson
Secretary
September 23, 1996
Roseland, New Jersey
The presence in person and/or the representation by
proxy of the holders of a majority of the issued and outstanding
shares of stock entitled to vote is necessary and sufficient to
constitute a quorum. Accordingly, if you do not expect to be
present at the meeting, please execute the accompanying proxy
and return it promptly in the enclosed envelope, which requires
no postage if mailed in the United States, so that your shares
of stock may be represented at the meeting.
The accompanying proxy is being solicited by the Board
of Directors of the Company for use at the forthcoming Annual
Meeting of Stockholders. Each stockholder giving such a proxy
has the power to revoke the same at any time before it is voted
by so notifying the Secretary of the Company in writing. All
expenses in connection with the solicitation will be borne by
the Company. This proxy statement and the accompanying proxy
are being mailed to the stockholders on or about September 23,
1996.
The Company has one class of securities outstanding and
entitled to vote at the Annual Meeting of Stockholders, its Common
Stock, par value $.10 per share. At the close of business on
September 13, 1996, the record date for determination of stockholders
entitled to notice of and to vote at the meeting, the Company
had issued and outstanding 290,038,815 shares of Common Stock
(excluding 24,240,573 treasury shares not entitled to vote).
Each outstanding share of Common Stock is entitled to one vote
with respect to each matter to be voted on at the meeting.
The representation in person or by proxy of a majority
of the shares entitled to vote shall constitute a quorum at the
Annual Meeting of Stockholders. Directors are elected by a plurality
of the affirmative votes cast. The affirmative vote of the holders
of a majority of the shares cast is required to ratify the appointment
of Deloitte & Touche LLP as the Company's independent certified
public accountants. Under the Company's Restated Certificate
of Incorporation and By-laws and under Delaware law, abstentions
and "non-votes" are counted as present in determining
whether the quorum requirement is satisfied. With regard to the
election of Directors, votes may be cast in favor or withheld.
Votes that are withheld will be excluded entirely from the vote
and will have no effect. Abstentions may be specified on any
proposal (other than the election of Directors) and will have
the effect of a negative vote because each proposal (other than
the election of Directors) requires the affirmative vote of a
majority of the shares present in person or by proxy and entitled
to vote. Under applicable Delaware law, a non-vote will have
no effect on the outcome of the election of Directors or any other
proposal. A non-vote occurs when a nominee holding shares for
a beneficial owner votes on one proposal, but does not vote on
another proposal because the nominee does not have discretionary
voting power and has not received instructions from the beneficial
owner.
The Company's Board of Directors has adopted a policy
whereby stockholders' proxies are received by the Company's independent
tabulators and the vote is certified by independent inspectors
of election. Proxies and ballots that identify the vote of individual
stockholders will be kept confidential from the Company's management
and directors, except as necessary to meet legal requirements,
in cases where stockholders request disclosure, or in a contested
election.
Properly executed proxies will be voted as marked, and
if not marked, will be voted in favor of the election of the persons
named below (each of whom is now a director) as directors to serve
until the next Annual Meeting of Stockholders and until their
successors are duly elected and qualified. If any nominee does
not remain a candidate at the time of the meeting (a situation
which management does not anticipate), proxies solicited hereunder
will be voted in favor of those nominees who do remain as candidates
and may be voted for substitute nominees designated by the Board
of Directors.
| Name | |||
| Gary C. Butler | Group President of the Employer Services Group of the Company (1) | ||
| Joseph A. Califano, Jr. | Chairman of the Board and President, National Center on Addiction and Substance Abuse at Columbia University (2) | ||
| Leon G. Cooperman | Chairman and Chief Executive Officer, Omega Advisors, Inc., an investment partnership (3) | ||
| George H. Heilmeier | President and Chief Executive Officer of Bellcore (Bell Communication Research), a research and engineering consortium (4) | ||
| Ann Dibble Jordan | Consultant (5) | ||
| Harvey M. Krueger | Senior Managing Director of Lehman Brothers, investment bankers (6) | ||
| Charles P. Lazarus | Chairman of the Board of Toys "R" Us, Inc., a toy specialty retail chain (7) | ||
| Frederic V. Malek | Chairman, Thayer Capital Partners, a merchant banking firm (8) | ||
| Henry Taub | Chairman of the Executive Committee of the Board (9) | ||
| Laurence A. Tisch | Co-Chairman and Co-Chief Executive Officer of Loews Corporation, which is engaged in the consumer products, hotel and insurance businesses (10) |
| Name | |||
| Arthur F. Weinbach | President and Chief Executive Officer of the Company (11) | ||
| Josh S. Weston | Chairman of the Board of the Company (12) |
__________________
(1) Mr. Butler was elected director of the Company,
effective May 23, 1996, by action of the Board of Directors.
Mr. Butler has held the indicated position since January 1995.
Prior thereto, he had been Group President of the Dealer Services
Group of the Company for more than five years.
(2) Mr. Califano was a senior partner in the Washington,
D.C. office of Dewey Ballantine from 1983 through 1992. He is
also a director of Authentic Fitness Corporation, Chrysler Corporation,
K Mart Corporation, New York/New England Telephone Cos.,
Travelers Group, Warnaco Inc. and Health Plan Services, Inc.
(3) Mr. Cooperman was Chairman and Chief Executive Officer
of Goldman Sachs Asset Management from 1989 until July 1991, and
is a limited partner of Goldman, Sachs & Co. Prior to that
time, Mr. Cooperman spent 22 years in Goldman Sachs' Investment
Research Department, in which he served as partnerincharge,
cochairman of the Investment Policy Committee and chairman
of the Stock Selection Committee.
(4) Dr. Heilmeier has been President and Chief Executive
Officer of Bellcore (Bell Communication Research) since March
1991. Mr. Heilmeier is also a director of Compaq Computer Corporation,
The MITRE Corporation and TRW, Inc.
(5) Ms. Jordan is the former Director, Social Services
Department, Chicago Lying-In Hospital, University of Chicago Medical
Center, a position she assumed in 1970. She is also a director
of Hechinger Company, Johnson & Johnson Corporation, Salant
Corporation and The Travelers, Inc.
(6) Mr. Krueger has been a Senior Managing Director
of Lehman Brothers and its predecessor companies for more than
the past five years. He is also a director of Chaus, Inc., Club
Med Inc., IVAX Corporation and R.G. Barry Corporation.
(7) Mr. Lazarus has been Chairman of the Board of Toys
"R" Us, Inc. for more than the past five years. He
is also a director of Loral Corporation.
(8) Mr. Malek has been Chairman of Thayer Capital Partners
since 1992. During 1992 he was Campaign Manager, Bush-Quayle
'92. Prior to that time, he was ViceChairman of Northwest
Airlines, Inc. from 1990 until December 1991, and was President
of Northwest Airlines from 1989 to 1990. Mr. Malek is also
a director of FPL Group Incorporated, National Education Corporation,
American Management Systems Corp., ICF International, Inc., Manor
Care Corp., Northwest Airlines, Inc., INTRAV, Inc. and various
Paine Webber mutual funds.
(9) Mr. Taub became Honorary Chairman of the Company's
Board of Directors in 1986 and has been Chairman of the Executive
Committee since 1983. He is also a director of Hasbro, Inc. and
Rite Aid Corp.
(10) Mr. Tisch has been Co-Chairman and Co-Chief Executive
Officer of Loews Corporation for more than the past five years.
He is also a director of Bulova Corporation, Petrie Stores Corp.,
Federated Department Stores, Inc., CNA Financial Corporation and
Loews Corporation.
(11) Mr. Weinbach became President and Chief Executive
Officer of the Company in August 1996, having served as President
and Chief Operating Officer since January 1994. Prior to that
time, he had served as Executive Vice President since August 1992,
and had, prior thereto, been Senior Vice President, Administration
and Finance, for more than the past five years. He is also a
director of Decision One Corp.
(12) Mr. Weston has been Chairman of the Board of the
Company for more than the past five years. Prior to August 1996,
he served as Chairman of the Board and Chief Executive Officer
of the Company for more than the past five years. He is also
a director of Public Service Enterprise Group, Shared Medical
Systems Corporation, Vanstar Corporation and Olsten Corp.
Directors' Meetings, Committees and Fees
During the last fiscal year five meetings of the Board
of Directors were held. All directors attended at least 75%,
in the aggregate, of the meetings of the Board of Directors and
the committees of which they were members.
The Company has a standing Audit Committee composed of
Messrs. Califano, Cooperman and Krueger, and Ms. Jordan. Mr.
Krueger is the Chairman. The principal functions of the Audit
Committee are to (i) make recommendations to the full Board of
Directors concerning the appointment of independent auditors,
(ii) review the scope of the audit and related fees, (iii) review
the Company's accounting principles, policies and reporting practices
with the independent and internal auditors and management, (iv)
discuss with the independent auditors the results of their audit
and determine what action, if any, is required with respect to
the Company's internal controls and (v) consider other audit and
nonaudit matters from time to time as requested by the full
Board of Directors. The Audit Committee met four times during
fiscal 1996.
The Company has a Compensation Committee composed of Messrs.
Lazarus, Malek and Tisch. Mr. Malek is the Chairman. The purpose
of the Compensation Committee is to develop guidelines and review
the compensation and performance of officers of the Company and
other Company associates, to review and approve criteria for granting
bonuses and options to officers of the Company, and to develop
plans for managerial succession. The Compensation Committee met
four times in fiscal 1996.
The Company has an Executive Committee composed of Messrs.
Krueger, Malek, Taub, Weston and, since August 1, 1996, Weinbach.
Mr. Taub is the Chairman. The purpose of the Executive Committee
is to act in the absence of the Board of Directors. The Executive
Committee met twice during fiscal 1996.
The Company does not have a Nominating Committee or any
committee performing nominating or similar functions.
Nonemployee directors are paid an annual retainer
of $25,000, plus $1,000 for each Board of Directors meeting attended.
In addition, nonemployee directors are paid $750 for each
committee meeting attended, except for the chairman of such committee,
who is paid $1,000 for each meeting he attends, and except that
each nonemployee member of the Executive Committee is paid
$1,000 for each meeting he attends. Nonemployee directors
may elect to defer payment of the above amounts. There are no
fees paid to employee directors or other fee arrangements provided
by the Company.
The nonemployee directors of the Company are entitled
to participate in the 1989 NonEmployee Director Stock Option
Plan (the "Directors' Plan") pursuant to which options
for 5,000 shares of Common Stock will automatically be granted
to persons who become non-employee directors at any time after
the adoption of the Directors' Plan. In addition, each nonemployee
director will be granted an additional option for 5,000 shares
on the first business day after each fifth anniversary of the
date of the initial grant to each such nonemployee director,
provided that he or she is then still serving in such capacity.
The Directors' Plan was adopted on November 2, 1989 and
will remain in effect until terminated by action of the Board
of Directors. All options have been and will be granted at the
fair market value of the Common Stock, determined on the basis
of the closing price of the Common Stock in consolidated trading
on the date of grant, as reported in The Wall Street Journal.
Twenty percent of the options granted under the Directors' Plan
become exercisable on the first anniversary of the date such options
were granted, and twenty percent become exercisable on each successive
anniversary date until all such options are exercisable; provided
that options become exercisable only if the director is then still
serving in such capacity, unless certain specified events occur
such as the death, disability or retirement of a director, in
which case the options shall immediately vest and become fully
exercisable. All options granted under the Directors' Plan have
a term of ten years. Under the Directors' Plan, options for 20,000
shares at an exercise price of $11.46 per share and options for
10,000 shares at an exercise price of $28.72 per share have been
granted to each of Messrs. Califano, Krueger, Lazarus, Malek and
Tisch; Mr. Cooperman has been granted an option for 20,000 shares
at an exercise price of $19.34; Ms. Jordan has been granted an
option for 10,000 shares at an exercise price of $26.15 per share;
and Mr. Heilmeier has been granted an option for 10,000 shares
at an exercise price of $29.38 per share. Depending upon the
date of grant, the foregoing option grants (all of which were
originally grants for 5,000 shares) reflect the adjustments caused
by two 2 for 1 stock splits.
In addition, a non-employee director who chooses to retire
after 20 years of service in such capacity and having attained
the age of 70 will receive a pension of $25,000 per year for the
remainder of his or her life. If a non-employee director chooses
to retire after having attained the age of 65 with 15 years of
service, he or she will receive a pension of $12,500 per year.
Security Ownership of Certain Beneficial Owners and Managers
The following table contains information as of August
26, 1996 with respect to the beneficial ownership of Common Stock
of the Company by each director and nominee for director of the
Company, by each of the five most highly compensated executive
officers of the Company and by all directors and executive officers
of the Company as a group (including the named individuals).
Unless otherwise noted in the footnotes following the table, the
persons as to whom the information is given had sole voting and
investment power over the shares of Common Stock shown as beneficially
owned. To the knowledge of the management of the Company, no
person beneficially owned as of August 26, 1996 more than 5% of
the outstanding shares of the Company's Common Stock.
| Name | Beneficially Owned (1) | |
| Gary C. Butler | ||
| Joseph A. Califano, Jr. | ||
| Robert J. Casale | ||
| Leon G. Cooperman | ||
| George H. Heilmeier | ||
| Ann Dibble Jordan |
| Name | Beneficially Owned (1) | |
| Harvey M. Krueger | ||
| Charles P. Lazarus | ||
| Peter M. Leger | ||
| Frederic V. Malek (2) | ||
| Henry Taub (3) | ||
| Laurence A. Tisch | ||
| Arthur F. Weinbach | ||
| Josh S. Weston (4) | ||
| Directors and Executive Officers as a group (20 persons, including those named above) (5) |
* Indicates less than one percent.
(1) Includes shares that may be acquired upon the exercise
of options granted by the Company that are exercisable prior to
October 25, 1996. The shares beneficially owned include 20,000,
22,000, 130,000, 15,000, 2,000, 22,000, 22,000, 33,600, 12,000,
316,000, 610,500 and 6,000 shares subject to such options granted
to Messrs. Butler, Califano, Casale, Cooperman, Heilmeier, Krueger,
Lazarus, Leger, Malek, Weinbach and Weston and Ms. Jordan, respectively,
and 1,411,414 shares subject to such options granted to the Directors
and Executive Officers as a group.
(2) In addition, members of Mr. Malek's immediate family
were potential beneficiaries of charitable trusts or owned outright
an aggregate of 1,600 shares of Common Stock of the Company.
(3) Members of Mr. Taub's immediate family were potential
beneficiaries of charitable trusts or owned outright an aggregate
of 159,021 shares of Common Stock of the Company, and a charitable
foundation of which Mr. Taub is an officer owned an aggregate
of 7,864 shares of Common Stock of the Company.
(4) In addition, Mr. Weston's daughter owned 400 shares
of Common Stock of the Company.
(5) Members of the immediate families of non-director
officers of the Company owned 1,400 shares of Common Stock of
the Company.
Stockholder Approval Required
Directors shall be elected by a plurality of the affirmative
votes cast at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS.
The following sections of this proxy statement cover the
components of the total compensation of the five most highly compensated
executive officers of the Company. These sections include: (i)
a series of tables covering annual and long-term compensation;
(ii) a pension plan table summarizing the annual benefits payable
under the Company's defined benefit retirement plans; (iii) a
report by the Compensation Committee of the Board of Directors
describing the Company's compensation policies for fiscal 1996
for its executive officers and the rationale upon which its chief
executive officer's compensation for fiscal 1996 was based; and
(iv) a performance graph comparing the Company's total stockholder
return to the S&P 500 and the S&P Computer Software Services
Indices over a five year period.
Summary Compensation Table
The following table summarizes the compensation of
the Company's chief executive officer and the four other most
highly compensated executive officers for services in all capacities
to the Company for the three years ended June 30, 1996.
| Name and Principal Position | ||||||||
| Josh S. Weston | ||||||||
| Chairman and Chief | ||||||||
| Executive Officer | ||||||||
| Arthur F. Weinbach | ||||||||
| President and Chief | ||||||||
| Operating Officer | ||||||||
| Gary C. Butler | ||||||||
| Group President | ||||||||
| Robert J. Casale | ||||||||
| Group President | ||||||||
| Peter M. Leger | ||||||||
| Division President | ||||||||
(1) None of the named executive officers received any perquisites
or other personal benefits of an amount, or any other annual compensation
of a type, required to be reported by the Securities and Exchange
Commission pursuant to applicable rules and regulations.
(2) The dollar values shown in the Restricted Stock Awards column
are based on the closing market price of the Company's Common
Stock on the date the restricted shares were granted. Restricted
shares may not be transferred or pledged, but such Company-imposed
restrictions lapse with the passage of time (over periods of up
to six years) and continued employment with the Company.
As of June 30, 1996, the aggregate number of shares of
restricted stock held by a named executive officer and the aggregate
fair market value of such shares (calculated by multiplying the
aggregate number of shares held by such a named executive officer
by $38 5/8, the closing price on the New York Stock Exchange of
the Company's Common Stock on June 30, 1996) was: Mr. Weston,
22,000 shares ($849,750); Mr. Weinbach, 37,400 shares ($1,444,575);
Mr. Casale, 32,400 shares ($1,251,450); Mr. Butler, 39,900 shares
($1,541,137); and Mr. Leger, 6,500 shares ($251,062).
The restricted stock awards to the named executive officers
reported in the table that vest, in whole or in part, in under
three years from the date of grant, together with their vesting
schedule, are as follows:
(i) Mr. Weston received a grant of 44,000 restricted
shares in fiscal 1994, of which 22,000 vested in fiscal 1995,
and 22,000 shares will vest in 1997, pursuant to the terms of
the 1994 Executive Incentive Compensation Plan based upon the
achievement by the Company of certain earnings per share objectives;
(ii) Mr. Weinbach received a grant of 17,000 restricted
shares in fiscal 1994, of which 1,000 shares vested in fiscal
1995 and 1996, and 1,000 shares will vest in each of fiscal 1997
and 1998 and 13,000 shares will vest in fiscal 1999;
(iii) Mr. Butler received a grant of 13,000 restricted
shares in fiscal 1994, of which 1,000 shares vested in fiscal
1995 and 1996, 1,000 will vest in fiscal 1997 and 1998 and 9,000
shares will vest in fiscal 1999, and a grant of 14,200 restricted
shares in fiscal 1996, 1,300 of which vested in fiscal 1996 and
1,300 will vest in each of fiscal 1997 through 1999 and 9,000
will vest in fiscal 2000;
(iv) Mr. Casale received a grant of 14,800 restricted
shares in fiscal 1996, of which 800 shares will vest in fiscal
1997, 1,600 will vest in fiscal 1998 and 1999, 800 will vest in
fiscal 2000 and 10,000 will vest in fiscal 2001.
(v) Mr. Leger received a grant of 4,000 restricted shares
in fiscal 1995, of which 500 vested in fiscal 1996, 500 will vest
in each of fiscal 1997 and 1998, 1,500 will vest in fiscal 1999
and 1,000 will vest in fiscal 2000.
Dividends are paid on restricted stock at the same rate
as other outstanding shares of the Company's Common Stock. In
the event of a change of control of the Company, the unvested
portion of the restricted stock of Messrs. Weinbach, Casale and
Butler will be subject to limited accelerated vesting.
(3) The Company does not award Stock Appreciation Rights (SARS).
(4) For the year ended June 30, 1996, consists of the sum of
(i) contributions to the Company's Retirement and Savings Plan
(401(k)) in the following amounts: Mr. Weston, $5,572; Mr. Weinbach,
$4,465; Mr. Casale, $3,936; Mr. Butler, $5,435; and
Mr. Leger, $4,265, and (ii) compensatory split-dollar insurance
premiums (with a statistically calculated economic benefit to
the executive determined by Phoenix Home Life Insurance Company
for W-2 income purposes) in the following amounts: Mr. Weston,
$5,428; Mr. Weinbach, $1,396; Mr. Casale, $1,443; and
Mr. Butler, $651. In fiscal 1995, $60,175 of relocation
benefits were included for Mr. Butler.
Stock Option Plans
The Company has in effect a 1981 Key Employees' Stock
Option Plan (the "1981 Plan") and a 1990 Key Employees'
Stock Option Plan (the "1990 Plan"). The 1981 Plan
and the 1990 Plan collectively are referred to as the "Option
Plans". Officers and key employees are eligible to participate
in the Option Plans, which permit the issuance, in addition to
nonqualified options, of "incentive stock options"
("ISOs") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The
Company has ceased granting options under the 1981 Plan, but outstanding
options under the 1981 Plan will remain valid. In the event of
a change in control of the Company, the unvested portion of the
stock options of Messrs. Weinbach, Casale and Butler will be subject
to limited accelerated vesting.
The Option Plans are administered by the Compensation
Committee of the Board of Directors. The Committee has the authority
to determine the employees to whom options will be granted and,
subject to the Option Plans, the terms and amount of options granted.
ISOs expire no more than ten years from their date of
grant, with an exercise price equal to 100% of the fair market
value on the date of grant. Nonqualified options may expire
as much as 12 years after the date of grant, but the exercise
price need not be equal to 100% of the fair market value on the
grant date.
An optionee has no rights as a stockholder with respect
to any shares covered by his options until the date of issuance
of a stock certificate to him for such shares. During the life
of the optionee, the option is exercisable only by him. No option
is exercisable more than 15 days after termination of employment,
or (if termination is due to the death of an optionee) more than
six months after the appointment and qualification of an executor
or administrator of the deceased optionee's estate or 12 months
after the death of the optionee, whichever occurs earlier.
The following table sets forth certain information concerning
stock option grants to the named executive officers during the
fiscal year ended June 30, 1996.
| Name | |||||
| Josh S. Weston | |||||
| Arthur F. Weinbach | |||||
| Gary C. Butler | |||||
| Robert J. Casale | |||||
| Peter M. Leger | |||||
(1) All options were granted pursuant to the 1990 Plan. The
options were granted at an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant. The
options were granted for terms of ten years, and vest during periods
from four to six years subsequent to the date of grant.
(2) The grant date values were calculated on the basis of the
Black-Scholes option pricing model. Options were assumed to be
exercised seven years after the date of grant, based on historical
experience. A risk-free interest rate of 6.75%, stock price volatility
of 19% and the dividend yield of 1% were used in the calculation
for the option grant to Mr. Butler. For the grant to Mr.
Leger the risk-free interest rate was 6.7%, the stock price volatility
was 17% and the dividend yield was 1%. A discount of 14% was
applied to the calculated value to reflect the risk of forfeiture
during the option term. The actual value of the options will
depend on the market value of the Company's Common Stock on the
dates the options are exercised. No realization of value from
the options is possible without an increase in the price of the
Company's Common Stock, which would benefit all stockholders commensurately.
The following table sets forth certain information concerning
option exercises during the last fiscal year by the named executive
officers and unexercised options held by such officers at the
end of the last fiscal year.
| Name | ||||||
| Josh S. Weston | ||||||
| Arthur F. Weinbach | ||||||
| Gary C. Butler | ||||||
| Robert J. Casale | ||||||
| Peter M. Leger | ||||||
Defined Benefit Plans
The following table shows the estimated annual retirement
benefits payable under the Company's retirement program, consisting
of the Retirement Capital Accumulation Plan (the "Pension
Plan") and the Supplemental Officers' Retirement Plan (the
"Supplemental Retirement Plan"), to persons in specified
average compensation and credited service classifications, assuming
retirement at age 65.
Compensation covered by the Pension Plan is limited to
January 1 base salary up to the current compensation limit in
effect for the plan year. Compensation covered under the Supplemental
Retirement Plan includes cash compensation and compensation from
restricted stock vesting during the year. Benefits under the
Supplemental Retirement Plan are subject to reduction for social
security, Pension Plan and 401(k) benefits.
Messrs. Casale, Butler and Leger have, in the aggregate,
7, 20 and 3 years of credited service respectively under the Pension
Plan and 6, 7 and 3 years under the Supplemental Retirement Plan.
Mr. Weinbach has 15 years of credited service under the
Pension Plan. The Company has agreed that for purposes of the
Supplemental Retirement Plan, Mr. Weinbach is deemed to have 10
years of credited service and, unless his employment is terminated
for cause, will receive the maximum benefits available under such
Plan.
Mr. Weston is not a participant in the Supplemental Retirement
Plan and, accordingly, the table above does not reflect his retirement
benefit. In fiscal 1995, the Company agreed to pay a portion
of the annual premium of two life insurance policies insuring
the lives of Mr. Weston and his wife. In return for the
Company's agreement, Mr. Weston agreed to reduce the annual
retirement benefit under his employment contract from $550,000
per year to $382,000 per year, an amount calculated to reimburse
the Company in full for all costs (including costs for the use
of money) of the life insurance premiums paid by the Company.
If the Company does not receive full reimbursement for such costs,
Mr. Weston's retirement benefit will be further reduced or
the trust which owns the life insurance policies will make the
Company whole.
Employment Agreements
Josh S. Weston, the Chairman of the Board and Chief
Executive Officer, as well as a director, of the Company, entered
into an employment agreement with the Company as of June 1, 1983,
whose term ran until July 31, 1996, when he retired as Chief Executive
Officer. Mr. Weston's annual salary during the term of the agreement,
as amended, was $1,000,000. The agreement, as amended, provided
that Mr. Weston was eligible to receive an annual bonus of
up to $200,000 in fiscal 1995 and $250,000 in fiscal 1996, and
a restricted stock grant of up to 22,000 shares per year based
upon the Company's earnings per share performance during the year.
The agreement also provided for certain retirement benefits as
described in the "Defined Benefit Plans" section of
this proxy statement.
Arthur F. Weinbach entered into an employment agreement
with the Company as of August 1, 1996, the day Mr. Weinbach became
Chief Executive Officer of the Company. The agreement has successive
oneyear terms unless terminated by the Company or Mr. Weinbach
prior to June 1 of any year. Mr. Weinbach's annual base salary
is to be no less than $580,000, and his annual target bonus no
less than $290,000. The agreement provides that Mr. Weinbach
is to be granted restricted stock awards for a number of shares
so that restrictions will lapse in each fiscal year of the Company
on shares with a market value on the date of the award of at least
$500,000, and stock options for 110,000 shares of Common Stock.
If Mr. Weinbach's employment is terminated by the Company without
cause, then he is entitled to receive his base salary for 18 months
and continue to vest in his restricted stock awards and stock
options. If his employment is terminated following a change-in-control
of the Company, he will receive a termination payment equal to
a percentage, ranging from 300% if such termination occurs within
two years of such change-in-control to 100% if it occurs after
the third year, of his annual base salary and his average annual
bonus for the prior two years. In addition, all of his stock
options will become fully vested and all of his restricted stock
having restrictions lapsing within three years after such termination
shall have such restrictions automatically removed.
Messrs. Casale and Butler have entered into agreements
with the Company which provide for a defined severance period,
not to exceed nine months, in the event of a termination of their
employment resulting from a change in control of the Company.
Certain Transactions
Harvey M. Krueger, a director of the Company, is a
Senior Managing Director of Lehman Brothers, which provided various
investment banking and brokerage services to the Company in the
past fiscal year.
Compensation Committee Interlocks and Insider
Participation in Compensation Decisions
The Compensation Committee of the Board of Directors
is composed of three outside directors: Messrs. Lazarus, Malek
and Tisch.
The Compensation Committee of the Board of Directors (the
"Committee") is responsible for setting on behalf of
the Board of Directors the base salaries and the total compensation
levels of the Chairman, the President and Chief Executive Officer
and the presidents of the Employer Services, Brokerage Services
and Dealer Services businesses, as well as a structure for other
key executives of the Company. The Committee grants all stock
options and reviews all recommendations for grants of all restricted
stock to these and other key executives.
Compensation Policies
The Company's executive compensation policies for
fiscal 1996, which were reviewed by the Committee, were designed
to emphasize both competitive and variable compensation, with
direct linkages to business objectives and exceptional performance.
The primary components of the compensation package for
key executives for fiscal 1996 were base salary, bonus, restricted
stock and stock options. The Company and the Committee have always
believed that stock ownership in the form of restricted stock
and longer-term stock option vesting is vital in linking management
to stockholder interests. The Company sets its salary and bonus
targets below the median of market range levels of comparable
companies included in the S&P 500 Index. Therefore, executives
derive more from stock price appreciation as a percent of total
compensation than in a company whose base salary levels are set
at market levels or higher.
Annual Compensation
Annual compensation consists of a base salary and
a cash bonus. The base salaries for executives for fiscal 1996
were determined based upon the job grade of the position, the
salary range of the job grade and the performance of the executive.
Key executives earned cash bonuses in fiscal 1996 based
upon individual annual accomplishments versus individual pre-established
goals that included business growth and increased profitability.
Performance goals also included quality/service, product development,
organization development and leadership.
Long-Term Compensation
Long-term compensation is comprised of restricted
stock and stock options. The Company has from time to time sold
shares of restricted stock to executive officers and other key
employees, at par value, in recognition of their individual levels
of relative responsibility and prospective contributions to the
business. Company imposed restrictions on transfer or pledge
of the restricted stock generally lapse over the ensuing five
years, and are subject to continued employment. The restricted
stock plan is designed to encourage stock ownership, longevity,
and long-term performance. The Committee also considers the dollar
value of annually vested restricted stock in setting annual cash
compensation.
Stock options are granted, usually every two years, to
executive officers and other key employees in amounts based upon
their job grade and individual performance. Stock options are
granted at fair market value as of the date of grant, and have
a term of up to ten years. Stock options provide incentive for
the creation of stockholder value over the long-term, and also
significantly aid in executive recruiting and retention.
Restricted stock and stock option grants were made to
individual key executives during fiscal 1996 on a basis consistent
with the above guidelines.
Benefits
The Company provided certain supplemental benefits
to key executives during fiscal 1996 to ensure that it could compete
effectively for executive talent. These supplemental benefits
included additional company paid life insurance and certain additional
retirement benefits described in the "Defined Benefit Plans"
section of this proxy statement.
CEO Compensation
The Committee meets annually without the Chief Executive
Officer present to evaluate his performance and to determine his
compensation.
The base salary for fiscal 1996 for Mr. Weston, the Chief
Executive Officer, was determined by the terms of his employment
agreement with the Company as described in the "Employment
Agreements" section of this proxy statement. Under the terms
of that agreement, his salary could only grow if earnings per
share grew. In fiscal 1996, Mr. Weston's base salary was $1,000,000.
His cash compensation has always been below the median of the
base compensation of chief executive officers at companies included
in the S&P 500 Index with annual revenues between $1 and $5
billion, as surveyed by the Company.
The incentives of the Chief Executive Officer were provided
in the form of restricted stock and stock options. This ensured
that the Chief Executive Officer and the Company's stockholders
would have a commonality of purpose in enhancing stockholder value.
As set forth in the 1994 Executive Incentive Compensation Plan,
the Chief Executive Officer will be eligible to receive a cash
bonus, as well as restricted stock, based upon the Company's earnings
per share performance during the year.
The Committee has granted Mr. Weston, during the
last five years, stock options totaling 40,000 shares and the
opportunity to purchase 44,000 shares of restricted stock. In
fiscal 1996, the Company achieved a 14% earnings per share growth,
its 35th consecutive year of double digit earnings per share growth.
Based on those results and pursuant to the terms of the 1994
Executive Incentive Compensation Plan, Mr. Weston received a bonus
of $234,000, and 22,000 of the 44,000 shares of restricted stock
previously purchased by him vested. The Committee believes that
Mr. Weston's leadership has been instrumental in achieving the
Company's unparalleled record of growth in earnings per share.
Compensation Committee
of the Board of Directors
Frederic V. Malek, Chairman
Charles P. Lazarus
Laurence A. Tisch
The following graph compares the cumulative return on
the Common Stock of the Company for the most recent five years
with the cumulative total return on the S&P 500 Index and
the S&P Computer Software Services Index ("CSSI")
over the same period, assuming an initial investment of $100 on
June 30, 1991, with all dividends reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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| Jun-96 |
At the Annual Meeting of Stockholders, the stockholders
will vote on the ratification of the appointment of Deloitte &
Touche LLP, certified public accountants, as independent auditors
to audit the accounts of the Company and its subsidiaries for
the fiscal year begun July 1, 1996. A representative of Deloitte
& Touche LLP will be present at the Annual Meeting of Stockholders
and will have an opportunity to make a statement if he desires.
He will be available to answer appropriate questions.
So far as the Board of Directors is aware, only the aforementioned
matters will be acted upon at the meeting. If any other matters
properly come before the meeting, the accompanying proxy may be
voted on such other matters in accordance with the best judgment
of the person or persons voting said proxy.
Stockholder proposals intended to be presented at the
1997 Annual Meeting must be received by the Company for inclusion
in the 1997 Proxy Statement no later than May 23, 1997.
The Company's Annual Report for the fiscal year ended
June 30, 1996, which is not a part of the proxy soliciting material,
is being mailed to the Company's stockholders together with this
proxy statement.
For the Board of Directors
James B. Benson
Secretary
Roseland, New Jersey
September 23, 1996